Real estate investments remain an attractive option for people who are not afraid of owning an asset that requires management. However, not all real estate investments are guaranteed to provide high yields. Finding those that do may be hard, especially for those new to real estate investing.
Table of Contents
- Tip #1: Find a House That Doesn’t Need Further Improvements
- Tip #2: Find Emerging Markets
- Tip #3: Consider Short Term and Long Term Rental Profitability
- Tip #4: Calculate Profitability
- Tip #5: Get Access to Real Estate Statistics
- Use This Tool to Find High-Yield Property Investments
The key to making money in the rental business is finding a property that will provide a good return on investment. You can find such properties in highly popular areas. They offer something unique to the tenant, such as location or amenities, or cost less, driving up the ROI.
To find them, you need to do market research to see whether a particular property offers the potential to bring you a high yield instead of being a cash burner.
Market research allows you not only to find lucrative areas for investment but also to make a wise choice between multiple properties in a given area. For this task, we can use Market Finder. The Market Finder tool lets you find the right US-based markets for high-yield property investments.
Below, you’ll find the top five tips to find high-yield property investments. From conducting market research to assessing the condition of the property, you’ll learn how to make a real estate investment.
Tip #1: Find a House That Doesn’t Need Further Improvements
The more you invest upfront, the less the cash on cash return will be. However, it doesn’t just apply to the price of the house. Any inspections or renovations add to the overall cash investment and can bring the cash on cash return down.
The best investment property doesn’t require any investment apart from the actual price of the house. It’s not always easy to find a place like it. However, you should aim to find a house with minimal renovation costs attached.
Inspect the property when you go to the house tour and look for water damage, faulty wiring, and other areas that may need repair. You can get a much lower price for houses that require repairs or renovation, but you should understand that the cash investment will be higher, bringing the cash on cash return down.
If you do want to plan a renovation, call up experienced contractors and obtain multiple quotes to ensure that the cost of repairs can be included in the ROI calculation.
Tip #2: Find Emerging Markets
One of the best ways to find high-yield property investments is to identify emerging real estate markets. Such areas experience growth and development, whether by people coming to a previously unpopular area, or significant economic growth accompanied by increased construction activity.
Areas like the above may be in metropolitan areas or in scenic locations with all the necessary accommodations to work remotely. Investing in emerging markets early means investors can benefit from property appreciation in the long run and won’t find it hard to fill their rental units.
Now, how do you identify an emerging market? You should analyze trends in the real estate markets that you’re interested in or look up general statistics on US markets. You’re looking for areas that are experiencing job growth, population inflow, and infrastructure developments. A new project like a highway or public attractions may signal that the area will become more attractive to tenants.
Pricing trends are one of the easiest ways to spot emerging markets. As people start to move, the demand for housing grows, leading to higher property values. Look at the year-over-year price growth in the area. If it was stagnant for decades and recently started growing rapidly, it’s a sign that it’s becoming more popular.
Population Trends
A handy way to know what states to look at during your search is by looking at which states gain population and which lose. According to the US Census Bureau, here are the 10 states that people are moving in and out of:
| In | Out |
| 1. Texas | 1. California |
| 2. Florida | 2. New York |
| 3. South Carolina | 3. Illinois |
| 4. North Carolina | 4. Pennsylvania |
| 5. Georgia | 5. Massachusetts |
| 6. Tennessee | 6. Washington |
| 7. Nevada | 7. Colorado |
| 8. Maine | 8. Indiana |
| 9. Delaware | 9. Michigan |
| 10. Idaho | 10. Wisconsin |
An important note is that you can’t just find an area with a high year-over-year price growth rate and invest in it immediately. A location with high housing price growth can be overvalued because, in the past few years, many areas that saw skyrocketing prices are now experiencing slowdowns.
What you’re looking for is an area that is only starting to see a real estate appreciation trend, and you still need to do a rental estimate calculation to see whether it offers a high yield or cash flow. So treat it as a supporting factor, not the main one, when deciding where to invest.
Related: 40 Best Places for Buying Investment Property in 2023
Tip #3: Consider Short Term and Long Term Rental Profitability
To find a high-yield property, it’s essential to consider both short term and long term rentals. While long term rentals can provide steady income, renting out your unit short term may offer higher profitability in certain areas. Don’t get stuck on one type of rental property, and explore all potential rental options to maximize profit.
Many real estate investors think that you can make the most on long term rentals, but it is not necessarily true. There are many short term rental investments that would make you more money over a long period, provided the location is right.
The biggest factor to consider when deciding whether you want to rent short term or long term is the location of the property. Places living that are popular among tourists can be a great option for short term rentals. They can include state capitals or vacation areas close to wildlife reserves, beaches, or entertainment venues.
