For a long time, buying a rental property has been a lengthy and time-consuming process. It would take investors a lot of time and experience to know how to buy a rental property. They would have to analyze market by market and property by property to find a worthwhile investment. The rise of technology has eased the process, but it could still take a considerable amount of time. But now, with Mashvisor, you can kiss those days goodbye. Mashvisor turns 3 months’ worth of research into 15 minutes. Finding investment properties and analyzing their potential returns has never been so simple and so quick.
Let’s dive right in and explain how to buy a rental property using Mashvisor.
Looking for your desired neighborhood
Begin your quest of how to buy a rental property search by entering the city you would like to buy a property in. You will be shown the various areas of the cities. Each neighborhood’s traditional and Airbnb cap rate, cash on cash return, and median price will be displayed.
Related: How do I buy an investment property in an unfamiliar area?
You can use the heatmap to further assess the neighborhoods. After selecting your desired feature, the heatmap will highlight which areas are ‘hot’ or ‘cold’ for the feature. The different features include listing price, traditional and Airbnb cash on cash return, traditional and Airbnb rental income, and Airbnb occupancy rate.
Related: Finding Income Properties Using a Heatmap
Get familiar with the neighborhood and decide if it is a good area for a rental. Is this a place people would like to live in? What makes it attractive? Tourist destinations? Job market? School districts? What does the demand and infrastructure look like? Put yourself in place of a potential tenant and think about what would make a neighborhood appealing.
Finding a property
For the next step on how to buy a rental property, choose a property from the designated neighborhood. Traditional and Airbnb properties are displayed as pins. Click on a pin to see the projected Airbnb and traditional cap rate and cash on cash return.
You can filter the results if you’re looking for specific types of properties or certain features of a property. You will be able to adjust the number of bedrooms and bathrooms you are looking for. If you’re interested in a single family home, condo, townhouse, or other type of property, you can specify that as well.
Related: Invest in Condos or Single-Family Homes?
To get a sense of the property’s performance in the neighborhood, a summary of the neighborhood is presented. The median home price, traditional and Airbnb cash on cash return, average rental income of a property if used as a traditional or Airbnb, Airbnb occupancy rate, and the optimal rental strategy (Airbnb or traditional) are given for the neighborhood.
For a more detailed comparison, you can view existing Airbnb and traditional properties in the neighborhood. The Airbnb properties are obtained straight from Airbnb, providing you with the most up-to-date rental rate and Airbnb occupancy rate. The traditional rentals are provided from various rental websites. A valuation analysis, detailing how similar the property is to others in the area based on type, number of bathrooms and bedrooms, and distance, is also provided. How are these comparisons related to how to buy a rental property? Well, using other properties as comps gives you an idea of how well the neighborhood is performing and ultimately whether or not the property will be a lucrative investment.
Now that you have a clear idea of the neighborhood’s influence on the investment, it’s time to narrow down the choices. If you plan on funding the property through a mortgage, enter your down payment and the loan type. The interest rate is set based on the area. You can also adjust the minimum cap rate and cash on cash return you aim for. Finally, set your budget and rental income expectations. The properties that match your standards will be displayed.
Watch how to buy a rental property using Mashvisor.
Understanding the property’s potential
Awesome! You’ve found a property that interests you. Now let’s determine if pursuing it would be a profitable investment.
On the property page, the price of the property will be presented. You’ll also see the rental income, monthly expenses, cap rate, cash flow, occupancy rates, and cash-on-cash return, for both an Airbnb or traditional usage.
Cash flow is the determining factor of your investment’s success. It is essentially the rental income subtracted by monthly expenses. A positive cash flow means you are earning more than you are spending. A negative cash flow, which you want to avoid, means you are not earning enough or are spending too much. Luckily for you, the cash flow, for either strategy, of the property is calculated.
To learn more about cash flow, let’s discuss monthly expenses. These are recurring expenses that you must cover. One example is mortgage payments, which you can always adjust depending on your plan. Other expenses relate to damage, maintenance, and management. You can always add or change any expenses, which will alter the cash flow. Also, don’t forget about property taxes.
To get straight to the point, an investment valuation score is provided. This score, shown as a percentage, evaluates the investment opportunity for the property. The higher the percentage, the better the investment potential.
Buying the property
Once you’ve made up your mind, it’s time to buy the property. Reach out to your bank and get pre-approved for a mortgage. They will also provide information on how to buy the rental property. Share the property report with your agent and contact the seller. Make a reasonable and comfortable offer. It’s fine to hesitate, make an offer that makes sense for you and is in line with your financing.
Voilà! You now know how to buy a rental property and are ready to make some big bucks as a landlord! Knowing how to buy a rental property doesn’t seem so complicated now, right?
This is just the beginning of the road. You will need more assistance along the way.
Let Mashvisor help you in your journey by providing data and rich information on how to manage and how to buy a rental property.