We’ve come a long way from the Stone Age. With all these new technological innovations going on in 2018, it’s no surprise we no longer use cave paintings to communicate. When you decide on owning an investment property, you want to make sure you’re getting the best of the best.
Aside from your personal expertise in investment properties, investment property research is critical for finding your money maker. The world wide web was founded to make all the information in the world available at the tips of your fingers.
Here, we accumulated a guide to performing the best investment property research. This way, you are able to stay in the loop of the real estate business, without missing a thing. Let’s start this expedition.
Let’s Just List ‘Em
For your precious real estate investing times sake, we designed a quick list of what to research when you’re on the hunt for the best real estate investments:
Now, for the nitty-gritty details.
Phase One Of Our Investment Property Exhibition: The Basics
This is significantly important if you’re a beginner real estate investor. You have to get the simple basics down. Get to know the definitions or the real estate metrics, the different real estate investment strategies, and the real estate analytics that value your investment property.
We know this can be a hefty amount of information to hold at one time, so split up your research. Start by understanding what exactly an investment property is, and how you make money in real estate from it.
Then, get an idea of the metrics of property value like cash on cash return and cap rate. Get to know your potential real estate investment strategies and choose one to pursue depending on how well it matches your own real estate investment portfolio.
Once you get your investment strategy down, take a look at the real estate analytics. Real estate analytics are some of the most important indicators of making money in real estate. You can find real estate investment tools, such as Mashvisor, that give you those numbers. The numbers alone stand empty without the definition research. You need to put words to those metrics.
The basics give you strong fundamentals as a real estate investor. Once you get those basics down, you are already 100 steps into the game.
Phase Two of Our Investment Property Expedition: Real Estate Market Research
So you have your eye on an investment property, but you know nothing about the real estate market itself. There are a good amount of attributes to consider when you’re completing the real estate market study of your potential investment property.
Below, we named a few aspects to look at when determining the status of our real estate market:
Buyer’s Market or Seller’s Market?
This is a huge question many real estate investors ask about the market they are investing in. In simple terms, the definitions of the two are:
- Buyer’s Market Real Estate:
The rental property supply exceeds the rental property demand. This gives buyers the advantage over sellers when it comes to price negotiations, as there is more room for consultation in price.
Here, investment properties tend to sell for less and sit on the market for a longer period of time before receiving any offers.
This is a market condition attributed to a shortage of supply (properties) available for sale, giving pricing power to the seller. This property market stands when low supply meets high demand.
Here, the seller of the property in a town with limited inventory gains firm control over setting the house price.
So which is your real estate market? You can identify the market’s condition by determining the inventory. This is one of the main ways you can recognize whether the market is one of sellers or buyers. However, don’t neglect the fact that the real estate market is not consistent.
What is considered a buyer’s market one day may not be so the next, and vice versa. This is why you should always be up to date on your real estate market study.
The Most Famous Real Estate Mantra-Location, location, location
The state, city, and neighborhood all have a piece of your real estate market cake. Each of the U.S. housing markets has built their names over the years. Some have been named the best U.S. real estate markets out there, some the worst. Why? One factor is because of location.
Tourism, attractions, and environment all come into play with the best markets to invest in. Owning an investment property in a U.S. real estate market that is known to be of the best is key. However, if the state alone doesn’t stand alone as the best, the smaller cities and neighborhoods are what support it.
Mashvisor is one of the real estate research tools that allows you to do market and property analysis down to the T. Remember the real estate analytics we talked about previously? Mashvisor’s predictive analytics are just what you need.
To start looking for and analyzing the best investment properties in your city and neighborhood of choice, click here.
Heat map analysis is yet another tool to use in residential real estate market research. Performing comparative market analysis gives you a glimpse at the strengths and weaknesses of a particular neighborhood or area.
Mashvisor describes heat map analysis as “a technique used in investment analysis in general, and in a comparative market analysis in particular, using a map tool and visual cues to find the property that you’re looking to invest in.”
With the use of a heat filter, this analysis helps to identify the difference in performance between one area or another in a neighborhood. This allows you to make the decision of what the best locations in each neighborhood are when searching for an investment property.
Location data can be considered the most important data, as the area you choose will need to deliver between 60% – 80% of your return.
*Que Scary Music*-Vacancy Rates
We both know that the last thing you need as a real estate investor is to be the owner of an investment property that remains empty. Take a look at the vacancy rate in the market you are investing in. If the rates are considerably high, chances are it’s going to be tough to get that occupancy rate up.
A high vacancy rate means there isn’t much demand for your investment property. Uh-oh. However, low vacancy rates would mean that there are a good amount of renters in the market you are in.
Needless to say, you should aim to find yourself in the best case scenario for property investors. This would be being a part of a real estate market with a history of consistently low vacancy rates. Why? Well, this would mean that you are the price maker in terms of rent, rather than the price taker.
Phase Three of Investment Property Research Expedition: The Property Itself
You did the background check and it’s time for the grand finale. Choosing the investment property itself will be rewarding if you did the right research. Now, you have to look at the rental property itself. The best way to “research” when it comes to this is to ask the questions.
How new or old is it? How old or new are the electric and water networks? Are there any damages to the home? Is it physically stable or will there be extra expenses to fix it up? Again, ask the questions.
You need to perform a full background check on that bad boy. This is where those investigator skills really come in handy, don’t you think? With the help of an investment property inspector, you can get an idea of how the investment property physically stands. The small price of an inspection can potentially save you millions down the road. Well worth it, are we right?
Part One of Investment Property Research Expedition: COMPLETE
We say part one because this is only a small portion of what goes into investment property research. Education in real estate investing is great, but we like to believe a good amount of becoming one of the most successful investors is from experience.
We don’t want you nose-diving into the real estate business without any knowledge whatsoever. However, we also don’t want you to hold yourself back just because you don’t think you’re educated enough. Find your balance and trust your real estate investing gut. Take diligent risks with the use of your Mashvisor brain.