Real estate investing is a tough sphere to operate your business in. Successful real estate investors are well aware of the fact that making money in real estate requires serious preparation, hard work, and patience. This is simply because investment properties are truly a great source of income, but only if they are among the best real estate investments on the market. That is why real estate investors conduct in-depth research before choosing where to invest in real estate. Every real estate investor knows that location is essential for the prosperity of his/her investment properties. That is when real estate market analysis comes in handy.
Moreover, there are specific characteristics which can help you differentiate the best places to buy investment properties from the worst places to invest in real estate. If you are interested in learning how to differentiate the locations with the best real estate investments from the ones with the worst real estate investments, keep on reading.
#1 The Best Places to Buy Investment Properties
Different locations share certain features, of course. Such characteristics usually play a significant role in the way your investment properties operate and prosper on the market. Sure enough, every real estate investor strives for owning and managing the most successful investment properties. That is why we will provide you with the features that best places to invest in real estate have in common. Are you still wondering where to invest in real estate? Here is what you need to know about the best places to buy investment properties. If you are interested in exploring the best places to invest in the US market, make sure to read “Best Places to Invest in Real Estate: 7 Cities with Highest Returns.”
The best locations for investment properties are typically calm and crime-free neighborhoods. However, it is necessary that such areas are connected to public transportation and have all the necessary facilities nearby. Of course, the best places to invest in real estate strongly depend on the rental strategy you have chosen for your property. For instance, Airbnb rentals are a successful real estate investing strategy when the area attracts tourists or business travelers. When interested in making money in real estate through traditional rentals, ensure that tenants in the market seek such accommodation. Appropriate cities for this strategy are a university town, or industrially and economically advances areas.
Real Estate Data
As previously mentioned, real estate market analysis is extremely useful when searching for new investment properties. Besides providing you with information about the state of the local housing market, comparative market analysis helps you in finding the best places to invest in real estate. It is relatively easy to decide on where to invest in real estate after comparing the data for multiple areas. Make sure that the location of your choice shows high results in performance. Indicators for this are a good cash on cash return, cap rate, and potential rental income. Only through real estate market analysis can the real estate investor understand whether or not financing investment properties in the area is a good investment opportunity.
The Best Real Estate Investments
Besides the location, it is worth mentioning some characteristics of the best real estate investments as well. In order to be making money in real estate, make sure to invest in properties which require minimum repairs. Take into consideration that the most expensive properties are not necessarily the ones to generate the highest positive cash flow. Additionally, make sure you choose the property type of your investment properties according to the investing strategies you wish to adopt. If you want to understand how to find the best property for you, check out “How to Find the Best Investment Property Using a Heatmap.”
#2 The Worst Places to Buy Investment Properties
The time has come for exploring what kind of places and properties real estate investors should avoid. If you are curious to know which the worst places for investing in real estate in the US are, please read “Worst Places to Invest in Real Estate: Avoid These Cities.”
The worst places to invest in real estate are areas with a high supply of rental investment properties and no tenants. Among the worst places to buy investment properties are areas associated with criminal behavior or noisy neighborhoods. Places without easy access to facilities tend to be on the list of the worst real estate investing locations. The same is valid when there is little or no public transportation in the area.
Even if you have chosen a great place for your investment properties, if it is not aligned with your investment strategy, it will still be one of the worst places to invest in real estate. Imagine renting out an Airbnb property. What if it is at the end of the city with no direct connection to attractions and interesting destinations? Most likely, such a place will not attract many guests. Therefore, it will probably generate negative cash flow and cost you money.
Real Estate Data
Again, even if the location seems like the perfect place for your investment properties, conducting comparative market analysis is a must. Imagine investing in traditional rentals in a city which sounds promising- growing economy, many job opportunities, etc. However, the prices in the real estate market are relatively low. Consequently, there is a high demand for buying a property and very low interest in renting one.
Another example is a vacation city which attracts numerous tourists. Nonetheless, the costs of properties are extremely high, the taxes are growing and real estate metrics, such as cap rate and cash on cash return, reveal low results. Such an area can certainly be classified as one of the worst places to buy investment properties as the expenses will be higher than the generated income and you will end up losing money.
The Worst Real Estate Investments
Let’s mention a few things about the worst real estate investments themselves. These are properties that are in poor condition and need a lot of repairing. These might also be properties which are hardly associated with the chosen investment strategy. Moreover, such properties might be investments which do not fit in the specific area. Imagine owning an expensive property in a relatively poor area or vice versa. The chances are you will hardly find any tenants for your rental.
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