Considering entering the world of real estate investing? Well, this idea may turn out as a very lucrative activity. Planning on managing rental properties, either long term rentals or short term rentals? Great! Still, to succeed in buying an investment property you should select only the best options. How? Let’s explore the steps a real estate investor should take in order for him/her to select the most profitable rental properties.
#1 What Are the Types of Rental Properties?
When a real estate investor has a goal to successfully buy rental properties, he/she needs to decide on the initial purpose of the investment property. Why so? There are different criteria real estate investors should keep in mind when considering investing in either Airbnb rental properties or traditional rental properties. Nevertheless, in order not to rush things with these two different real estate investing strategies, let’s find out what are the short term rentals as well as long term rentals.
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Short Term Rentals
Airbnb rental properties are seen as one of the best real estate investment properties. Moreover, compared to traditional rental properties, short term rentals are more profitable. This is one of the main reasons why many real estate investors take this strategy into account when investing in real estate.
Still, how do Airbnb rental properties operate and why does such an investment property fall into the category of “the most profitable rental properties”? Short term rental properties are typically offered for rent up to thirty nights. Hotels are losing potential clients due to the fact that Airbnb rental properties are in bigger demand among travelers. Single home, studio, loft, apartment, you name it, it can be turned into an Airbnb investment property. However, for your future Airbnb property to be truly successful, it should be located in a top tourist/ business destination. The next step a real estate investor should take is to take a few convincing photos and add a description. Congratulations- now you are an Airbnb host!
Moreover, Airbnb rental properties have different advantages. One of the major benefits is the chance to skip paying taxes for a short term rental. Another major plus is that Airbnb rental properties benefit from the host protection insurance. This includes the liability insurance program which is specifically for Airbnb hosts and their listings.
Interested to learn how to find Airbnb rentals? Make sure to read “Airbnb Rentals: Finding Income Properties Using a Heatmap.”
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Long Term Rentals
Traditional rentals are “the best rental properties” due to a few reasons. The first one is that you may have few investment properties in your portfolio and still keep your initial job, for instance, being an accountant. The second one is the constant rental income that traditional rental properties generate. Moreover, a real estate investor can simply count the income. There is no need for worrying about the Airbnb occupancy rates as well as seasonal fluctuations.
As a landlord, your main responsibility is to keep your tenants satisfied by maintaining your rental properties and providing the repairing services. However, for any serious damages, a landlord has the right to charge tenants for the extra maintenance needed for the property.
One more thing to add- the location is a top priority. It is advisable to select a neighborhood that is suitable for long term stays. For instance, top tourist destinations and areas close to the airport are not the suitable places for long term rentals. Curious to learn more about long term rentals? Make sure to read “Real Estate Investment Strategies Guide: Long Term Rentals.”
#2 Researching Rental Properties: Real Estate Market Analysis & Investment Property Analysis
After understanding what type of a landlord you want to be, it is just the right time to proceed with researching rental properties. There are two types of analyses a real estate investor should do in order to select the best rental properties.
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Real Estate Market Analysis
The first step every real estate investor should take is to conduct a real estate market analysis. However, if you are an experienced real estate investor who is familiar with the current real estate market, you most likely know how to conduct a detailed real estate market analysis. Yet, let’s explore what information an investor receives after analyzing the specific real estate market.
The main reason for conducting real estate market analysis is to identify real estate comps. Real estate comps are recently sold investment properties that share similar characteristic with your selected property. Moreover, analyzing real estate comps helps an investor to estimate a property’s real estate market value before buying an investment property or selling one. Additionally, this guides you in estimating the possible rent to charge tenants. Ready to learn more about real estate market analysis? Make sure to read “Real Estate Market Analysis in 6 Simple Steps.”
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Rental Property Calculator
When conducting the real estate market analysis manually there is a chance of making a mistake. This is also valid when conducting investment property analysis. Real estate metrics, such as cap rate, return on investment, etc., are crucial when planning on buying an investment property. Can you imagine yourself comparing hundreds of rental properties and selecting the perfect one? It is nearly impossible. Someone else who is using the rental property calculator will always be a step ahead of you. Therefore, it is advised to use a rental property calculator when conducting both real estate market analysis and investment property analysis. It takes just a few seconds to calculate and present all real estate metrics needed.
When using Mashvisor’s rental property calculator, you can even gain more detailed information. Like what, you may ask? First of all, you receive detailed neighborhood analysis as well as in-depth investment property analysis. Moreover, if you are not sure what the optimal strategy for your investment is, Mashvisor’s rental property calculator will indicate that for you.
To start looking for and analyzing the best investment properties in your city and neighborhood of choice, click here.