There are many best places to invest in real estate locally and globally, but the objective is to figure out which places score higher in terms of cap rate, cash on cash return, and traditional or Airbnb occupancy rate. A key criterion is to select strategic locations that would increase the appreciation value on your investment property/ies in the long term. To see high ROI on your real estate investments, you have to do lots of searching and comparing key metrics in the cities you are interested in investing. The best places to invest in real estate last year is not set in stone and does not necessarily carry on to stay the best in consecutive years. You have to factor in key economic and social events that might increase a property’s value in one year and lower it in the next. For novice investors, this task might be a little challenging but with the help of many analytical tools like Mashvisor, you can readily access and find thousands of lucrative properties across the US without a worry. If you are not comfortable of doing this on your own, hiring a real estate agent might also be a good idea for further guidance on the matter.
Related: The Pros and Cons of Hiring a Real Estate Broker
8 Key Criteria to look for before buying your rental property
- Neighbourhood
Whether you want to buy a rental property or own a new home, it is important to pay attention to the quality of the neighbourhood you are investing in. Your job is to become a neighbourhood expert and understand the long term positive repercussions of selecting a good area over not-so-good premises. Consider fixing and flipping a rental property in a great neighbourhood to give you the best return on your investment. Furthermore, the quality of the neighborhood you choose will attract different types of tenants and vacancy levels. For example, buying real estate near a university will attract lots of students and you will face a volatility in vacancy rates. Ultimately, look for safe neighbourhoods with easy access to public transportation, shops, and entertainment. A good quality neighborhood is a prerequisite for the best places to invest in real estate.
Related: Investing in the Right Neighborhood
- Property Taxes
Property taxes are impossible to avoid, but are not unified across the states. Before you plan on investing in a property, make sure you know how much tax will be deducted from your rental income. Check out the official 2017 Property Taxes by State compilation before you decide which city to invest in. However, keep in mind that many best places to invest in real estate might carry high property taxes, but that may not always be a bad thing if the neighborhood guarantees long term tenants and low vacancy.
- Education & Entertainment
Consider buying rental real estate nearby reputable elementary or/and secondary schools. If you plan on renting your single family or multi-family home, good chance these tenants already have kids or plan on having kids in the near future. No only do you need to pick a good neighbourhood for your rental property, but choose one with easy access to shops, restaurants, entertainment, and public transportation that are considered important to your potential tenants. All in all, these facilities affect your monthly income and the overall value of your rental property in the long run. The best places to invest in real estate are strategically situated near the best commercial districts and public transportation.
- Crime Rate
This criterion is very important to factor in and can make or break the value of your real estate investment property. It goes without saying that no one wants to live in a place with a high crime rate and violence. The best places to invest in real estate are in safe areas and maintain a very low criminal activity all year round. To make things easier for you, check crime statistics and police presence in the area of choice.
5.Employment vs Unemployment
Another no brainer! When you consider a property for investment, make sure location comes with growing employment opportunities. In the world of real estate, areas with high unemployment rate trump areas with regressing job growth. Check out the U.S Bureau of Labor Statistics to decipher the best places to invest in real estate.
- Residential and Commercial Construction
There is a positive correlation between growing cities and a rise in residential and commercial construction. Cities with a good growth rate attract more tenants and increase the price of the surrounding properties. In the best places to invest in real estate, you see a big presence of new apartments, residential and commercial buildings etc., take it as a good omen for your real estate business prospects.
- Rental Income and Vacancies
The best places to invest in real estate maintain;
- Low vacancy fluctuations
- High rental income
In a nutshell, high vacancy rates lower rents while low vacancy rates raise rental income. Also, calculate the average rent aka rental comps in the area of choice, and make sure it covers all your expenses i.e. mortgage payments, taxes to maintain a good ROI on your rental property.
- Cost of Insurance
High insurance costs pose a hindrance to a profitable real estate investment. Make sure to pick an area with less risk to mitigate your insurance costs as a landlord. Landlord insurance costs is 15% – 20% more than homeowners insurance. Also, if an area is susceptible to natural disasters, paying higher insurance costs are surefire way to eat away at your rental profit.
Related: How Can you be Making Money in Real Estate in Expensive Cities?
Invest in good properties that carry positive KPIs to a successful real estate business portfolio and make sure you do enough research about the potential property before you seal the deal. Mashvisor can save you lots of time and speed the process in finding a real estate property with a positive cash flow cycle. Remember, the best places to invest in real estate bring you more money and higher returns in the long run.