The key here is that since there are a lot of visitors, your short term rental will be booked for most of the month, bringing in more profit than with a long term rental. By renting out your property on a short term basis, you’re taking advantage of higher nightly stay fees on Airbnb.
Practical Example
Let’s take Aspen, CO, as an example. While it is a popular destination for winter sports enthusiasts, it is also one of the most expensive places to live in the US. Residents and visitors face high housing costs, dining expenses, and entertainment costs. But Aspen enjoys a lot of tourist traffic, so finding Airbnb properties for sale in the ski resort town is an excellent option for an investor.
However, short term rentals aren’t a cure-all. To find the best short term rental market, you need to do a lot of research before investing. In some areas, due to various factors, short term rental properties may be less profitable than renting out a unit as a long term rental. Consider factors such as rental income, occupancy rates, and competition from other short term rentals in the area.
Tip #4: Calculate Profitability
One of the most crucial steps in property investment is calculating profitability before making an investment. You can do that with Mashvisor’s rental calculator. The calculator allows you to input information about the property you want to buy. The information includes the price, the mortgage rate, and renovation cost that help calculate profitability.
What makes it unique, though, is that Mashvisor can provide some of the data needed for calculation on its own. Information, such as rental rates and occupancy rates, are estimated by Mashvisor based on real estate data parsed from multiple trustworthy sources.
With the above information included in the calculator’s algorithm, you can get access to rental property metrics, like cash on cash return, cap rate, or cash flow, for your property. Upload data on multiple properties or play around with the listing prices to see at what price you should stop bidding.
Calculating potential profits crucial because it can get you out of a bad deal where, for example, the potential for monthly earnings is high but can be eaten up by mortgage payments. It’s a very important aspect of making sure your property generates a high yield.
Tip #5: Get Access to Real Estate Statistics
Access to accurate and up-to-date real estate statistics is essential to successful property investment. Fortunately, you can view accurate and up-to-date statistics with Mashvisor.
Mashvisor offers real estate data and comps for property investors sourced from Airbnb and ListHub. The latter is a site that has tens of thousands of vacation properties for sale and stores data on each of them.
The data Mashvisor sources from the said platforms are varied, such as the price of housing in any area in the US, Airbnb occupancy rates, long term rental occupancy rates, and walkability scores. Based on the said data, Mashvisor can also calculate more complex metrics, such as cash on cash return, cap rate, and monthly rental income.
Understanding real estate statistics is critical to making a profit on your investment. Whether you’re a new investor or a seasoned one, knowing your market is the only thing needed to find high-yield property investments.
Related: What Are Real Estate Comps and Why Are They Important for Real Estate Investors?
Use This Tool to Find High-Yield Property Investments
Mashvisor’s Market Finder tool is an innovative solution that can help property investors identify lucrative investment opportunities across the US. It analyzes real estate market data and provides investors with a clear and easy way to find high-yield properties on an interactive map.
The tool uses various sources to gather real estate data. It works with one of the largest MLSs in the US, ListHub, and Airbnb to present you with a comprehensive database of real estate information.
One of the key benefits of the Market Finder tool is that it allows investors to easily compare different markets and identify the most promising areas for investment. Using the tool to analyze data from multiple markets allows investors to quickly identify areas with high yield potential. In the end, you are able to make informed decisions about where to put your money.
The data can be accessed via the interactive map that highlights the best areas according to your chosen metric: cap rate, occupancy rate, rental income, etc. The various filters make it easy for investors to find properties that match their investment goals and preferences.
Mashvisor’s Market Finder is a powerful tool for property investors looking to identify high-yield investment opportunities. Use the tool’s real estate market data analysis and compare different areas. It can help you filter out the noise of big data and locate the best place to invest.
Real estate investors can use Mashvisor’s Market Finder tool to identify high-yield investment opportunities.
Interested in seeing how Market Finder works? Sign up for a 7-day free trial of Mashvisor today.
Conclusion
Investing in real estate is one of the most popular ways to build long-term wealth and generate passive income. However, not all properties offer high yields, and finding the right property can be challenging for investors. To find a high-yield property that’s worth your time, you must conduct extensive research and calculate profitability in different scenarios.
Conducting market research to identify emerging markets lets you be the first to invest in a promising area. Such markets are towns that are experiencing growth and development. They lead to increased demand for rentals and property appreciation. It is also important to consider whether you want to do short term rental and long term rental profitability to increase returns.
Mashvisor’s Market Finder is an excellent tool that can help property investors successfully identify profitable short term rental markets. It allows you to access market rental analysis features that provide insights into the best locations to invest in. Ultimately, the tool will allow you to maximize your returns on high-yield property investments.
If you want to learn how to use the tool, schedule a demo now and one of our Product Specialists will assist you.