Before asking ‘how to buy the best rental property’, a real estate investor should consider the best places to invest in real estate properties first and foremost.
Successful real estate investing takes into account demand drivers on a macro level before honing down on the best rental property. Real estate investors must understand how economic conditions send ripple effects to the housing market and push investors to tailor their business plan for long-term financial success. Making money in real estate is a sustainable and long-term business, if and only if investors understand the market dynamics and their effects on the real estate market as a whole. For one, real estate investors would stay away from deteriorating economies and look for cities with the highest growth potential. Successful real estate investors know how to take action in a seller’s market as opposed to a buyer’s market.
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Real Estate Formula For Success = Knowledge + Planning + Taking Action
How to buy the best rental property requires KNOWLEDGE
Educate yourself and acquire as much knowledge as possible to develop the right skills and competencies to invest in real estate properties for financial success. Read real estate blogs, keep up with real estate news, listen to real estate investment podcasts on your way to work. Long story short, become a real estate expert and invest your time before you decide to invest your money. If you can find a real estate investment mentor, even better.
How to buy the best rental property requires PLANNING
Never invest in anything without proper due diligence and planning. Construct a business plan for your real estate business, and define your investment goals and long-term vision. Do not neglect to search for the best real estate investment strategies to kick start your real estate business. What might work for you may not work for another real estate investor, and vise versa. Learn how to conduct proper comparative market analysis and investment property analysis.
How to buy the best rental property requires TAKING ACTION
Take action and start out small. Do not take a big leap and understand that things take time; start small and slowly build your real estate business. Find the best places to invest in real estate properties before you choose the best rental property for growing your business. Choosing to invest in a prime location ensures positive cash flow returns in the short run as well as in the long run. Analyze your investment property and conduct cash flow analysis to estimate your net income and cash on cash return. You can do this with Mashvisor’s investment property calculator, which gives real estate investors a good estimate of their cash flow returns after discounting their monthly expenses.
Whether you choose to invest in – a single family home, a multi-family home, or even a short term rental strategy – the highest returns are typically available in areas where housing prices are relatively lower. If you are starting out, we advise real estate investors to focus on homes selling for under $200,000; in this way, if the economy is unstable and you need to sell the property, you can find potential buyers much faster if you cannot find potential tenants interested to rent your property.
The best investment properties reap a steady rental income as well as accumulating home equity and appreciation for greater financial rewards in the long term.
Related: How Do You Find the Best Buy and Hold Real Estate Investment Properties?
How To Buy The Best Rental Property in 5 Easy Ways
1. The rental property is aligned with your business plan and objectives
How to buy the best rental property is aligned with your business model and long-term objectives. Make investment decisions based on your real estate strategy and objectives. For example, if your focus is to maximize your rental income to X amount of dollars per month, choose a positive cash flow property that will reap the cash flow returns and cap rate you want to achieve.
2. The rental property is located in a growing market
To reiterate, learn how to buy the best rental property in the best locations; investing in a growing city with employment and job growth is a positive economic indicator as well as a good incentive to buy investment property ensuring a good return on investment.
3. The rental property is located in a good neighborhood
To zoom in on a micro or property level, real estate investors choose good quality neighborhoods to buy rental property. How to buy the best rental property in a good neighborhood, you may ask? Simply put, be aware of nearby amenities like school districts and parks, also watch out for the crime rate and whether or not the area is improving, i.e., people renovating homes, government investment in roads, and developers buying land. A good neighborhood attracts good quality tenants and in turn high rental demand and good rental income.
4. The rental property is in a good shape and requires minor repairs
Tenants stay away from renting a property in a bad shape or requiring major repairs and maintenance. As a landlord, don’t delay minor or major repairs and maintain a high level of upkeep to attract potential tenants and keep current tenants happy.
5. The rental property has a low vacancy rate
The best answer we can give you on ‘how to buy the best rental property’ is summed up as follows: choose to invest in areas with high demand for rental units, low vacancy rate, and high rental income. These are the three major criteria to take into account for buying the best rental property. Having a low vacancy rate is necessary to keep your occupancy rate stable and your cash flow returns afloat.
Related: Become an expert on real estate investing: What is a good ROI for rental property?
Conclusion
‘How to buy the best rental property’ requires much research and due diligence. Consult in a real estate mentor or a real estate professional if you are starting out. Gaining real time knowledge and advice will speed your earning potential and real estate success in due time.
Head over to Mashvisor for more real time insights!