Thinking how to get into real estate investing? Wondering how to succeed with residential real estate investment? Let us tell you right away that the key to profitable rental property investment decisions is finding the right data and conducting lots of analysis. Usually, the real estate analysis needed for buying an investment property amounts to 3 months. Mashvisor has brought down this process to 15 minutes. Read this Mashvisor review to find out how we help you conduct all the different types of real estate investment analysis for buying lucrative traditional and Airbnb rental properties even as a beginner.
Related: What Is Mashvisor? What Can It Do for Real Estate Investors?
Real Estate Market Analysis
As location is one of the most important factors for the success of residential real estate investors, the first type of analysis which they need to conduct is real estate market analysis. There are so many aspects that go into distinguishing the best places to invest in real estate from the bad ones. Some of these non-real estate features include:
- The state of the economy: major sectors, economic diversity, economic growth, etc.
- The job market: types of available jobs, average wage, employment growth, etc.
- Demographics: age distribution of the population, level of education, ratio of homeowners vs. renters, demographic growth, etc.
- Trade and commerce: Business hubs attract more residents as well as more short term visitors.
- Tourism, particularly if you are thinking of buying an Airbnb property
Meanwhile, there are many specific housing market factors that you need to consider to decide if a place is among the top locations for investing in real estate at the moment or not. These include:
- Median home values: Beginners are strongly advised to invest in real estate in affordable markets to avoid bankruptcy and foreclosure.
- Startup costs including closing fees, home inspection, appraisal, and others: These affect directly both your initial cash investment and your return on investment.
- Mortgage rates: The local interest rate on mortgage loans will determine both your initial investment and monthly mortgage payments.
- Traditional and Airbnb occupancy rate: A higher occupancy rate translates into lower running costs related to vacancy and a better rental income.
- Traditional and Airbnb rental income: This is how much money you will receive on a monthly basis from your tenants or Airbnb guests.
- Rental expenses such as property tax, rental income tax, property management, property maintenance, cleaning fees, utilities, and others: Recurring costs are subtracted from the rental income to determine cash flow and rate of return on a rental property.
- Cash flow: An investor needs to always go for positive cash flow properties as this means making money in real estate.
- Cash on cash return: This is one of the most important measures of return on investment in residential real estate investing.
- Cap rate: Yet another crucial metric of profitability in the industry.
Related: Cap Rate vs. Cash on Cash Return: How to Calculate Rate of Return in Real Estate Investing
No wonder that performing diligent real estate market analysis at both the city level and the neighborhood level takes months if you have to gather real estate data on all these indicators.
However, the Mashvisor real estate investment tools have optimized the way to analyze markets to decide if they make for the best places to buy an investment property or not.
At the city level, beginner investors with no previous experience in residential real estate can find the top markets for buying a rental property in the US housing market in the relevant section on our real estate blog. We’ve included both the best places for traditional rentals and the most profitable Airbnb locations. Our real estate blogs are updated all the time to show investors where they should invest their money depending on their budget and preferred rental strategies. You can find out the top locations based on many different factors such as the highest rental income, the highest cash on cash return, the highest cap rate, or the highest Airbnb occupancy rate.
Related: What Airbnb Occupancy Rate Can You Expect in 2020?
Once you’ve selected an affordable US housing market which matches your expectations for return on investment, the Mashvisor real estate investment software platform helps you conduct neighborhood analysis. This analysis is an equally important part of the real estate market analysis as even in small cities different areas provide strikingly different rate of return, not to mention large cities such as New York, Los Angeles, Chicago, San Francisco, Austin, Boston, San Diego, Atlanta, Dallas, and others.
There are two Mashvisor real estate investment tools which help you with neighborhood analysis: the heatmap and the neighborhood pages.
The heatmap is one of the hottest real estate software tools. It provides a color-coded neighborhood map of any US city or town for the following filters:
- Listing price
- Traditional rental income
- Traditional cash on cash return
- Airbnb rental income
- Airbnb occupancy rate
- Airbnb cash on cash return
Just remember that on Mashvisor’s heatmap red means low values and green indicates high values. So, for example, you’d like to look for neighborhoods with red median property price and green Airbnb cash on cash return.
The heatmap tools allows a rental property investor to find the top-performing neighborhoods within his/her budget in any US housing market in order to focus his/her further real estate analysis on these areas.
Relate: Real Estate Heat Map: A Revolutionary Tool for Neighborhood Analysis
Once you’ve taken note of a few such areas, it’s time to move your neighborhood analysis to our next tool: the neighborhood pages.
Clicking on the name of a neighborhood in our search app will take you to the page dedicated to this area on the Mashvisor real estate investment software platform. There you will find all the real estate data as well as traditional and Airbnb analytics which you need in order to make an informed, evidence-based, profitable rental property investment decision. All data and calculations will be readily available for you. These include:
- Mashmeter: This score has been calculated by our software algorithms using predictive analytics to evaluate how good a neighborhood is for investing in real estate. It is represented as a number between 0 and 100.
- Median property price
- Average price per square foot
- Traditional cash on cash return
- Airbnb cash on cash return
- Traditional rental income
- Airbnb rental income
- Number of real estate listings for sale
- Number of traditional rentals
- Number of Airbnb rentals
- Airbnb occupancy rate
- Optimal rental strategy: traditional or Airbnb
- Walk Score
- Historical rental income for traditional and Airbnb rental properties
- Real estate comps: These are properties which have been recently sold, and the available data includes the property type, size, and sale price. This information is a crucial part of any real estate analysis, especially comparative market analysis (discussed below), as it gives investors understanding of the state of the local housing market and fair market values.
- Optimal type of property: single family home, condo, townhouse, multi family home, etc.
