Valuation Techniques Overview

Types of investment analysis include bottom-up, top-down, fundamental, and technical. Investment analysis involves researching and evaluating a security or an industry to predict its future performance and determine its suitability to a specific investor.

For example, a prior transaction might have been conducted in a more favorable environment for debt or equity issuance. The valuation multiples found in prior transactions typically include control premium and synergy assumptions, which are not public knowledge and are often transaction-specific.

The other time you should run a CMA is when helping a buyer determine whether a home they’re interested in is a good deal. If you’re just starting out or working in an unfamiliar area, a thorough CMA will tell you if a home is priced right.

After a more detailed expense analysis, you’ll often discover the 70% Rule falls short of the mark. Remember that the less closely the comps wealth preservation mirror the property in question, the less accurate you should consider your ARV estimate. The 70% Rule is useful in house flipping to help you instantly evaluate whether a potential deal is in the right ballpark.

You should always create a CMA to get a sense of the value of a home in advance of a listing appointment. Having a CMA on hand ensures you’re able to address the homeowner’s questions about market value and demonstrates that you’re always prepared. Then, run an updated CMA after the appointment so you can incorporate what you learn when visiting the neighborhood and touring the property with the homeowner. Kiah is a licensed attorney with experience in real estate development.