Real estate is considered to be one of the best income-generating assets. However, not everyone ends up having a successful real estate career. One of the most challenging parts of real estate investing is finding a good income property for sale. Savvy real estate investors are aware of the significance of understanding how to buy an income property. This is a skill that will greatly influence your success in the real estate business. So, how do you find the best income-producing property in 2020? Read on to learn the fundamental steps to take and the tools to use to make the process successful.
1. Find the Best Real Estate Market
You’ve probably heard several times about the importance of location in real estate investing. Location is one of the key factors that determine the profitability of an investment property. So the first step on how to find investment property should be to research the location. The best income property locations are those that have a high demand for rental properties. When doing a real estate market analysis, you should consider areas with a good job market and high population growth. A good city to invest in is one that has good infrastructure and is in close proximity to schools, shopping centers, hospitals, and other amenities. To find the best cities to invest in real estate in the US housing market, be sure to check out Mashvisor’s blogs for reliable city data.
Related: Location Location Location: What Makes for the Best Place to Invest in Real Estate?
2. Use a Heatmap Tool
After selecting a profitable property market to invest in, it is time to find the best-performing neighborhood. With Mashvisor, you don’t have to waste a lot of time doing a neighborhood analysis traditionally. So, what tool can you use to find the best place to buy income property in your city of choice? The answer is the Heatmap Analysis Tool. This tool uses predictive analytics to find the best neighborhoods in your city of choice that fit your criteria.
The tool uses different colors (green, yellow, and red) in different shades to show you how different areas in the real estate market are performing for your selected metric. Therefore, you will be able to easily get an idea of the top neighborhoods in the market by filtering your search using metrics like average listing price, average rental income, cash on cash return, or Airbnb occupancy rate.
Mashvisor’s Heatmap Analysis
To start analyzing different neighborhoods in the US city of your choice, click here.
3. Use an Income Property Finder
If you have a neighborhood in mind, the next step in your investment property search will be to narrow down your options based on your search criteria and preferences. The best tool to use at this stage is Mashvisor’s Property Finder. This tool uses a wide range of metrics, data comps, and analytics to offer you lists of the best performing investment properties that would offer a good return on investment.
To use the tool, you simply choose one or multiple housing markets (up to 5) that you are considering for investment and set specific filters. The main filters you can use include your budget, rental strategy, number of bathrooms, and number of bedrooms. The tool will give you suggestions for the best rental investment properties that match your needs the most. It will sort them based on their profitability, which will factor in the property’s listing price, rental income, occupancy rate, cap rate, cash on cash return, walk score, and neighborhood score.
Mashvisor’s Property Finder
Related: Rental Property Finder: A Revolutionary Tool for Investing in Real Estate
4. Use an Investment Property Calculator
The final step in finding the best income properties is to carry out an investment property analysis. This analysis is to help you understand the investment capability of an income property relative to other income properties in a specific market. To thoroughly analyze an income property for sale, you will need to use Mashvisor’s rental property income calculator which is also an Airbnb calculator. Whether you are a beginner or experienced investor, this is a must-have real estate investment tool.
The tool will not only help you make the right investment decision but it will also help you save a lot of time and money in your search. With this user-friendly tool, all you need to do is enter basic property details such as your budget and financing method. It will then show whether the rental property is viable based on real estate metrics such as cap rate, cash on cash return, and cash flow. It will also show you the optimal rental strategy (Airbnb rentals or traditional rentals).
Let’s go through the three main calculations offered by Mashvisor’s rental property calculator:
- Cash Flow: Cash flow shows the expected profitability of an income property after all monthly expenses are deducted from the rental income. The tool will estimate all the operating expenses of the property such as mortgage payment, taxes, insurance, and maintenance costs. You may also adjust the expenses depending on the specific income property or your location. The best income property to go for is one with positive cash flow. With our calculator, you are able to do this selection easily.
- Cap Rate: Cap rate is one of the best ways to estimate the potential rate of return on investment (ROI) of an income property. It is calculated by dividing the net operating income of an investment property by its value.
- Cash on Cash Return: Cash on cash return is also used to estimate the potential return on investment of an income property. It is calculated by dividing the net operating income by the total cash investment. This metric shows the profit you can expect to generate from a property you buy using a mortgage.
Mashvisor’s Investment Property Calculator
Related: How to Use Mashvisor’s Rental Property Calculator
Now You Know How to Find a Great Income Property!
Real estate investing can be quite intimidating for beginners, especially when it comes to finding a good income property investment. Knowing how to find income property is the foundation on which the career of a real estate investor is built. Whether you are planning to find your first income property or you are an experienced property investor looking to improve your portfolio, you will need to use the right tools to find great investment properties. With Mashvisor’s real estate investment tools, buying income property is made easier. By using our tools, you will improve your decision-making and drastically cut down the time and energy spent to find the best investment property.
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