A successful real estate investor knows that the most important step in the real estate investing business is choosing the right rental property. Thus, property investors are in constant search for the best investment property for sale, whether near or far.
Some property investors are ready to go for out-of-state real estate investing as long as they are able to find a good, profitable, and safe investment opportunity there. Others, on the other hand, would not leave the 20-mile radius. Some property investors, especially beginners, stick to finding an investment property for sale near them because they are aware of their local housing market. Plus, it’s easier to buy, manage, and rent out a property nearby – the real estate investor can easily check the rental property before buying, regularly visit the rental property after renting it out is cheap, and there is no need for professional property management (which can be very expensive).
Related: When Hiring Professional Property Management Is a Must
This brings us to the question: is buying an investment property for sale near me a smart real estate investment decision or not? Well, as with most real estate questions, this one has no right or wrong answer. Sometimes an investment property for sale near you could be the best investment opportunity out there, while other times it might be a terrible investment decision. Let’s have a look at what you, as a real estate investor, should do to determine whether or not to go for this option.
Real Estate Market Analysis
You might be aware of your local housing market from just living there, but you’re not an expert unless you’ve already invested in it. Thus, if you’re a beginner real estate investor, you need to perform a real estate market analysis before buying an investment property for sale near you. This will help you understand how the local housing market is doing at the moment.
Related: How to Conduct Real Estate Market Analysis Without a Real Estate Agent
A real estate market analysis is basically gathering data about the current housing market and analyzing it to understand its state. For instance, after performing a real estate market analysis, property investors can understand whether it’s a buyer’s market or seller’s market, what return on investment they can expect from buying an investment property for sale, demand for real estate investing, appreciation, underlying population, job market, etc. Overall, it will help you determine whether or not the location of the rental property is good for real estate investing – after all, location is key to determining the profitability of investment properties.
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Therefore, if you find an investment property for sale near you, the first thing to do is perform a real estate market analysis to see how your local housing market is doing. If you got positive results (like high demand, a growing population, and high appreciation rates) then buying this rental property is a smart investment decision as it will most likely generate a good return on investment.
Neighborhood Analysis
Not every neighborhood in a real estate market is good for buying a rental property. For example, an investment property for sale in a neighborhood across town can be great for real estate investing, while a property in your own neighborhood might not. This is where the importance of performing a neighborhood analysis comes. When property investors conduct a real estate market analysis, they see whether the entire housing market is performing well or not. With a neighborhood analysis, they narrow down their search and filter out the bad neighborhoods.
In addition, as a real estate investor, you probably have a preferred rental strategy (long-term traditional or short-term Airbnb). As you should know, the optimal rental strategy depends on location! One neighborhood might have certain features that attract short-term tenants like tourists and travelers, making it a good neighborhood for an Airbnb rental property. So, if you live in such a neighborhood and this is your preferred rental strategy, then buying an investment property for sale near you is a smart investment decision.
For example, say you’re a real estate investor living in East Arlington, TX and you came across an investment property for sale near you. You’re thinking of buying this rental property and renting it out as a traditional rental. Is this a smart investment decision? Based on data analytics from Mashvisor’s rental property calculator, investing in this rental neighborhood will generate $1,310 traditional rental income and 3.38% return on investment. On the other hand, if your rental strategy was Airbnb, you’ll receive $2,272 Airbnb rental income and 8.82% return on investment! Thus, buying this investment property for sale near you and renting it out as a long-term traditional rental property is not a smart investment decision.
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Investment Property Analysis
After deciding that your local housing market is a good option for real estate investing at the moment and that your neighborhood is also profitable and matches your rental strategy, the final thing to do is an investment property analysis. Property investors need to ensure that an investment property for sale will yield the return on investment they aim for after making the purchase. To achieve this, you need to analyze the rental property before buying it.
Related: Investment Property Analysis: Real Estate Investing
An investment property analysis includes calculations of expenses related to buying, owning, managing and repairing the rental property as well as its expected rental income. It’s best to perform this analysis with a rental property calculator. This real estate investing tool calculates profitability measures like the cap rate, cash on cash return, cash flow, and rental income to help you decide whether an investment property for sale nearby will yield a good return on investment and if buying it is a smart investment decision.
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Investment Property for Sale Near Me – The Bottom Line
To succeed in the real estate investing business, you need to make a smart investment decision. One dilemma that a real estate investor might face is whether or not to buy an investment property for sale nearby. Although there are a number of benefits to owning a rental property near you, this might not be the best option. It all depends on your local housing market, neighborhood, and the rental property itself. Successful property investors perform these analyses before buying an investment property for sale in any market, near and far.
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