Starting an investment property search can be somewhat overwhelming for a beginner real estate investor. The real estate market is so vast, and there are millions of investment properties out there. Where is a beginner real estate investor even supposed to start for a successful investment property search? Well, this guide on the dos and don’ts of investment property search is actually a great start.
Learn how to perform an investment property search and what pitfalls to avoid in order to find the most profitable investments in real estate for the best return on investment.
Do Look for The Best Real Estate Market
An investment property search starts with finding the best place to invest in real estate. This means looking for a real estate market that is not only prospering now, but for which real estate market trends point to a fruitful future for investment properties there. The best real estate market will have the following characteristics:
- Strong and growing economy
- Diversified industries
- Job growth and a low unemployment rate
- Population growth
All of these elements will make for successful real estate investing. Keep in mind that you are also looking for affordable investment properties during your investment property search. Sometimes, a hot real estate market with all of these traits will cost too much and won’t bring a good return on investment.
Start your investment property search off right by analyzing real estate markets with an investment property calculator. Click here to get started.
Don’t Feel Limited to Your Local Real Estate Market
While there are many advantages to buying investment property close to home, a serious real estate investor should consider all and any real estate markets during an investment property search, no matter how far they may be. You don’t want to miss out on great real estate investment opportunities just because the idea of traveling or paying for rental property management doesn’t appeal to you. If your local real estate market is not doing well or is simply too expensive for a good return on investment, you have plenty of great choices in the US housing market.
Do Conduct Neighborhood Analysis
Neighborhood analysis is very important for a successful investment property search. Even though a city’s real estate market is booming, a neighborhood analysis will reveal which specific neighborhoods will be the best place to invest in real estate investment properties. In fact, some neighborhoods may provide negative cash flow even when the rest of the real estate market promises positive cash flow.
Neighborhood analysis is especially important when choosing a real estate investment strategy. Choose the best neighborhoods for Airbnb rentals or traditional rentals with neighborhood analysis.
Don’t Neglect to Investigate the Specific Street
Many times, real estate investors find a great real estate market and even perform neighborhood analysis to find the best place to invest in real estate. But if the investment property is sitting on a street near a noisy railroad track or on a street full of neglected and abandoned investment properties, it can have a negative effect on the success of the investment property. Always investigate the street during an investment property search to find the most profitable investments in real estate.
Do Perform Investment Property Analysis
Once a real estate investor finds the best place to invest in real estate, it’s time to perform investment property analysis. This is the only way to complete your investment property search and find the best investment properties. After narrowing down a few investment properties in the location of your choice based on the price range you can afford, investment property analysis will be the only way to decide which one will be the best real estate investment for you.
With investment property analysis, a real estate investor can find the investment property which will provide the best return on investment. Through analyzing cash on cash return, cap rate, rental income, and occupancy rate, investment property analysis will reveal the most profitable investments in real estate during your investment property search.
Don’t Skip Out on a Professional Home Inspection
It happens sometimes that on paper, an investment property looks like the best real estate investment out there. Investment property analysis returns a great cash on cash return, cap rate, rental income, and occupancy rate. It even factors in basic repairs that you may have noticed upon performing your own home inspection or the ones the current owner disclosed to you. However, without a professional home inspection, you can never have the complete picture of an investment property. A professional home inspection can reveal issues that can’t be seen by the untrained eye such as structural and foundation issues.
Do Perform Real Estate Market Analysis
Now that your investment property search has lead you to an investment property with a potential for a high return on investment, it’s time to make sure the price is right with real estate market analysis. If a real estate investor relies on the listing price only to determine if the investment property makes for a good real estate investment deal, he/she will be making a grave mistake.
Find real estate comps similar to your investment property in the same location. Check out what they sold for in the real estate market and compare the traits of the investment properties. You’ll end up with a range of prices from the real estate comps and will have to determine where your investment property falls.
Don’t Use Too Few Real Estate Comps
Real estate experts suggest using at least three to five real estate comps. If you use only one, you will not end up with an accurate estimate of the value of your investment property. In case you are having trouble finding real estate comps for real estate market analysis, you can always look at the cap rate of the location. Work backward from the cap rate and find out the property value in this way.
Do Use an Investment Property Calculator
Because investment property analysis and real estate market analysis are so crucial to an investment property search, a real estate investor should make sure to get the most accurate results. Since you’ll be performing these analyses on multiple investment properties, you need a way to do it quickly as well. The answer? Use an investment property calculator.
An investment property calculator (or an Airbnb profit calculator) will be your best friend during investment property search. It will do almost everything from showing you which real estate market is the best for investing in property, through performing neighborhood analysis for you, to returning values for cash on cash return, cap rate, rental income, and occupancy rate. Imagine getting all of this information in seconds with minimal work. It’s possible and only possible with an investment property calculator like Mashvisor’s.
To start looking for and analyzing the best investment properties in your city and neighborhood of choice with Mashvisor’s investment property calculator, click here.
Don’t Bother with Spreadsheets and Manual Calculations
If you’re hesitant to use an investment property calculator, know that the other option is spreadsheets and manual calculations. Spreadsheets, whether physical or digital, are a pain in any real estate investor’s side, but especially for a new real estate investor. Spreadsheets along with manual calculations leave so much room for error and take up so much time. Do you want an investment property search to take months on end? Well, then use spreadsheets and calculate everything yourself. No? Then use an investment property calculator.
A successful investment property search is the first step towards a successful real estate investing career. Make all the right moves by following our “dos” and avoid all the common mistakes by adhering to our “don’ts.” You’ll find an investment property search is made so much easier with this guide!