If you’ve come to our website, you must be interested in the real estate investing business. Whether you are a new real estate investor or an experienced real estate professional, you must know that income properties are one of the best ways to make money in the world of real estate investments. However, not just every income property is guaranteed to make money for you as a real estate investor. Thus, it is important for all real estate investors to learn how to find and buy the best income properties to make the most money in the real estate investing business. No worries, we come to your help here as we have compiled a list of the traits which make for the best income properties out there. Just sit back, relax, and keep reading for your journey towards becoming a successful real estate investor.
1. The best income properties are found in top locations
Regardless of whether you are a new or an experienced real estate investor, you must have heard many times now that location is everything in real estate investing. That is quite true as location is one of the key factors determining the profitability of all investment properties, including income properties. So, it comes as no surprise that the best income properties are situated in top locations. When you are looking to buy a rental property, do thorough research of the US housing market to find the best places to buy an investment property at the moment. Once you’ve settled on a place, conduct real estate market analysis to assure that the housing market of your choice is indeed a top location for real estate investments. Location will determine how much rental income you will be able to make and how much your operating expenses will be. It will also determine what kind of income properties are most suited for your particular situation and what kind of tenants your rental property should aim to attract.
To start searching for the top locations for real estate investments across the US housing market, click here.
2. The best income properties are simple real estate properties
While real estate investors might be tempted to invest in luxury rentals, thinking that more expensive investment properties will generate higher return on investment, this is not necessarily the case. In most cases, indeed, small, simple, undemanding real estate investments make for the best income properties. Whereas your rental income from such investment properties will be lower, so will be your operating expenses. Indeed, with undemanding rental properties you can do your property management on your own, thus saving from the need for professional property management services. As a result, simple real estate properties tend to result in good return on investment in terms of both good cap rate and good cash on cash return.
Related: What’s a good cap rate for investment properties?
3. The best income properties can be either single family homes or multi family homes
There is no specific type of property that makes for the best income properties. It depends on the location, the type of tenants you are trying to attract, your investment goals, and many other factors. Sometimes single family homes could be the best income properties. Their advantages include dealing with a single tenant at a time, having only one housing unit (rental unit) to manage and take care of, more independence, good return on investment, and higher real estate appreciation over time, among others. Sometimes though multi family properties are the best income properties. Their pros include higher occupancy rates and lower risk of occupancy rate (even if a few housing units are unoccupied, the rest of the rental units are occupied) due to multiple rental units producing rental income. What type of property you will choose for the best income properties in your real estate investment portfolio depends on the location where you buy real estate, your personal investment goals, and your preferences as a real estate investor. Just make sure to conduct thorough real estate market analysis and investment property analysis to always buy the most profitable and best investment properties.
4. The best income properties generate strong positive cash flow
The main – or even sole – purpose of the real estate investing business is to make money for the real estate investor. And, of course, the more money, the better. When you have income properties, the way to make money from them is through positive cash flow, which simply means that your rental income exceeds your operating expenses. The larger the difference between the two, the higher your return on investment. Thus, the best income properties are these investment properties which are able to generate strong positive cash flow, or put in other words – those rental properties which make more money than what they cost on monthly or annual basis. To make sure that you will buy a positively geared property (another way to call a positive cash flow real estate property), always conduct careful investment property analysis to assure good cap rate and good cash on cash return. To opt for the best results, real estate investors are strongly encouraged to use an investment property calculator like Mashvisor’s to save tons of time and efforts while analyzing their future investment properties. An investment property calculator is the real estate investing tool which will help you always buy the best income properties.
Related: Why an Investment Property Calculator Is Better Than Spreadsheets
5. The best income properties are suitable for traditional rentals as well as for Airbnb rentals
One of the most important steps before buying a rental property is to study the local housing market and whether traditional rentals or Airbnb rentals are the optimal rental strategy in this particular market. However, the real estate market is a dynamic one, changing every few years or even months. What is the best rental strategy today might not necessarily be the best rental strategy tomorrow. Thus, in order to be a successful real estate investor, it is advised to always choose rental properties which are suitable for both traditional rentals (long-term rentals) and Airbnb rentals (short-term rentals). Simply put, these are the best income properties in the world of real estate investments.
Related: Four Things to Consider Before Purchasing an Airbnb Investment Property
To find the best income properties in the US real estate market, click here.
As the term itself suggests, an income property is a real estate investment property which is supposed to make money for the real estate investor through regular income. While there is no single best investment property in the world of real estate, there are certain traits which make for the best income properties. To succeed in real estate investing, learn how to find and identify these rental properties.
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