One of the main keys to a successful real estate business is knowing how to find real estate investment properties with good ROI potential.
Table of Contents
- How Do Real Estate Investment Properties Make Money?
- How to Find Real Estate Investment Properties That Make Money
- Wrapping It Up
Real estate investing is, first and foremost, a business, and the purpose of any business endeavor is to make money. Thus, learning how to invest in real estate is equivalent to learning how to make money in real estate.
Maybe the most beautiful aspect of real estate investing is the diversity of options to invest and make money. Many experienced real estate investors and other real estate professionals would agree that the best way to make money in real estate is by buying investment properties. But it doesn’t stop there.
To make good money, one of the best strategies is to rent the properties out to tenants. They can be rented out as either traditional rentals (long-term rentals) or Airbnb rentals (short-term rentals).
Investing in real estate for a profit boils down to learning how to find real estate investment properties. These are the types of properties that will make money for the investor and, ultimately, the landlord or owner.
If you’re a beginner real estate investor looking to find answers to these important concerns, you’re in the right place. We will discuss how to find real estate properties that will make money for both short-term and long-term periods.
How Do Real Estate Investment Properties Make Money?
To find the best investment properties, you need to consider how to make money with them. Investment properties are also known as income properties. Rental properties are considered the best income-generating properties.
There are two basic ways in which real estate investment properties make money for real estate investors.
First, rental properties make money by being rented out to tenants who pay for a short or long-term stay. It translates into monthly rental income for the real estate investor or landlord. The investment properties should generate rental income exceeding the operating expenses in order to make money and not go in the red.
Second, income properties make money by undergoing real estate appreciation, which simply means that their value goes up over time.
To earn in real estate, you should know how to find real estate investment properties that generate positive cash flow. Ideally, they should turn in a good profit in rental income as they increase in value over time. The best real estate investments will make a good return in both the short and long term.
Related: How to Make Money in Real Estate as a Beginner
How to Find Real Estate Investment Properties That Make Money
To find the right investment property, there are certain factors to consider and steps to take. Let’s discuss them both.
5 Factors to Consider to Find the Best Investment Properties
To find the ideal investment properties, you need to take into account several important factors. These will determine how profitable an investment property is. They include:
1. Location
Where a property is located will give you an idea of its income-generating potential. To get the most out of your investment, you need to find the most ideal location that lines up with your goals. This includes taking a closer look at the city and neighborhood that the subject property is in.
2. Job Market
To find good income properties, you need to look for a location that offers plenty of job opportunities. Doing so is crucial regardless of whether you’re starting a rental property business or just want to flip houses. People are most likely to move to another city where there is plenty of work to go around.
3. Crime Rate
Nobody wants to live in a city where the crime rate is high. Thus, to find the most profitable properties, you need to be located in a safe and secure neighborhood.
4. Economic Growth
As mentioned earlier, people are most likely to migrate to locations where job opportunities are plentiful. Locations with plenty of job opportunities are ones that are growing and thriving economically. You need to find places where there’s economic growth as they are more likely to attract tenants and new residents.
5. Future Development
You should also consider what the future has in store for the neighborhood you’re looking into.
Do future plans involve plenty of economic growth? Are there plans for major companies to come to town? Will that piece of land in a peaceful neighborhood be converted into an industrial place?
All of these things will affect a property’s valuation. So, to find the right investment property, you need to consider the different factors above, too.
What Should Investors Do to Find the Right Investment Properties?
Having said all that, you will need to perform extensive due diligence to find the best investment property that meets your needs. And in order for you to find them, you will need to do the following:
1. Focus on the Location
Location, location, location. Any real estate investor will sooner or later hear (probably many times) that location is everything in real estate investing. While this statement may be an exaggeration, location plays a key role in finding the best real estate investments.
A property’s location will determine the following:
- Which property type to buy (single-family home, multi-family home, townhouse, apartment, condo, etc.)
- The kind of tenants you should target (college students, young professionals, millennials, young families, retirees, etc.)
- Your optimal rental strategy (traditional vs. Airbnb)
- How much rent you can charge
- Your operating expenses (including property tax, property insurance, property management, etc.)
- Rate of real estate appreciation
Try to find a location that has a high demand for rental properties accompanied by a relatively low supply. Also, study the regulatory environment governing both traditional rentals and Airbnb rentals.