- Optimal number of bedrooms
If you are new to the world of real estate investing, you might be wondering where all this data is coming from. You should rest assured that all our data and analytics come from reliable sources which are publicly available. The listings data comes from the MLS (for MLS listings) and Auction.com (for foreclosures). The traditional rental data comes from the MLS and Zillow, while we obtain the Airbnb data directly from Airbnb. In this way, our real estate analysis always reflects the performance of actual real estate listings as well as long term and short term rental properties.
Using Mashvisor’s real estate investment tools up to this point has already saved you a couple of months of hard work trying to get all the numbers and qualitative information needed to decide if a certain market is good for buying rental properties or not.
Comparative Market Analysis
Another chief part of the real estate analysis needed for making profitable rental property buying decisions is the comparative market analysis, or CMA for short. This is analysis which is usually conducted by real estate agents or very experienced investors as it requires deep knowledge of the local US housing market and access to lots of data.
A comparative market analysis helps a real estate investor figure out the fair market value of the type and size of property which he/she is planning to buy. It requires looking for real estate comparables, or real estate comps. These are properties similar to the one you want to purchase which were sold in the past few weeks. They have to be comparable to your target investment property in terms of:
- Property type
- Size
- Year built
- Amenities such as swimming pool, garden, patio, veranda, balcony, parking, fireplace, etc.
- Neighborhood
Related: How to Find Real Estate Comps in 2020
The prices for which such real estate comps were sold will provide you with an idea of what the fair value is for the property you are hoping to buy. But that’s not enough. In order to conduct comprehensive comparative market analysis, you also need to look at current listings, pending listings, and expired listings. Once again, you will need at least a few weeks to do all this – collect the data and do the calculations using traditional spreadsheets.
Luckily enough, the Mashvisor real estate investment app has eliminated the need for comparative market analysis as well. As mentioned above, the neighborhood pages provide users with readily available real estate comps. Investors can look at these recent sales and their features to understand better what they can expect when buying an investment property in this area.
Rental Market Analysis
As if this wasn’t enough data collection and calculation, there’s more real estate analysis that needs to be done for a profitable investment decision. The next step in the process of making the best real estate investments is rental market analysis.
The purpose of this analysis is to find out the predominant rental rates and occupancy rates vs. vacancy rates in the location where you want to invest, for the property type in which you are interested. Once again, this process requires looking for rental comps, or current traditional or vacation home rentals – depending on your preferred rental strategy – and comparing their rental rates. This will help a real estate investor price his/her rental property right to optimize the rental income and return on investment without compromising the occupancy rate.
Related: How to Find Reliable Traditional and Airbnb Rental Comps
Mashvisor helps investors avoid this type of real estate analysis too. All investment properties for sale listed on the real estate investment software platform come with a list of rental comps including both traditional rental comps and Airbnb rental comps. Our real estate investment tools show you how similar these properties are from the one you are considering buying, how close, and how much traditional or Airbnb income they generate.
Just try to imagine the amount of time which you save by not having to conduct this rental market analysis manually, on a few different locations.
Related: How to Conduct Rental Market Analysis with Our Real Estate Investment App
Investment Property Analysis
After finding the best place to buy a traditional or Airbnb rental property and performing property search, it’s time to conduct investment property analysis on the listings which you have selected. This real estate analysis is crucially important for finding the best real estate investment properties with positive cash flow and high rate of return, in terms of both cash on cash return and cap rate.
Related: 4 Best Property Search Tools for Investors in 2020
This means that a real estate investor has to look at each income property for sale to evaluate the price, startup costs, rental income, rental expenses, cash flow, cash on cash return, and cap rate. This is achieved with the help of the real estate comps and rental comps gathered during the comparative market analysis and rental market analysis, respectively.
Alternatively, you can keep using Mashvisor’s real estate investment tools to perform rental property analysis quickly and efficiently. For each property listed on our real estate investment app, you get access to comprehensive investment property analysis. This is conducted by our rental property calculator based on the real estate data and comps discussed above.
For all rental properties for sale, our investment property calculator provides a real estate investor with:
- Property address
- Property type
- Description from the MLS
- Listing agent’s name and contact information
- Photos
- Days on market
- Year built
- Owner occupied status
- MLS ID number
- Number of bedrooms
- Number of bathrooms
- Type of heating
- Type of cooling
- Virtual tour
- Traditional rental income
- Airbnb rental income
- Traditional cash flow
- Airbnb cash flow
- Traditional cash on cash return
- Airbnb cash on cash return
- Traditional cap rate
- Airbnb cap rate
- Traditional occupancy rate
- Airbnb occupancy rate
- One-time startup costs for renting out traditionally and on Airbnb
- Inspections
- Repair costs
- Furniture and appliances
- Closing costs
- Other custom costs
- Monthly expenses for traditional and Airbnb renting
- Insurance
- Utilities
- Property management
- Property maintenance
- Property tax
- HOA dues
- Rental income tax
- Cleaning fees (when buying an Airbnb property)
- Other custom costs
Related: Mashvisor’s Rental Property Calculator: A Guide for Beginner Real Estate Investors
This detailed real estate analysis allows you to evaluate the investment potential of any income property. Importantly, you don’t get to analyze only investment properties for sale already listed on our platform. You can also analyze off market properties whose address you enter into the Mashvisor real estate software platform.
The answer to the question “How to begin investing in real estate for maximum profit?” is “Through diligent real estate analysis”. As shown in this Mashvisor review, our real estate app has automated all types of analysis needed for making lucrative rental property investments including real estate market analysis, comparative market analysis, rental market analysis, and investment property analysis. In total, we’ve turned 3 months of research into 15 minutes.
To start buying top-performing traditional and Airbnb rental properties in any US housing market, sign up for Mashvisor now. Use Mashvisor promo code CORONA60 for 60% off.