Searching for income properties is no easy task, it takes a lot of effort, hard work, and time. However, the rewards are worth the trouble. When looking for income properties, it is easy to get fixated on an investment property thinking it is the only one of its kind. The price is good, the property passes the quality checklist, but is this enough? Is this the best income property in your local housing market? The truth is, it might be the best investment property, and it might not be. Here is a list of 8 must do’s in order to find the best income properties in your local housing market.
Lots of people get excited and forget about their agenda when buying income properties. It’s easy to fall in love with the real estate investment property and brush past major details that will convert your property from a headache to a passive income treasure. Don’t get us wrong, it is necessarily bad to fall in love with the place, but it is just as important to select the right property in the right market. Figuring out your tenants market is the first step for having the best real estate investment strategy.
Learn the Area
When searching for income properties, look for a place that has all the amenities that the target tenants desire. Once a property is found, learn everything possible about the area. A good rental income property will rent itself in the right market. A good real estate investor will use the acquired knowledge to make a better sales pitch for any future tenant. Use the proximity of the place to recreational opportunities, schools, parks, public transportation, highways, anything that may trigger the tenants interest in the sales pitch. If done right, they will fall in love with the place and be more willing to pay more for rent or at least will be willing to move in right away, which will limit the vacancy of the rental property.
Take a Drive
No one knows the neighborhood better than the locals. Take a drive, and mingle with the locals. See what they think of the area, how it’s been developing over the years. This will bring you some insider information and hopefully insight on whether this is the right location for income properties for your. By talking to the locals, you will be able to discover what the local demographic is. This is beneficial in terms of knowing what type of tenants you can expect.
Sales History
Income properties have been found, the neighborhood has been inspected, and all signs lead to buying the real estate property. It is now advisable to check the previous sales history of the area. How is the housing market projecting? Are properties going for more or less than the investment property you’re looking into? Are there a lot of selling listings? If so, why is that?
Rental or Buyer Neighborhood
Before investing in income properties, you must find out if the city of interest is a dominantly renter or buyer city. Big cities tend to have more people interested in renting as opposed to a small suburb which is mainly filled with homeowners. This can make renting out income properties harder. Once researched, it is good to know what the average rental income is in the area and how much you are to expect.
Current Upkeep Costs
Every investment property will have different expenses. Ask the current owner about the cost of ownership. Expenses include insurance and property taxes as well as utilities. Find out how much money the rental property is going to be costing you on a monthly basis to have a better idea of how much profit to expect. Any serious real estate seller will offer this information. Be cautious of the ones who don’t.
Community Comparisons
You drove around the neighborhood. Now drive around neighboring communities to see how this area stacks up. This is often forgotten as real estate investors think it doesn’t concern them, but this is far from the truth. A bad neighboring community can have adverse effects on your income properties. Figure out the average income. Is it higher or lower than in your neighborhood? Is there a difference in the taxes paid? Does a neighboring area have a higher criminal rate? These are all factors that can sway potential tenants mind.
Growth Potential
This is a step that is meant for the future. Find out how the area is projecting to grow. A good place to find this information is by going to the city hall. It will have all the information that you need to decide how the city is growing. For example, it can be building a hospital in a few years (which is amazing for your properties appreciation value). The city hall will afford you the information of the area that can help you decide on buying real estate investment properties.
Investment Property Analysis
And the end, one of the most important steps that are required when deciding on buying income properties is investment property analysis. Successful real estate investors know that the investment is only worth it if the cash flow and return are significant. Generally, you are want income properties that have a return higher than 8% (in terms of cap rate and cash on cash return) and are capable of generating positive cash flow. It will be a shame not to mention that we at Mashvisor can help you find and analyze investment properties.
When searching for the best income properties in your local housing market, it is important to have a real estate investment strategy. Buying income properties is high risk that is capable of rendering high reward. However, there are common mistakes that frequently get made by real estate investors. We at Mashvisor have the solution and tips to help you not fall for these pitfalls. One of the main mistakes that real estate investors make when beginning a real estate business is getting fixated on the first investment property they find. By following these 8 steps when looking for income properties, you will be able to find the best income properties in your local housing market. Visit us at Mashvisor for all your real estate needs.