To find the best investment property in real estate is your ticket to making lots of money and guaranteeing positive cash flow returns as well as financial security in the long term. The best rental income properties share similar characteristics, and it is up to the real estate investor to identify the best places for investment properties to reap a good return on investment in terms of high cash on cash return and high cap rate. The best rule of thumb to avoid, or better yet mitigate, high vacancy risk and high tenant turnover is to choose safe neighborhoods in prime locations and booming economies. Whether you choose a traditional rental strategy or an Airbnb rental strategy, location is a key determinant of the success or failure of your investment property.
9 Features of the Best Investment Property
1. Location is a key prerequisite for the best investment property
No surprise here! Choose to invest in real estate in thriving economies, good areas, and safe neighborhoods. The best investment property is located in areas with low crime rates and good nearby amenities (i.e., schools and parks). To elaborate further, look at the bigger picture in terms of the city you want to invest in, make sure you invest in places with thriving economies, high employment rate, and high economic growth.
2. Positive economic indicators
Becoming a real estate investor takes lots of research and planning. Do not invest in random places without conducting proper real estate market analysis. Real estate investing is your business, so make sure you analyze and study the housing market you want to invest in. Know how to conduct comparative market analysis to grow your rental income potential and maximize your return on investment. The economy plays a huge part in the upturn or downturn of the housing market. If the economy is in a downturn, property prices plummet, and real estate investors might incur major losses. To mitigate this risk, choose rental income properties in healthy housing markets looking sunny side up. To find the best investment property, real estate investors look to the bigger economic picture before honing down on the investment property itself.
3. Attractive property with enhanced home appeal
If you want to attract the right tenants, you must ensure your investment property is in a great shape. Tenants stay away from rental properties requiring major repairs and renovations. As a landlord, do not delay major or minor repairs because delaying can hurt your wallet down the line and eat into your profits. Also, make sure to enhance the appeal of the home, i.e., adding a pool in the backyard or growing a nice garden around the house can make your rental property stand out in a good way.
4. High rental income and low vacancy risk
The best investment property with good ROI gives landlords the leverage to charge high rent and find good quality tenants in a relatively shorter period of time. Moreover, rental properties in good areas reap high occupancy rate, high cap rate, high cash on cash return, and low vacancy risk. Mashvisor’s investment property calculator gives real estate investors an estimation of the overall return on investment by factoring in their expenses and cost. Mashvisor also cuts your time in half because it allows real estate investors to find the best investment properties by a click of a button.
5. Positive cash flow returns
A positive cash flow property is the best investment property. Basically, you want to buy a rental property reaping a net profit that is greater than the sum of your expenses. It is crucial real estate investors conduct comparative market analysis, including a cash flow analysis to identify the best investment property for growing their real estate business.
6. Low property taxes
The best investment property is in a location with low property tax. Paying too much taxes on your rental property can be a huge hindrance to your earning potential. Make sure you are fully aware of the tax laws in the city you want to invest in.
7. High cash on cash return and cap rate
The best investment property reaps high ROI. To be more specific, you want to look for the cash on cash return and cap rate before you decide to buy your first rental property. The higher the return on investment, the better. Make sure your numbers are in the positive.
The best investment properties accumulate appreciation over time and essentially increase the rental property’s worth in the long run, given a healthy economy. The buy and hold real estate strategy is a sound investment for many real estate investors because they collect short-term rewards in the form of rental income and gain long-term appreciation when they do decide to sell it.
Best Places to Invest in the Best Investment Property This Year
If you are looking to buy your first rental property this year, we give you the best places for the best investment property right now.
1. Sacramento, California
- Median Property Price: $449,000
- Traditional Rental Income: $1,370
- Airbnb Rental Income: $2,210
- Traditional CoC Return: 1.3%
- Airbnb CoC Return: 4.2%
- Traditional Cap Rate: 4.3%
- Airbnb Cap Rate: 7.3%
- Airbnb Occupancy Rate: 62.1%
2. Charlotte, North California
- Median Property Price: $441,000
- Traditional Rental Income: $1,640
- Airbnb Rental Income: $2,300
- Traditional CoC Return: 2.4%
- Airbnb CoC Return: 5.1%
- Traditional Cap Rate: 5.1%
- Airbnb Cap Rate: 7.9%
- Airbnb Occupancy Rate: 52.6%
3. Raleigh, North California
- Median Property Price: $492,000
- Traditional Rental Income: $1,560
- Airbnb Rental Income: $2,290
- Traditional CoC Return: 1.6%
- Airbnb CoC Return: 3.5%
- Traditional Cap Rate: 4.4%
- Airbnb Cap Rate: 6.4%
- Airbnb Occupancy Rate: 52.0%
4. San Diego, California
- Median Property Price: $828,000
- Traditional Rental Income: $3,000
- Airbnb Rental Income: $2,980
- Traditional CoC Return: 2.3%
- Airbnb CoC Return: 2.5%
- Traditional Cap Rate: 4.8%
- Airbnb Cap Rate: 5.1%
- Airbnb Occupancy Rate: 66.6%
5. Las Vegas, Nevada
- Median Property Price: $225,000
- Traditional Rental Income: $1,210
- Airbnb Rental Income: $2,070
- Traditional CoC Return: 3.5%
- Airbnb CoC Return: 8.6%
- Traditional Cap Rate: 7.4%
- Airbnb Cap Rate: 12.8%
- Airbnb Occupancy Rate: 28.5%
Invest your time to acquire the right real estate education to make smart investment decisions. Successful real estate investors study the housing market to find the best places for investment first and foremost. Become a real estate expert and see your returns double in no time. Mashvisor will help you in all these. That’s how you will learn to buy the best investment property each and every time.