4 Real Estate Investments Rules — Markets and Analysis with CMA explained

If you are new to this business of real estate, and want to buy or sell a property, you need to understand the basics of a real estate market research and analysis only because you don’t want to buy too expensive and don’t want to sell and leave money on the table. CMA stands for Comparative Market Analysis and it is a great tool to analyze properties and study the real estate market.

In this article, you will learn how to prepare and understand a comparative market analysis from either your real estate agent or yourself. If you can, use the help of real estate agents; They can be a real big help in your transaction, when you choose the right one. The CMA analysis is good when you are selling your house as well as when you are buying real estate, so here is what there is to know in a real estate comparative market analysis:

The location and its demographics are 2 really important factors. They will help you to target a specific audience in your research and understand how to analyze the real estate market. To start, you need to pinpoint and choose a specific district, it can be one that you know well or one that you know is where you want to buy or sell and evaluate these criteria, (you can put them down by writing, it helps to remember after):

MACRO = THINK BIG PICTURE = A DISTRICT

What is a macro-analysis in real estate ?

Macro is a greek word (makros) that means long and/or large. Economists will use it as an adjective to define something that is bigger or has a large scale.

This is where you need to take a step back and compare different markets with the same variable. For example, a country will compare its population with a variable; The United States has a population of 328M and France 67M; Compared to the size of the land available, citizens in the US would have 88.64 square miles each and French would have 0.3 per inhabitant. That’s because there is a lot more land available in the US than in France. One is not better than the other, it simply means that the country is bigger in size (and most likely the land is worth more in France, when there’s less of it available). What you need to think about is that: Does it matter to you or to your project ?

You want to gather and put together as much information as possible and learn about a particular territory, or district that could be interesting to invest in. One preferably that you know better (Ex. city vs country) The more you know about markets the best it is… but a lot of info can become overwhelming really fast. The purpose of the macro analysis is to help you decide where to focus your micro (more detailed) analysis (including the CMA) on something promising for you.

MICRO = LOOK INTO THE DETAILS = A STREET

What is a micro-analysis in real estate ?

Micro (as you might know now :)) is a greek word (mikros) that means small. Scientific will use it as an adjective to define something that is extremely small, like some parts in our laptop called microprocessors.

Economists will analyze people and/or businesses in more detail (keeping in mind their macro environment) with the objective to better understand their behavior and their interactions (including their spending profiles).

The CMA analysis will do just that.

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