Real Estate
The Right Way to Conduct an Initial Analysis of an Investment Property
November 11, 2020

Before jumping into a deal, you need to make sure you’re making the right choice with an investment. And so, you need to do an initial analysis of the property you intend to purchase. Despite the importance of an initial analysis, many investors go with their gut feeling instead of concrete facts to estimate the true value of a deal. Therefore, today we’re going to look at the right way to conduct an initial analysis of a property of interest.

Initial Analysis of a Real Estate Investment Property

If you’ve researched initial value estimates before, you’ve come across terms like Cap Rate and Cash-on-Cash return which serve as great metrics to compare, contrast, and estimate property values and determine the best investment. However, as an initial assessment before diving into the numbers, it’s always best to get rough estimates through an initial analysis. Therefore, while you take the time to learn and apply the best value estimation metrics later down the line, you can start off with a rough initial analysis.

Determining the True Value of Your Real Estate Investment Through an Initial Analysis

Different properties are valued differently depending on the location, market condition, amenities, and size. Therefore, you need to remember to estimate and assess the values of different property types differently. Let’s look at two concrete examples, the single-family home, and a multi-unit property.

Single-Family Homes

The best way to estimate single-family home values is to find a good comparable. If a home with similar facilities, rooms, and the location is rising in value, the property of your interest will also rise in value.

Multi-Unit Properties

In the case of multi-unit properties, instead of a comparable, the revenue-generating capacity of multi-unit properties plays a huge role in determining its market sale value. In this case, you are primarily concerned with the cash flow of the property and how it will appreciate over time. While it’s hard to estimate an accurate value for appreciation, looking around the neighborhood and checking past data is a good way to get a rough idea.

What Are the Essentials When Conducting an Initial Analysis?

When conducting an initial analysis, you need to cover these important bases:

  • Inherent Property Details: These are the main attributes of the property such as the number of units, square footage of the entire lot, number of rooms, and indoor amenities.
  • Purchase Information: The amount of money you need to conjure up at the time of purchase to pay for the purchase price of the property itself, rehab, and improvement costs.
  • Property Financing Details: If you’re buying the property on credit, as most investors do, you will have to take into consideration the costs and information about financing the investment. Here, you need to pay special attention to the down payment, interest rate, and closing costs of your mortgage or loan.
  • Income: You need to take note of the potential income generated by the property through rent and other services.
  • Expenses: This is the cost of maintaining the property, including property taxes, maintenance costs, insurance, and holding costs.


Before bogging yourself down with exact metrics, it’s always best to do a quick initial analysis of the property with easy to gather information before crunching the numbers on the deal. With the few tips we provided today, you should be able to quickly run through an initial analysis and determine if a property is worth your time and money.


About author

Richard Nevis

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