Investing in rental properties is not only the most common way but also the best way to make money in the world of real estate. Property investors enjoy many advantages of such investments including a stream of rental income, increasing home equity, real estate appreciation, tax breaks and others. That is, of course, if they’re investing in the right location! After all, the location of investment properties controls the factors that determine how profitable they will be.
As a beginner real estate investor, you might think it’s more efficient to invest in a rental property near you. While that might be true to a certain extent, it’s not necessarily the best investment decision. To succeed in real estate investing, you must be willing to find the best locations that yield the highest return on investment. This means you might need to consider out-of-state real estate investing! If you’re wondering “How do I determine if I should invest in rental properties near me or an out-of-state investment property?” then you need to ask yourself these questions:
Is There a Demand for Rental Properties Near Me?
The first factor that location determines which affects the profitability of an investment property is the demand in the real estate market. This is something property investors must know the answer to simply because there’s no point in owning rental properties near me when there are no tenants occupying them and paying rent. Find out what makes certain cities in-demand for renters with a high occupancy rate and ask yourself: Do these exist in my local housing market?
Furthermore, gather information about the local housing market such as its economy, job growth, population growth, the price-to-rent ratio, and whether it’s a buyer’s market or a seller’s market. All of these affect the rental demand for investment properties in a real estate market. If you find that they indicate an unprofitable investment, then you should consider buying an out-of-state investment property.
Related: Top 10 Real Estate Markets for Buying Rental Property in 2018
Are Rental Properties Near Me Affordable?
If you’re thinking about starting a real estate investing business by renting out your own home, you can skip this question. However, many beginner property investors decide to buy another property specifically to rent it out and turn it into a money-making machine. If that’s the case for you, the first thing you should look into is property prices in your local real estate market. In other words, ask yourself: Can I afford to buy rental properties near me? Beginner investors are advised to NEVER buy what they can’t afford!
In an overpriced real estate market like San Francisco, you won’t be able to make a good ROI unless your rental property generates an unrealistically high rental income to make up for the high property prices. One tip we can give you here is to invest in buyer’s markets – the supply of homes for sale is higher than the buyers. Thus, properties are more affordable in such markets. A real estate market analysis will help you find the answer to whether rental properties near me are affordable.
With Mashvisor’s property finder tool, you can find an affordable investment property in any city across the US housing market. Just select your city/cities of choice, set your budget and use different filters to control your search results and voila! You’ll be given a list of the best properties that not only match your criteria but provide the highest ROI in the location. Do you have a free Mashvisor account? Click here to use our Property Finder and find properties in a matter of minutes!
Are Rental Properties Near Me Positive Cash Flowing?
Finding positive cash flow is essential if you’re looking to make money from rental properties. In real estate investing, property investors calculate cash flow by subtracting their monthly expenses from the monthly rental income. You always want the final number to be positive, indicating you’re actually making a profit. If it’s negative, on the other hand, it means your rental income can’t keep up with your expenses like property tax, insurance, utilities, etc.
Related: How to Find Positive Cash Flow Properties in the US Housing Market
In other words, you should ask yourself: Can rental properties near me make a good rental income? A real estate market analysis will also help you here in finding if your local housing market offers positive cash flowing investment properties. In addition, performing a rental property analysis is an important step to determine the profitability of the property itself. If you don’t think you can perform these analyses on your own, make use of Mashvisor’s investment property calculator.
This real estate investing tool gives property investors the ability to compare and analyze different locations and different rental properties in the same real estate market. It provides them with data analytics including the median property price, rental income, cash on cash return, and cap rate – all of which are used to evaluate the profitability of an investment property. To find and analyze investment properties in your city and neighborhood of choice, click here!
Can I Afford Professional Property Management?
As a beginner real estate investor, you might think “It’s better to invest in rental properties near me because their proximity makes it easier and more efficient to manage them.” This is definitely a valid point, we can’t argue with that. But what if your market research and analyses indicate that out-of-state real estate investing is, in fact, the smarter investment decision? Does it mean you’re going to just give up your dream of becoming a real estate investor and owner of a rental property?
What if we told you that managing out-of-state investment properties is not only possible but also easy. We’re talking about hiring professional property management! These companies will take care of your property while you sit back and enjoy a passive rental income. Keep in mind though, this is not a free service – you’ll have to add management fees to your monthly expenses which might affect your profit margin. Thus, make sure you know your financial standing and expected rental income to assure you can afford professional property management before buying an out-of-state rental property.
Related: When Hiring Professional Property Management Is a Must
The Bottom Line
Location plays an important role in achieving a successful real estate investing career when owning a rental property. Therefore, before asking yourself how to find rental properties near me, you should first find out if your local real estate market is even a good option. To start searching for the most profitable investment properties in any city and neighborhood across the U.S, sign up for Mashvisor and make use of the tools we have to offer! To start out your 14-day free trial with Mashvisor, click here.
Ready for the next step? Read: How Can I Find Real Estate Property for Sale Near Me?
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