Owning a rental property is only desirable when you are making a profit. To ensure this, you need to choose your investment property carefully before buying. When searching for the best investment property, the first step is to learn about the potential profitability of a location. “Location, location, location!” is the most popular mantra in real estate investing for a reason. It is the most important factor that will determine your return on real estate investment. When you choose the right real estate market, your investment property will tend to give you the highest return on investment. However, location is fairly broad. Choosing the best rental investment markets could be an overwhelming task considering the many states, cities, territories, and suburbs across the country to choose from.
Finding the best places to invest in real estate requires that you narrow down your search through a systematic analysis of the housing market. Whether you are a first-time real estate investor or have been in the industry for some time now, knowing how to research rental markets is a crucial skill. When researching housing markets, you should look at both the macro-level (the general rental market) and the micro-level (the specific neighborhoods). You should first begin with finding a good investment city by performing a real estate market analysis and thereafter, do a neighborhood analysis to find the best neighborhood.
So, what information should real estate investors look for when looking for the best rental investment markets? And what resources can they use to make the analysis as effective as possible? If you are wondering where to invest in real estate, this blog is for you. Read on to find out!
Related: How Land Casinos Affect Real Estate Markets
Finding the Best Cities (Real Estate Market Analysis)
The first step to finding the best places for buying a rental property is to assess the city where you wish to purchase a rental property. When trying to figure out where to invest in real estate, you should look for cities that promise a high return on investment. This will help ensure the best investment performance. To know whether a specific city is a good investment location, there are some economic elements you need to look at.
Generally, the best places to invest in real estate are usually up and coming cities with features such as:
- Growing job market
- Future developments
- High population growth rate
- Low number of rental property listings
- Reasonable property taxes
- Low insurance costs
- Booming tourism industry
- Low crime rate
A city with the above features will have a high demand for rental property. For instance, cities that are popular travel destinations make for the most profitable Airbnb locations due to a high number of travelers flocking to such areas. A city with a flourishing job market will also attract young people looking for employment. As a result, there will be more people looking for long-term rental properties. As you can see, deciding on your rental strategy of choice should be done early on so you know what characteristics to look for in the best city to invest in real estate.
Once you’ve researched those characteristics, you still have a little more information to dig up. That’s because the most accurate way to find the best rental investment markets is to look at the numbers. You need to look at profitability indicators like median listing price, average rental income, and average cash on cash return. All these real estate metrics are important for locating the best rental investment markets. Therefore, general city data is very crucial in the first stages of your market research.
So, how can you access general city data? Mashvisor’s real estate investment blog is the best source. This data is provided by our investment property calculator. Apart from city data, you will also get key information on economic, population, and job trends.
Start Here: 20 Most Profitable Locations for Traditional Rentals in 2020: Cash on Cash Return
You can also check out our Real Estate Market Reports where we have laid out absolutely everything you need to know about the major markets in the US. Take a look:
- Tampa Real Estate Market
- Palm Springs Real Estate Market
- Seattle Real Estate Market
- Las Vegas Real Estate Market
- Houston Real Estate Market
- San Diego Real Estate Market
- New York Real Estate Market
- Miami Real Estate Market
- Philadelphia Real Estate Market
- Phoenix Real Estate Market
- Chicago Real Estate Market
- Austin Real Estate Market
- Orlando Real Estate Market
- Nashville Real Estate Market
- Los Angeles Real Estate Market
- Atlanta Real Estate Market
- Dallas Real Estate Market
Finding the Best Neighborhoods (Neighborhood Analysis)
After finding the best rental investment markets on a city-level, the next step is to go down to the neighborhood-level. Finding a good city to invest in is important when trying to find the best rental investment markets. However, to get more accurate results in your real estate market analysis, you need to focus on an investment property’s neighborhood. Even though your city of choice may be generally profitable, profitability levels will vary from neighborhood to neighborhood.
To find up and coming neighborhoods in your city of choice, you should check for neighborhood amenities such as:
- Access to public transportation
- Goods schools and colleges
- Hospitals
- Restaurants
- Gyms
- Shopping centers
Related: What Kind of Neighborhood Has the Best Investment Properties?
To accurately perform your neighborhood analysis, you should also run the numbers to know how profitable a neighborhood is. The key real estate data you want to find include listing price, rental income, cash on cash return, and occupancy rate. Mashvisor’s real estate heatmap is the ultimate real estate investment tool for finding such neighborhood data. A heatmap provides a visual representation of numerical data using different colors for different percentages and number ranges.
Our heatmap analysis tool uses both traditional and predictive analytics thereby providing very accurate results. The tool provides data for both traditional and Airbnb rental properties. For instance, if you are looking for the best places to buy a vacation home, you can filter your search on the heatmap analysis tool to get Airbnb data.
Related: Airbnb Rentals: Finding Income Properties Using a Heatmap
The Bottom Line
Looking for the best rental investment markets is the first step to finding a profitable income property. When doing your market analysis, you should start on a broader analysis of rental markets and later narrow down the scope of the analysis to specific neighborhoods with income properties for sale. However, analyzing rental markets the traditional way is usually time-consuming and inaccurate.
So, whether you are looking for the best vacation rental investment markets or long-term rental markets, Mashvisor’s got you covered. Be sure to use Mashvisor’s real estate investment blog and market reports to identify the best cities and Mashvisor’s heatmap tool to identify the best neighborhoods.
Upon finding the best rental investment markets, the final step will be to find a profitable income property for sale. Again, Mashvisor will help you out. With our investment property calculator, you can quickly and easily perform property analysis on investment properties for sale in the US housing market.
To start looking for and analyzing the best investment properties in your city and neighborhood of choice, click here.