The Real Estate Fundamental and Technical Analysis that Prevent Your Deals from Going Bad
Technical Analysis is something that has formula, trend, data and charts for you to analysis a deal.
Fundamental Analysis is more about fact, history, human behavior and other unpredictable factors involved.
Today, I’m going to share with you the real estate fundamental and technical analysis that I read from Richdad Forum which can protect your real estate deal from going bad.
Real Estate Fundamental Analysis
Analysis on the property developer
- Who is the property developer?
- What is their track record with other properties in the past?
- Do they turn a profit?
- Do their investors walk away happy?
- Do people invest with them again and again?
- Do they finish projects on time, on budget, and within promised parameters?
- Will the developer be able to purchase building materials, bring them in, and have the labor to build while maintaining affordability? (These are 3 big areas that can increase a price and put a project in jeopardy).
Analysis on the property location
- What has happened in the area to suggest that it could grow? (For example, why did the developer choose to build there instead of somewhere else in the world?)
- What are other properties around it selling for? Is this area growing in popularity? How do you know? Will it grow more? When will it reach capacity? What factors would you look to in order to feel that it has reached its capacity?
- Has interest been strong on those other investments? Why or why not?
Analysis on the property usage
- Is this something that will be supported by others in the area? (For example, will a rental location be filled with staff because the area is growing quickly and needs lots of people? Or as another example, will a hotel get booked up because the government is working hard to market the area?
- Is the property appropriate for the demographic who it will be marketed to?
Analysis on the property competition
- Who else is building right now? What is their track record? (You want to see this because if just one never-heard-of-before builder is building, you might not be as attracted to a project as you would be if several big-name builders were all creating projects in the same place).
- Who else is investing right now? Is it the Donald Trumps of international investing? There’s a good chance you’ll want to get in on the same deals they do.(did you see that Mr. Trump is investing one year behind me in the same area we are…LOL…got to love it….being ahead of him by one year internationaly…not the first time or last….LOL…)(that one is for you Chris)
- What will the “end user†competition be like? Will there be dozens of buyers clamoring for a single unit? That will increase prices and potentially earn you a good return. However, if there is not enough demand, the result would be the opposite. Is the property appropriate for the demographic who it will be marketed to?
Above is just some questions that you need some hard works to find out the answers. Because of this, fundamental analysis is more challenging and sometimes quite hard to learn. Maybe because of this, many people tend to skip this analysis steps and ruin their investment deal at the end.
Real Estate Technical Analysis
In technical Analysis, all you have to do is looking at the historical pricing of a property and tries to identify the pattern in future.
However, it is really hard to get the accurate number for this. Even you compare with other projects that finished or running at this moment, you just can get the average pricing for a particular area or property.
So based on the pricing data you collected, ask yourself the following questions:
- “Does this piece of information change my opinion of the risk level of the project?
- “Does this piece of information change my opinion on the reward level of the project?
- “Do I still feel that the risk/reward ratio is within the acceptable parameters I’m comfortable with?”
- “Given my answer to question 3, should I hold the line or should I implement an exit strategy right now?
Now you should have a big picture on how to run the fundamental and technical analysis on real estate. Hope the information I collected are useful for you.
Good Luck!
Source : Richdad