Investment Strategies What’s the Best Investment Property Based on Your Investment Strategy? by Nasser Mansur February 18, 2018January 11, 2022 by Nasser Mansur February 18, 2018January 11, 2022 What Makes for the Best Investment Property? When it comes to finding the best investment property in real estate investing, there are multiple factors that need to be taken into consideration. The best investment property in real estate investing is the property that is most suitable for your individual investment, based on a number of factors that may or may not affect your real estate investment depending on the investment strategy that you go with. In this article, we will go through 4 major factors that a real estate investor should consider when trying to locate the best investment property to invest in. These factors will be broken down depending on the different types of investment strategies that most beginner investors use in real estate. If you’re a real estate investor, you need to consider each of these factors and measure the advantages and disadvantages of each investment strategy based on these factors. Once you’ve measured and compared the different factors, you should be able to determine the best investment property for your choice of investment strategy. Best Investment Property – Location The location of an investment property is the #1 factor that needs to be considered by any real estate investor, and it will have the biggest effect on your investment. The best investment property is located in an area that supplements your investment strategy in the short term or the long term to help you achieve the highest returns on your investment. Rental Properties The best investment property for a rental strategy should be located in an area that supports rental properties and where many people rent homes, giving you access to a large pool of tenants. The performance of a rental property in an area depends heavily on the price-to-rent ratio of that area. An area where rental rates are much higher than price rates of properties is typically considered more friendly to buyers than to renters and is generally considered a bad area for investing in a rental property. To find the best investment property for renting out, look for locations that are popular traveling and tourism destinations for a short-term rental strategy, as these locations will typically have a high seasonal pool of tenants. Alternatively, for a traditional or a long-term rental strategy, look for school districts or college towns, as these areas typically have a larger tenant pool and tenants tend to rent properties for longer periods of time. Find the best rental properties for investing in the US! Fixer-Upper The best investment property for a fixer-upper investment strategy is typically located in an area that has a low average price, or an area where construction and renovation costs are low. Fixer upper properties, however, aren’t as affected by their location as other investment strategies. A fixer-upper strategy generally relies more on the type of property that you’re investing in than its location. Buy and Hold The best investment property for a buy and hold strategy should be located in an area where real estate properties have a high potential for appreciation. When looking for the best location for buy and hold investment properties, look for areas that show signs of development or where there are development projects in the making. Indicators that an area might appreciate in value include the construction of new facilities, such as hospitals, schools, or shopping malls, or the development of new transportation services, such as a new nearby airport or a new train station. Also, an area that supports rental properties will give you an advantage, as you will be able to generate an extra cash flow from the property until it appreciates and you can sell it for a large profit. Related: What is Location in Real Estate Investing? Best Investment Property – Time-Frame The best investment property will generate a profit within a time-frame that is desirable by the real estate investor. The different investment strategies in real estate are meant to take place over different periods of time. Rental Properties Rental properties generate a profit on a regular basis. For this reason, the best investment property for a rental strategy is a property that you intend to own and rent out for a long period of time. Since rental properties generate profits in small amounts through rental income, in order for a rental property to cover its costs, a real estate investor will need to hold the property and rent it out for a sufficient amount of time for that property to generate enough rental income to cover the costs of purchasing the property and the expenses of owning it. Fixer-Upper Generally speaking, the faster you can close a deal using a fixer-upper model, the better. Fixer upper strategies are typically short-term investment strategies that allow real estate investors to make a profit over a short period of time. The best investment property for a fixer-upper strategy is an investment property that meets the requirements of a fixer-upper (in a bad condition and in need of renovation) but that does not require extended periods of time before it is back in a livable condition. Buy and Hold As the name implies, a buy and hold strategy relies on holding the property for extended periods of time until its value increases. The best investment property for a buy and hold strategy is a property that is expected to appreciate in value over time. Depending on how quickly you want to sell the property, and how much profit you want to make from it, a buy and hold strategy will typically take several years to reach its maximum value. Related: What Are the Best Short-Term Investment Options in the Real Estate Market? Best Investment Property – Property Type The type of property