At this point, we should be congratulating you for deciding to start a career in real estate. As the first step requires that you buy an investment property, this post is what you really need.
Of course, finding an investment property is a challenge. However, there are a few tips that we can provide for that purpose. Most importantly, these tips will tell you what makes for a great deal on an investment property. Therefore, by saying “maximum return”, we are referring to having a high return on investment. In other words, it means that an investment property should have the potential of generating a good rate of return on what you have already invested.
There are a few tips that we would love to present to you that are more general. From there, we are going to give you some more specific pointers that you should consider when looking for an investment property.
Buying an Investment Property: General Tips
These general tips should apply to your business overall. So, they have to do with prior procedures and preparations rather than the property itself.
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Tip #1. Put your emotions aside
Business is business. You can’t buy an investment property just because you love the tree that is in the backyard. Why? Because there is more to an investment property than how it appears. There are numbers and figures that you must take into account before you take any further steps (which we are going to be talking about later in this post). Reason and logic are what should be driving you and not your emotions. So, when talking business, get rid of your emotions for the sake of achieving your financial goals.
Tip #2. Plan well
Well, come on! We all know you can’t possibly be general with your goals. If you say you want to buy 20 investment properties in 10 years and become a multi-millionaire, that is too general. Be realistic with your plans, moreover, be more precise. A specific goal would be that you want to buy another investment property within two years and increase your income to $200,000 a year, for example. In this case, you have a solid plan to which you can stick to. Otherwise, your mind will be wandering around not knowing what to do. As a result, you might end up not achieving anything at all with all the possibilities available.
Understand that unless you have a clear vision and a precise goal, your mind will get confused and, therefore, lost. This way, you are risking losing it all trying to chase two rabbits at once.
Related: How to Start a Real Estate Business: What Do You Need?
Tip #3. Knock on some doors
This is where social skills are key. It is always a good idea to analyze the area where you want to buy an investment property by talking to the neighbors. This will not only help you get insights on the location but also on the neighbors themselves. You are investing in a property that will be making money for you. Therefore, you want the neighbors to be good as well. The last thing you want is your tenant moving out because the drunk neighbor is putting on a show in the neighborhood.
Buying an Investment Property: Specific Tips
Now that you understand the general criteria for getting into the real estate business and buying an investment property, in particular, here are some in-depth criteria that you should be looking for:
Tip #1. Do your homework
We know it sounds like school. We also appreciate the fact that math might be your least favorite subject. Unfortunately, there is no way to go about buying a profitable investment property without some calculations.
Calculating important measures is a way to avoid any failed real estate investments in the future. Therefore, it is a matter of proper investment property analysis to determine the prospect of an investment property to decide whether it is worth your while.
Another aspect of your homework is the comparative market analysis. It is based on finding real estate comparables to which you can compare the investment property. Why is it essential? To analyze the profitability of a certain location, of course! The property is not your only priority. It goes far beyond that to performing neighborhood analysis.
**Check out Mashvisor’s blog to learn all about the real estate analysis.
Related: What’s the Real Estate Education You Need to Start an Investment Business?
Tip #2: Work with professionals
Real estate experts are always there for you when you feel stuck. When buying an investment property, it is a good idea to hire a real estate agent. This property expert will save you time and effort in finding investment properties for the maximum returns. The only note we would have is that you should make sure they know the location in which you are interested in investing in real estate. This means that they know the area and know what works and what does not. Moreover, they know what is a good return on investment and what’s not.
Another type of real estate professionals that might be of great help is the home appraiser. They can give you an insight into the market value of an investment property. They can also help you decide what to charge for rent in case you are investing in rental properties.
Tip #3: Use the right resources
If you are wondering how to find investment properties for sale in the first place, then there are so many real estate resources that help a real estate investor do that. Therefore, if you do not wish to hire professionals, learn about the resources they use. This will give you access to lucrative investment properties in the market. Some great resources that we would recommend are Trulia, Zillow, the MLS, and, sure enough, Mashvisor. We have a wide range of investment property listings as well as data that will save you the efforts of real estate analysis. You will have access to estimations of capitalization rate and CoC return as indicators of the rate of return. Therefore, you won’t have to go through the math part at all.
Tip #4: Use real estate investing tools
On Mashvisor, you can find everything you need to know about real estate investing. Of course, you can also use the best real estate investing tools that we offer. One of these is the investment property calculator. It has proven to be the best when it comes to finding the best real estate investments. Here are some ways in which an investment property calculator will help you:
- Detect income generating assets: As we have mentioned before, you must do your homework before actually buying the property. Therefore, using this tool will help you do just that. All you’ve got to do is insert all the data that you have and leave the rest to the calculator. Your goal is to find the best income properties that generate rental income.
- Determine the optimal rental strategy to work with: Of course, after analyzing the location and the property itself, an investment property calculator will tell you what rental strategy to go with. Some locations are better for Airbnb rentals while others are best for traditional rentals.
- You can also use it to find the best passive income investments: As you might already know, real estate investing can also be passive. This means you can choose to invest in properties without being involved, by investing your money and letting others do the management for you. Real estate partnerships, real estate syndication, and REITs are examples of passive investing. Even though you won’t get involved much, you still need to find the best investment properties to make sure you are investing your money wisely.
Finally,
The most profitable investments all come down to a combination of skills, personal qualities, and some well-thought-out moves. Therefore, at this point, what you really need to learn is how to find real estate investment properties that are beneficial to your business. Before you get to that, learn all the basics associated with the business in the first place. Only then you’ll be able to make the right decisions regarding buying an investment property.
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