Atlanta Property Management Blog

Introduction to Real Estate Investment Analysis

System - Tuesday, May 18, 2021

Are you planning on investing in your rental property but you're still learning how to analyze properties? In this article, we will offer you several tips you can use for investing in the right property.

Like I said, different properties are valued differently. Assessing a triplex the same way one might evaluate a single-family home leads to a wildly skewed value. Here’s what you need to know.

Single-family homes

Market “comps” determine the value of single-family homes, investment or not. These comps—or “comparables”—are nearby properties with similar characteristics. They share variables like floorplan, number of bedrooms and bathrooms, garage size, and amenities. A single-family investment home generally rises in value if a similar home is also rising in value—and vice versa.

Multi-unit properties

Larger investment properties—those with at least two units, and especially those with more than four—are priced and valued differently. The value equates directly to how much income or profit the property produces. It’s possible that an apartment building in a neighborhood where house prices are dropping could, in fact, increase in value.

You can’t just compare your apartment building to others down the street to see how much it’s worth. That’s why real estate investment analysis is so important.

There are several primary factors to consider, but cash flow and appreciation are the two most important variables. Cash flow is simply the money left after all the bills have been paid, and appreciation is the equity gained as the property value increases.

There are not a lot of great ways to estimate future appreciation without a crystal ball, so I generally choose to focus on the cash flow.

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