that you invest in is another major factor in deciding on the best investment property for your real estate investment. The best investment property type will be suitable for your investment strategy as well as compatible with the area that you’re investing in. Rental Properties The best investment property type for rental properties, especially if you’re a beginner real estate investor, is single-family homes. Residential properties, in general, are the main type of real estate properties used as rental properties. This, however, doesn’t mean that rental properties are limited to residential properties, as office buildings are commercial properties and they are considered among the best types of properties to invest in for renting out. While single-family homes and multi-family homes are the most popular types of rental properties for a long-term rental strategy, consider investing in vacation homes and townhomes for Airbnb or short-term rental strategies as they can have a higher potential for profit than long-term rentals depending on the area you’re investing in. Related: What’s the Best Property Type for Short-Term Rentals? Fixer-Upper The best type of real estate properties for a fixer-upper strategy is foreclosed properties. While foreclosures aren’t particularly a property type, the status of foreclosure often means that the property will be listed for sale at a lower price rate than the market’s average. Additionally, foreclosures are usually left in a bad condition and need renovations, making them a perfect match for fixer upper strategies. These foreclosures can be residential or commercial real estate, but commercial properties are typically more expensive and might require more repairs and renovation than residential properties. Buy and Hold The best type of investment property for a buy and hold strategy depends heavily on the area that you’re investing in and the factors that you believe might cause the area to develop. If the area has the potential for appreciation due to the construction of a new school, for example, then it might be a good idea to invest in residential single-family and multi-family homes, or even condominiums. Best Investment Property – Financing The best investment property will mean nothing to you if you can’t afford it. One of the most important factors in real estate investing is the method of financing used to purchase the property, and the amount of time and ability to pay back a debt. Rental Properties Perhaps the biggest advantage of rental properties lies in the financing options that are available to real estate investors when purchasing a rental property. The two main types of mortgages in the US are the 15 and the 30 years fixed interest loans. One of the features of the best investment property is the ability to financially plan around the investment and get the most accurate projections to ensure the future of the investment. Financing options that are available to real estate investors for investing in rental properties as well as the nature of rental properties and how they make money combine to allow real estate investors to plan their finances and determine the amount of income as well as the costs and expenses that their property will generate more accurately and more reliably than any other type of real estate investment. Related: Financing a Rental Property: What the Best Way? Fixer-Upper Although a fixer-upper strategy is generally considered difficult to finance, there are some financing options that were designed especially for this strategy and to help investors find the best investment property for a fixer-upper. The FHA rehab mortgage is the perfect financing option for a fixer-upper due to its short term, which is compatible with the time-frame of the strategy, and because it covers the costs and expenses of repairing and renovating the property as well as the cost of purchasing it. Buy and Hold If you do not intend to rent out the buy and hold property during the time that you’re holding it, then personal financing, or an all-cash purchase, might be the best option for you. If you do intend to rent out the property, however, then the same rules that apply to rental properties will apply to your buy and hold strategy, as you will be able to generate a rental income to cover at least some of the costs and mortgage payments until the property appreciates, and you can make a large profit from it. Bottom Line Any real estate property can be the best investment property if you play your cards right. Depending on the strategy that you want to use, the best investment property should have characteristics that are compatible with your investment strategy and that meets all the required conditions to generate a profit using that strategy. Have you decided on the best investment property to invest in? What strategy are you using? Let us know in the comment section below! For more blogs, guides, and articles all related to real estate investing, visit mashvisor.com/blog and enjoy 1,300+ articles on the different topics in real estate. Start Your Investment Property Search! START FREE TRIAL Start Your Investment Property Search! START FREE TRIAL 0 FacebookTwitterGoogle +PinterestLinkedin Nasser Mansur Nasser is an experienced content writer with a degree in English Language and Literature. He loves writing about all aspects of the real estate investing business with focus on market and property analysis and the best sources which every real estate investor needs in order to succeed. Previous Post Real Estate Investing 101: Top Real Estate Investment Strategies Next Post What Is the Best Type of Miami Investment Property? Related Posts Real Estate Investing vs. 401k: Which Should You Go For? Virtual Wholesaling: The Ultimate Guide for Beginner Real Estate Investors 5 Tricks To Save On Fix-and-Flips How to Make Your Money Work for You? 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