Despite the many options and the many possible strategies, real estate investing can be divided into two broad groups: residential real estate investing and commercial real estate investing. This means that there are residential real estate investors and commercial real estate investors. If you belong to the first group, the group of residential real estate investors, then you definitely want to hear the advice below in order to have smooth, successful, and profitable real estate investing journey.
The basics of residential real estate investing is that you buy an investment property which you then own and manage and most importantly rent out to tenants – either through short-term rentals or long-term rentals – for a rent. As a result, you receive rental income from which you deduct all your expenses associated with your rental property, and then enjoy the remaining money in the form of positive cash flow. However, there are some factors which all residential real estate investors should consider in order to have a successful rental property. Here is our advice with regards to these factors:
1. Choose your location carefully
Before buying an investment property, residential real estate investors should conduct detailed research of the housing markets across the US and choose the location of their future rental property very carefully. Location is key in real estate investing as it will determine the best type of investment property, the optimal rental strategy, and the potential tenants, among other things. Residential real estate investors should not be limited to locations within the 20-mile radius but should explore property investment options out of state as well. Sometimes the most lucrative real estate markets at the moment are located away from home, but it makes total sense to invest in them because of the profitability which they offer.
Related: Location Location Location – Is Location Really All in Real Estate Investing?
2. Choose the right type of property
Once the best location for real estate investing at the moment has been chosen, residential real estate investors should put efforts into figuring out what the best type of investment property for this area is. Each place is characterized by an ultimate property type when it comes to investments. For example, some places like major cities are so expensive that an investor simply cannot afford buying more than a studio apartment, which actually is a great urban property investment. On the other hand, residential areas attracting young families might be most appropriate for investing in a single family home to attract such tenants. Just don’t assume that because one location is ideal for multi-family homes, so is the next one. Always do your proper research to guarantee yourself the highest profitability in terms of cap rate and cash on cash return. And always always always make sure to have positive cash flow, no matter the location and the type of property.
Related: Buying Your First Rental Property: What Property Is Right for You?
3. Choose the best rental property
Once you have selected the location and the right type of investment property and you have performed real estate market analysis, you should choose the best rental property within your selected location. Here Mashvisor comes in hand because it will give you access to thousands of available investment properties across the US. Not only that, Mashvisor will also provide you with the most crucial numbers on each of these properties such as the property price, the estimated expenses, the expected rental income, the cap rate, the CoC return, the occupancy rate, and others. All these are readily available due to Mashvisor’s investment property calculator, which makes all its computations on the basis of traditional and predictive real estate analytics, which means that all numbers are highly reliable. So, in the search for the best rental property, all residential real estate investors should rely on this hot real estate investing tool.
Related: Real Estate Commission Calculator: Why Use It & How
4. Choose your rental strategy right
After residential real estate investors have landed on the best property for their case, they should continue with investment property analysis to determine the optimal rental strategy for this particular property. Some properties will make more money through traditional renting, while others are able to generate much more as Airbnb rentals. It depends on the location, the property type, and the actual property. If you are not excited about the tedious process of investment property analysis, you can forget all about it and use Mashvisor’s rental property calculator instead. One of the best features of this tool is that it will show you the best rental strategy for any investment property, so you don’t have to go through long, tiresome calculations.
5. Choose your tenants well
Once residential property investors are all done with the purchase of their rental property and preparing it for renting out, they need to start looking for tenants. The importance of this step should never be underestimated. Tenants is what could easily make it or break it for residential real estate investors. Thus, always make sure to develop a diligent screening process and go through it every time you have a vacancy, no matter how much time it might take to find good tenants. If you end up with tenants who will damage your rental property or not pay rent, it is better not to rent out your income property at all. Zero rental income (temporarily) is better than having to cover unreasonable repairs.
Related: How to Pick the Perfect Tenant from Multiple Applications
6. Set goals and follow them
The final piece of advice for residential real estate investors is not a step in the process of buying a rental property and renting it out. It is something that should be done at the very beginning. Each investor should spare some time, sit down, and set investment goals for him/herself. When you put a significant amount of your money, time, and energy into something – such as residential real estate investing – it is crucially important to know what you expect to get out of all this. Are you in it for the short-term gains or the long-run profits? What return on investment do you expect? How much time and effort are you willing and able to put into it? These are all important questions to ask when you set up your real estate investment goals. Once you have your goals all cleared, you need a plan and finally the diligence to follow through it step by step. When you know what your goals are, you should ask yourself whether each investment decision leads to achieving these goals.
Residential real estate investing is one of the top real estate investment strategies for the many options which it offers and the profit which it can lead to. However, there are some tricks which all residential real estate investors should know and apply. Now you have them listed above, so enjoy your journey to becoming a successful residential real estate investor with Mashvisor.