Also, you should try to find an area that is expected to undergo major infrastructure and economic developments soon. It will push real estate values up. So, pay close attention to location when learning how to find real estate investment properties with high returns on investment.
To start searching for the best places to invest in real estate in the US housing market, click here.
2. Choose Undemanding Income Properties
Different real estate properties yield different returns on investment. It means they make different amounts of money for the real estate investor. It is generally impossible to summarize that one specific property type makes more than another property type.
For instance, both single-family homes and multifamily homes can be good and bad real estate investments. The same holds true for apartments and condos.
However, there is one general rule that landlords should know: simple, undemanding real estate properties make for better rental properties.
Think about it for a second. You want to find an income property for sale to rent out to tenants. It means people without enough money to buy their own homes are looking for affordable housing options.
So, by choosing an uncomplicated, simple, but pleasant investment property, you are more likely to attract tenants right away. And because you will be charging reasonable rent, you will likely see low vacancy rates. And we know that high vacancy rates are one of the worst enemies of landlords.
Another benefit of investing in undemanding real estate properties is that your operating expenses will be low. And remember, the lower the operating expenses, the higher the positive cash flow. Your cash flow is the difference between your rental income and operating expenses.
Buying simple properties will also most likely undergo relatively higher real estate appreciation. After all, the land is the main asset that appreciates over time in real estate, not the actual structure.
So, when learning how to find real estate investment properties that are more profitable, choose the simple ones.
3. Do Not Neglect Out-of-State Real Estate Investing
When learning how to find real estate investment properties that generate a positive cash flow, we go back to location.
Location can mean a lot of things: urban vs. rural, college towns or university towns, city center vs. suburbs, a particular state, a particular city/town, a particular neighborhood, and more.
When talking about location, real estate investors should also consider the distance between their home and their investment property. Many beginner real estate investors are hesitant to go for out-of-state real estate investing as they prefer to be close to their rental property.
While it is perfectly understandable, it should be emphasized that investors should never overlook the option of investing in out-of-state properties. There are many promising properties to find beyond your backyard. It is particularly important if you live in an overpriced housing market or in a real estate market that simply does not offer good investment opportunities.
So, if you want to make money in real estate investing, you should keep yourself open to all options. Out-of-state investing included.
Remember that often, properties for sale away from home can generate much higher rental income. Such properties will require less operating expenses and provide the potential to appreciate more over time. If you truly want to find promising investment opportunities, never cross out investing in another state.
4. Conduct Real Estate Market Analysis and Investment Property Analysis
One of the first things that any aspiring real estate investor needs to learn is how to analyze data. Performing a real estate market analysis and investment property analysis are two of the best ways to do it.
The analyses are an important part of the process in how to find real estate investment properties. To find properties that will boost your investment portfolio and make money for you, it is essential that you know how to do the relevant analysis.
After you’ve done enough research and selected a possible housing market to invest in, you need to conduct a real estate market analysis. It will help you evaluate the overall state of the local housing market. Additionally, it will give you better insight into the rental market. With the right market insight, you can better understand the property price and rent levels.
If you know how to conduct a proper real estate market analysis, you will never overpay for your investment property. You will also know how much rent you can charge for your rental property.
In the same breath, knowing how to perform investment property analysis is an added advantage to you. You may use real estate comps or rental comps to do so. With these, you can compare your shortlisted investment properties to other properties in the area. You can use this knowledge to find the best property that fits your needs and goals.
Although property analysis might seem like a very time-consuming and demanding task, it is well worth it. Learning how to find real estate properties that will make good money is nearly impossible without it. Purchasing an investment property at the right price and setting the right rental rates will increase your chances of success.
5. Use an Investment Property Calculator
In order to find real estate investment properties that will generate positive cash flow, it is best for a real estate investor to use an investment property calculator.
Also known as a rental property calculator, this real estate investing tool will make the process of investment property analysis easier. It gives you highly accurate results in a much shorter time.
A good investment property calculator will calculate the return on investment related to a rental property. It uses rental income, cash flow, cap rate, and cash on cash return to determine its profitability.
Knowing how to find the expected values for these metrics is of crucial importance before buying an investment property. It will help you know how much money you can make off a property. If you want to be a successful real estate investor, never underestimate the power of a good rental property calculator.
