Generating a good return on investment should be the goal of every ambitious real estate investor. While experienced professionals might be looking for very big returns, most investors would be content with a 10 percent return on investment. In fact, an 8-12% cap rate is generally seen as the ideal return by beginners and experienced real estate investors alike. So how does one generate this rate of return on a rental property? And what is the most effective way to find investment properties that can yield a 10% return on investment? This article will delve into these questions in detail and show you how to secure a profitable real estate investment in the simplest way possible.
Related: How to Find Property with a 20% Return on Investment
How to Find a 10% Return on Investment Property with the Rental Property Finder
Thanks to the emergence of a wide range of real estate investment software solutions, finding an investment property that can yield good returns has never been easier. These tools take the guesswork out of the process and allow you to streamline and simplify property search in a way that was not feasible just a few years ago. The perfect example of this is the Mashvisor Rental Property Finder. This powerful real estate investment tool should be your go-to option when you are trying to find a property with a 10% return on investment. Let’s delve deeper into the features that make the Rental Property Finder such as an effective tool.
1- Advanced technologies
One of the main reasons why the Rental Property Finder is such a powerful tool is its reliance on cutting edge technologies. More specifically, advanced AI and machine learning algorithms. The combination of these two technologies enables the Property Finder to identify the ideal cash flow properties in a matter of minutes. Moreover, the AI does more than just search for properties based on standard metrics. In fact, it takes a myriad of other factors into consideration, namely social and behavioral patterns. Thanks to this, you can expect to zero-in on high return properties for sale that are exactly what you’re looking for.
2- Simple filters
Most property search tools come with overly complex interfaces that feature several confusing filters. Needless to say, this could make the process of looking for real estate investments that yield a 10% return on investment more difficult than it has to be. Fortunately, Mashvisor differentiates itself from the pack in this aspect as well. In fact, the Mashvisor filters are straight to the point and focus exclusively on variables that are easy to grasp. Real estate investors can filter listings based on location, distance, property type, rental strategy (Airbnb vs traditional), budget, and the number of bedrooms and bathrooms.
3- Investment property search across multiple cities
As you surely know, finding rental properties for sale does not have to be restricted to a single real estate market. In fact, the more you widen the scope of your search, the quicker you will be able to secure a 10% return on investment. Luckily, the Property Finder boasts a feature that makes this extremely easy. Thanks to the fact that you can search for property in multiple cities at once, you can look for traditional or Airbnb investment property in up to five real estate markets if you sign up for a Professional Plan with Mashvisor.
4- Investment property analysis
The great thing about the Property Finder is that it does more than just aid you in your investment property search. The tool gives you access to one of the most advanced investment property calculators on the market. This will allow you to carry out in-depth analysis for each listing and determine a host of important metrics such as the estimated traditional and Airbnb return on investment (cap rate and cash on cash return), rental income, and occupancy rate.
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Now that you have an idea of how to search for properties that can generate a good return on real estate investment, let’s get into some of the factors that affect your returns.
Understanding the Variables That Affect Your Return on Investment
It is important to note that getting a 10% return on investment is not solely dependent on property search. As a matter of fact, you need to factor in a number of other variables when investing in real estate. Being aware of these is what will allow you to achieve a good real estate return on investment. Here are the variables that you should focus on.
1- Real estate financing
Ensuring a 10% return on investment starts with getting the right investment property financing. As you probably know, nothing tanks an investment faster than an unmanageable mortgage. To avoid this situation, make sure to shop around and explore all the options that are available to you.
Related: 3 Ways for Financing Rental Properties When You’re Already in Debt
You should also use Mashvisor’s investment property calculator to factor in your mortgage info and determine what kind of return on investment you’ll actually get based on your down payment, the loan term and type, and the interest rate.
2- Property management
The way you manage the rental property is a highly consequential factor when it comes to achieving a 10% return on investment. Naturally, owning income properties involves taking on a lot of responsibilities as well as a considerable amount of expenses. It is important that you stay on top of everything and avoid a cost escalation that could hurt your bottom line. You can do this through proper bookkeeping and maintaining organized spreadsheets.
Related: Residential Property Management: Here’s How to Do It Yourself
You can also consider hiring a professional property manager. While it will cost you some of your rental income, professional managers can often help to increase your return on investment in the long run.
3- Housing market trends
Even if you get your property search and investment property analysis right, there is nothing you can do if the housing market takes a sudden downturn. Case in point, the ongoing Coronavirus pandemic has caught everyone by surprise and its long term effects on the housing market are yet to be assessed. The best you can do to mitigate market risk is to avoid taking on large debt and diversify your portfolio when you are looking for other real estate investments.
The Bottom Line
As you can see, finding an income property with a 10% return on investment is fairly simple. Even though we’re in the midst of a global pandemic as of the writing of this article, the real estate market is still going strong and there is simply no reason not to pounce on the chance to close a profitable deal. To start looking for and analyzing the best investment properties in your city and neighborhood of choice, click here.
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