Making money is the main goal of real estate investing. Every real estate investor’s dream is to own an investment property that makes a profit. In real estate investing, profits are made by having a good return on investment (ROI). ROI is a measure of how much money your investment property will be making, factoring in the size of your initial investment and other costs. In short, ROI measures the performance of an investment property. There are two main metrics used to calculate return on real estate investment: capitalization rate (cap rate) and cash on cash return (CoC return).
Today, we will explore what you have to do to get the highest return on investment in real estate. Let’s start with one key question:
What Is a Good ROI?
You now have an idea of what ROI stands for. However, what is a good return on real estate investment? Well, what is considered a good ROI will depend on a number of factors such as location, investment property type, property financing, risks, etc. For instance, multi-family real estate generally has a higher ROI than single-family homes. And sometimes, high cap rate real estate is not necessarily good for investment as it may come with high risks if it’s cheaper because it is located in a bad area. For this reason, to determine if a rental property is good for investment, you should take into account both ROI metrics together with other factors like listing price, rental income, and occupancy rate.
Nevertheless, most real estate experts agree that anything above 12% is a good ROI. As a property investor, having an income property with high ROI in terms of cap rate and cash on cash return will improve your chances of success. However, the challenge for most real estate investors is usually finding the highest return on investment property. If it was easy, everyone would be stumbling across the best investments in the housing market all the time.
So to help you find these opportunities more easily, we’ve put together some tips on how to get the highest return on investment property.
How to Get the Highest Return on Investment Property
1. Improve Your Real Estate Knowledge
For you to get the highest return on investment property, you need to have a deep understanding of the real estate industry. There are many things that go into earning a high return on investment. To make successful real estate investments, you need to understand these factors and how to take advantage of them. For instance, you should know the right investment property financing method to use, the ideal rental strategy to adopt, the right investment property type, and the right places to do your investment property search.
Understanding real estate investing will prevent you from buying the wrong investment property. One way to improve your real estate knowledge for free and improve your chances of finding the highest return on investment property is by reading Mashvisor’s blog.
Related: How Real Estate Classes Help Investors
2. Seek Guidance from Experts
Even though improving your real estate knowledge is very crucial, real estate is a very wide field. It is practically impossible to know everything that there is to know in a short period of time for you to be in a position to comfortably find the best real estate investments on your own. Therefore, surrounding yourself with people with more real estate knowledge and experience could be helpful.
This includes working with a good real estate agent and having mentors. Learning from those who have experience in the field can help you find profitable income properties more easily. You will be able to avoid pitfalls that could adversely affect your return on investment.
Related: Working with a Real Estate Agent: What Investors Should Expect
3. Don’t Involve Your Emotions
Finding income properties with the highest return on investment requires that you put your emotions aside during your property search. Look at investment opportunities logically instead of listening to your heart. For instance, you shouldn’t buy an investment property simply because you like the trees and greenery around it. While that may be okay when buying your primary residence, it may not necessarily yield the best monthly return on investment. There is more to an income property than its appearance. When seeking the highest return on investment, you should take into account the numbers. Never let your emotions drive you.
4. Use Real Estate Investment Tools
To find the highest return on investment property, you will need to analyze multiple real estate listings. Not all properties for sale will yield a good ROI. However, analyzing many potential investment properties manually will take you a lot of time and effort. Thanks to technology, there are several online real estate investment tools that investors can use to easily and accurately find investment properties with the highest return on investment. Mashvisor’s tools are the best in the market for finding the most profitable investments in the US housing market.
Here is a brief overview of Mashvisor’s tools:
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Heatmap Analysis Tool
Since location is a major determinant of the ROI, the first step is to search for a high-performing location. You can find the best cities for property investment by checking out Mashvisor’s blogs for reliable and up-to-date city-data. Start here: 10 Best Places to Invest in Real Estate in 2020.
You can then use Mashvisor’s Heatmap Analysis Tool to find and analyze the best neighborhoods in the city you have selected. Mashvisor’s real estate heatmap uses different colors to show the performance of different neighborhoods in a particular housing market for specific real estate metrics. You can use the cash on cash return as your filter to see neighborhoods with the highest return on investment, which will be marked in green.
Mashvisor’s Heatmap Analysis Tool
Give it a try now by starting your free trial with Mashvisor.
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Rental Property Finder
With a good location in mind, the next step is to narrow down your investment property options based on your search criteria and preferences. Mashvisor’s Rental Property Finder will help you achieve this. The tool will provide you with a list of investment properties with the highest ROI in the selected area that matches your search criteria. For instance, to find high cap rate properties for sale that fit your budget, you simply set the Budget Filter and type in the location. Instantly, you’ll be shown the investment properties with the highest cap rate in the real estate market.
Mashvisor’s Rental Property Finder
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Investment Property Calculator
Investment property analysis is the final step to finding income properties with the highest return on investment. An investment property calculator can help you do an in-depth analysis of potential investment properties. Mashvisor’s real estate return on investment calculator is very user-friendly and will help you find properties with high the highest cap rate and cash on cash return among other metrics. The calculator, which is also used as an Airbnb calculator, will also help you conduct comparative market analysis on investment properties to find their real estate comps. This way, you will be able to make the right investment decision.
Mashvisor’s Real Estate Return on Investment Calculator
Start looking for and analyzing the best investment properties in your city and neighborhood of choice.
Related: 8 Must-Have Real Estate Investment Tools
The Bottom Line
Whether you are a first-time real estate investor or already have a strong portfolio, your goal is to earn as much as possible from your investment property. ROI is the best indicator of a good investment opportunity. In this risky industry, your success as a real estate investor solely depends on your ability to get the highest return on investment property. The above tips will help you make this dream a reality.
To get access to our real estate investment tools, click here to sign up for a 7-day free trial of Mashvisor today and enjoy 15% off for life.