To find the best investment property calculator, you can simply go to a real estate website like Mashvisor. The site’s user interface will make learning how to use the calculator easier and faster compared to other platforms.
Related: Why an Investment Property Calculator Tells You More Than Just Numbers
6. Use Mashvisor
Technology is now considered the best friend of any real estate investor. One of its advantages is that it offers numerous opportunities on how to find real estate investment properties that are profitable. One of the top choices among the best real estate websites is Mashvisor.
Mashvisor offers investors two main features—the Investment Property Search and investment property calculator. Both help optimize the process of searching for, analyzing, and finding the best real estate investments.
Property Search Feature
Mashvisor’s Property Search makes it a lot easier for investors to find the right investment property that aligns with their goals. The user interface is simple enough to use that you find it difficult to learn how to navigate the site.
You simply enter a location (state, city, neighborhood, or zip code) in the search field, and it will give you results in seconds. The results are taken from its regularly updated database that covers almost all real estate markets in the country. Its data comes from reputable sources such as Zillow, Realtor.com, and Airbnb.
You may even customize your search using the real estate heatmap by adjusting the search filters. You can search for top-performing properties according to:
- Listing price
- Monthly rental income (Traditional and Airbnb)
- Cash on cash return (Traditional and Airbnb)
- Airbnb occupancy rate
Mashvisor’s Investment Property Search is the most efficient method to find real estate investment properties that will make you money.
Investment Property Calculator
Mashvisor’s investment property calculator, on the other hand, makes computing for profitability more efficient.
The website uses up-to-date real estate data and uploads it into the system for investors to use. Since the database is regularly updated, it makes knowing how to find the most accurate ROI projections easier to learn.
Mashvisor’s AI supplies the different variables needed to make calculations. However, you may also customize the entries to find the most accurate results for a specific neighborhood or property.
The platform allows its users to search through numerous investment properties across the US with readily available calculations. It makes calculations to find the return on investment projections highly accurate.
The system uses the following for ROI projections:
- Monthly rental income (Traditional and Airbnb)
- Cash flow
- Cap rate (Traditional and Airbnb)
- Cash on cash return (Traditional and Airbnb)
- Startup costs
- Operating expenses
- Airbnb occupancy rate
All the above calculations are based on traditional and predictive analytics, which makes the estimates highly accurate and reliable.
To learn more about how Mashvisor can help you find your next investment property, schedule a demo today.
7. Choose the Best Rental Strategy
Regardless of how amazing a rental property you buy, whether you will be able to make money from it or not depends largely on your rental strategy. That’s why it is crucial to set the right rental strategy for your income property.
Basically, you can decide to rent out your investment property either as a traditional rental or an Airbnb rental. To make the decision, you will need to rely on the results of your real estate market analysis and investment property analysis. It will give you a better idea of which rental strategy yields higher returns on investment in terms of cap rate and cash on cash return.
Alternatively, you can use Mashvisor’s investment property calculator to find out which rental strategy to go with. It suggests the optimal rental strategy for each available investment property based on traditional and predictive analytics.
Once again, Mashvisor will help you on how to find real estate investment properties that make money with the right rental strategy.
Related: Four Things to Consider Before Purchasing an Airbnb Investment Property
8. Consider Hiring a Real Estate Agent
When wondering how to find real estate investment properties that will turn into highly profitable rentals, you may want to hire a real estate agent. Employing a real estate agent is especially helpful if you are a beginner real estate investor.
Despite all the resources available out there, a real estate agent is still a professional who can make your deal a much better one. If you decide to hire an agent, it’s crucial to find one who specializes in investment properties and is well aware of the local housing market.
There are so many real estate agents and brokers that you should be able to find the best one for your particular case and your investment goals with ease. And the best real estate agent will show you how to find real estate investment properties with high profitability potential.
Wrapping It Up
Hopefully, this guide on how to find real estate investment properties that will make money for you will make you feel more confident as a new real estate investor. To keep gaining more and more knowledge about the exciting world of real estate investing and to find the best investment properties in the US housing market, get access to the right investing tools.
A website like Mashvisor makes it easy to find the right properties because of its helpful tools. Countless investors can attest to how the website has helped them acquire profitable properties. It’s easy to use, gives highly accurate market information, and you get more bang for your buck.
To access Mashvisor’s tools for real estate investing, click here to sign up for a 7-day free trial today, followed by a 15% discount for life.