Using Zillow to Evaluate a Real Estate Investment: A Helpful Tool, Not a Final Answer
Searching for your next investment? Zillow, one of the most recognizable names in the real estate world, is likely one of your first stops. . Whether you’re casually browsing homes or actively exploring investment opportunities, chances are you’ve landed on a Zillow listing at some point. Its vast database and easy-to-use interface make it a great starting point—but for real estate investors, Zillow data is a great resource to use as a starting point.
Here’s what we recommend:
1. Zillow: Popular but Imperfect
There’s no denying Zillow’s reach. Millions of listings, up-to-date maps, and filters for just about every preference make it a top platform for buyers, sellers, and curious browsers. But when it comes to evaluating a real estate investment, it’s important to understand that Zillow pulls from public records and broad data sets. That means it can miss key local factors or property-specific upgrades—things that can drastically impact an investment’s value or income potential.
Zillow is a great tool to start your analysis, but it shouldn’t be the only tool in your belt.
2. What Zillow Gets Right
Here’s what Zillow can offer at a glance:
Bedrooms & Bathrooms
Square Footage
Zestimate® (Estimated Market Value)
Rental Estimate
Sale History & Price Trends
Comparable Properties (Comps)
School Ratings
Neighborhood Overview
If you’re simply looking for a basic understanding of a property, this can all be very helpful. You can quickly identify, for example, if the property is in a high-performing school district or see how many price changes have occurred over time. This is useful when narrowing down options or creating a shortlist of properties to consider, but you’ll need to dive deeper than a list of facts and figures if you want to truly understand the value, or potential value, of a property.
3. Where Zillow Falls Short
The Zestimate and rental estimate are two of the most commonly used tools on Zillow—and also the two most often misunderstood. These estimates are based on algorithms that use past sales, tax assessments, and general area trends. But they do not account for current condition, recent renovations, tenant history, or neighborhood nuances that may not be reflected in the data.
For example, a home that recently added a new kitchen and finished basement might still show a lower Zestimate than its true value. Conversely, a property in need of major repairs may be overvalued if the algorithm hasn't caught up to its condition.
When relying on Zillow for investment decisions, always flag the valuation and rental projections as needing confirmation from more accurate and localized sources.
4. Get Ground-Level Truth from Professionals
A trusted real estate agent or property manager with access to the local MLS can provide accurate rental comps, neighborhood-specific insights, and a true understanding of current market conditions. These professionals can also spot red flags in a property’s photos, listing notes, or location that Zillow simply can’t detect.
And if you’re serious about a property, go see it in person (or have someone you trust do it for you). No online estimate can replace walking through a unit, seeing the condition, and identifying factors like layout, parking, or deferred maintenance that could materially affect your costs and returns.
Use Zillow to Start—Not to Decide
Zillow is a fantastic place to begin evaluating an investment property, but it’s not the final authority. Think of it as a helpful assistant, not a licensed advisor. The same applies to similar platforms like Realtor.com, Redfin, and Trulia—they're great for gathering a general overview, but they rely on similar data sources and have the same limitations when it comes to accuracy and context.
When the numbers start to look interesting, that’s your cue to bring in your realtor, property manager, and a proper due diligence process. No algorithm can replace local market knowledge and an in-person walk-through.
Looking for an expert who can help you evaluate your next investment move? Contact our team today.
