The Money is Calling Your Name
Do you hear that? Listen carefully, and you can. That is the sound of money calling your name. The most profitable investments in real estate are waiting for you. They’re like the adorable little puppies that give you teary eyes and a little frown in hopes you’ll adopt them.
We know that investment properties aren’t feeling sadness if you don’t buy them, but they can be tempting. So how do you know whether or not an income property is one of the most profitable investments out there? Read on to see what criteria make up the most profitable investments in real estate.
Top Features of the Most Profitable Investments in Real Estate
When you look into property investing, you want to assure that you have found the most profitable investments. With the use of investment property tools like a rental property calculator and investment property analysis, you have a whole property valuation ready to go. Mashvisor can do that job for you! If you need the nitty-gritty details of property investments, check out the product. Warning: We come in handy. The most profitable investments consist of the top features. Here are some of those attributes:
the most profitable investments meet Your Objectives
As a real estate investor, you will have specific goals set for yourself. Your investment property should reflect those goals. If you find an investment property that meets your financial expectations, consider it. You may have just found one of the most profitable investments. An important metric you should aim to meet is:
Cash Flow
This is important because you need to know how much money you’re actually going to be making from the investment property. You could have any value in mind, but make sure you set a realistic and reasonable cash flow goal. We all want to make millions from our income properties, that will be the goal.
Related: What Are the Best Locations for Cash Flow Properties in the US Real Estate Market?
Don’t be discouraged if you’re not a millionaire the first year. Or your second, or your third, or even your 10th year of real estate investing. One way to get a rough idea of how much cash flow you can expect from a rental property is using the gross rent multiplier (GRM). To calculate the GRM, which is also known as the gross rental yield, you divide the property investment purchase price by the monthly rent for a year. Let’s take a look at an example.
Purchase price= $150,000
Monthly Rent=$1,100
Months in a Year=12
GRM= (Purchase Price)/(Monthly Rent x 12 Months)
GRM= $150,000/ ($1,100 x 12)
GRM=11.36
So what does that GRM value even mean? Some of the most profitable investments will have GRMs of 10 or less. A value near or lower than 10 is likely to produce neutral or positive cash flow. Anything up there in value, like 15, will not be producing good cash flow and instead, you will end up with negative cash flow.
the most profitable investments are in a Growing market
The next thing to check is that the real estate market is growing. You want your investment property to be in one of the best real estate markets. There are a number of U.S. housing markets to be known as hot spots for real estate investors, so do your research.
Related: 5 Ways to Find an Investment Property
It is useful to know what kind of market your tenants will be a part of. New jobs on the market, new infrastructure plans, or a sign of a population growth are all good signs. These are just some of the indicators that you’re a part of a growing U.S. real estate market.
If you tick the box, you can expect a growing rental income as well. It would be a shame to find yourself in a declining real estate market, watching your dollars slowly deteriorate. Stable markets are safe, but you want to grow as a property investor. Both you and your investment property can grow if you’re in a growing market.
An Improved and Improving Area for the most profitable investments
You should have a vision in your head of what location in real estate you are looking for. If you’re aiming for an investment property that has little maintenance demand, you are likely looking for an established area. However, if you’re after potential appreciation or can’t afford the established areas yet, you might be looking for a neighborhood that has some flaws.
Whatever your objective, we don’t advise you to look for the most profitable investments in the worst of locations. Especially if there are no signs of hope that it will improve. You may think you found an area that is improving, but nothing is for sure. Do your research on the economy, buyer’s market, rental vacancy rates, and population changes. If things are looking good, you may have found one of your most profitable investments.
The Vacancy Rate in the Area is Dropping or Below 5%
This is especially important to consider when real estate investors like yourself are geared to more long-term property investments. This move usually comes from wanting to rent out the rental property for an extended period of time. Low and decreasing vacancy rates keep your investment property rented out. Why? There is a high demand, but a low supply. This way, you are able to provide tenants with that demand. This also helps increase that cash flow and improve bank financing.
Related: 7 Tips to Avoid a High Rental Vacancy Rate
The Bottom Line
It can be a leap of faith when you choose to invest in the more profitable investments. As a real estate investor, you have to keep your eyes wide open. Purchase those income properties with your mind, not your heart. It is fortunate that we have the ability to think and analyze. That is just what you need to do on your search of finding the most profitable investments.
Mashvisor has given you some of the signs that you have found one of the most profitable investments. So keep this information stored in that investor mind box. We are also willing to give you our product in order for you to evaluate that investment property down to the T.
To start looking for and analyzing the best investment properties in your city and neighborhood of choice, click here.
We even have a tool specifically to project just how much rental income you can expect from the most profitable investments. The investment property calculator is just one of the many real estate investing tools Mashvisor can provide you with. Don’t sell yourself short.
You can find the most profitable investments, we are sure of it. You have to keep the money-making ears open, you never know when the sound of money will be present. Your sense of hearing has never come so in handy.