One major dilemma that first-time investors face is unlocking the basics of how to invest in real estate. This includes
finding the best place to buy investment property. Sometimes, the signs are right there in your face. Other times, they are more subtle, and you end up needing guidance.
In this article, we’ll be providing you with all the major characteristics to look for in a location when checking out an income property for sale.
But first, why is location important?
Unlike other aspects of a home like the pricing, structure, and condition, the location of a property cannot be changed by the investor. Hence, it is the most important decision you can make when buying rental property. Once you choose an unfavorable location for property investment, it can be hard to reverse that decision or earn a profit on it.
With this in mind, here are some of the major features to look out for when buying an investment property:
1. The neighborhood has future investment prospects
Now and then, we see new neighborhoods spring up from nowhere and become the center of attraction. Everyone starts talking about these places. More importantly, many people start moving there. As a result, investors find them worthy investment opportunities.
A prime example of a city quickly turning into a best place to buy investment property is Austin in the Texas housing market. In 2017, the city was ranked as the place with the highest percentage of positive change in the U.S. It had the fastest job growth, an astronomical 40% increase in employment rate since 2006. The best part for investors was that there’s been a 54% increase in house prices over this same period. And 60% of its residents didn’t start moving into the city until 2010.
As a real estate investor, you want to think long term about investing in real estate, especially in up-and-coming cities.
2. There are good local schools around
Families with children looking to rent houses want to hear one thing: “Are there good local schools around?” If the answer is yes, there’s a higher chance that they will rent your property. Even couples without children may have plans, and quality schools nearby will be a deciding factor when choosing traditional rental properties.
According to a survey by Trulia, 19% of Americans say their dream home is in a neighborhood with a great school district. That number rises to 35% when you include the percentage of Americans who are parents with children below 18.
Going further, according to the National Bureau of Economic Research, there’s a relationship between tuition and the value of a home. For each dollar spent on public schools in a neighborhood, the property price rose by $20.
It is, therefore, safe to say that the value of your investment property is tied to the quality and quantity of local schools present in your choice of neighborhood. Moreover, it will be easier to find good tenants such as families to rent your property to.
3. The best places to buy rental property match the taste of millennials
Millennials make up the majority of the American population who is renting. Over 50% of the rental market is millennials. Locations that end up being the best place to buy investment property often have them in abundance. As a real estate investor, this is one factor that should influence your buying decision. For instance, our spring real estate market 2021 trends show that the prices of homes are currently rising. That makes it harder for a much younger generation like millennials to purchase houses outrightly. Hence, the need to rent.
So, the ideal question to ask when choosing the best rentals is: “Are lots of millennials flocking to this neighborhood?” And this can be for a couple of reasons. Such as the types of houses in the neighborhood — single-family homes or condos.
Generally, the idea is to always be knowledgeable of what drives the millennial population to rent certain kinds of homes at certain times. This information should then be the bane of your location choice. Because, in truth, you want to cater to that category of tenants who have the buying power to rent your properties.
Read more: How Millennials Are Shaping The Vacation Rental Industry
4. There’s a thriving job market
A year ago, we made a list of the best job markets to invest in. Why? Because we understand how important it is to the renting population whenever they’re looking for new neighborhoods. As a new investor looking for the best place to buy investment property, job markets should play an important role in your search too.
A neighborhood or a city with a hot job market will ideally attract the attention of the working population. While the statistics can revolve around the same constant for some cities, it can vary for most locations, with a number of them experiencing a spike at certain periods.
For example, according to the Milken Institute, Ohio County, West Virginia saw an upshoot in jobs, moving up 111 spots to 70th place. For some investors, this piece of data may be enough to start looking to buy properties for rent in Ohio County since more jobs are being created, so people will be moving in and looking for traditional rentals.
5. The neighborhood has a low crime rate
No one wants to live in an environment where they’re always looking over their shoulder because it’s not safe. Whether it is your first rental property or a diversified investment, you want to remove security issues from your offerings. Unsecure areas usually have lower demands for real estate rentals than areas with low crime rates.
According to the Center for American Progress, violent crimes cost Americans over $42 billion in direct costs. More people are looking for ways to avoid these kinds of costs and would choose to live in much safer neighborhoods. Not to mention that you want to avoid the extra costs associated with safeguarding your income property.
Read more: Best Places to Buy Real Estate: 5 Cities With Low Crime Rates
6. Social amenities and attractions are present
The best real estate investments are locations where people have easy access to the things they need the most. From grocery stores to restaurants and gyms. Some renters want basic amenities, while others want a more comprehensive bouquet.
It’s not unusual to see a prospective tenant with a list of neighborhood amenities required before renting in a particular location. And this can vary depending on the demographic you’ve decided to target.
Real estate amenities can have a direct impact on how much you stand to make on a home. This is due to the fact that rental income, occupancy rate, growth potential, and many other factors depend on how much people are choosing to live in a place. And one of these is the quality and proximity of the neighborhood facilities present.
7. The state’s property taxes are favorable
Many people don’t like to hear property taxes, but that’s one of the unavoidable costs of real estate investing. But it’s not all doom and gloom. When looking for the best place to buy investment property, you can narrow your search to locations where the property tax is lower.
This is because investing $100,000 in the Hawaii real estate market is a different exercise from investing the same amount of money in a property in the New Jersey housing market. The tax percentages are quite different and hugely so. You can also check out our list of states with the lowest property taxes if you’re looking for where to invest now.
Read more: 10 States with Low Property Tax in 2021
Best places to buy investment property for traditional rentals
Now that we know how to identify the best locations for buying a rental property, let’s have a look at some of the most profitable locations in the US housing market in 2021. We’ve ranked each of these locations based on their profit potential and according to Mashvisor’s comprehensive real estate market analysis data, which comes from multiple reliable sources in the industry.
Bishop, California
- Median Property Price: $477,450
- Price per Square Foot: $263
- Price to Rent Ratio: 17
- Monthly Traditional Rental Income: $2,350
- Traditional Cash on Cash Return: 4.92%
Inverness, Florida
- Median Property Price: $224,876
- Price per Square Foot: $135
- Price to Rent Ratio: 15
- Monthly Traditional Rental Income: $1,275
- Traditional Cash on Cash Return: 4.59%
Greenville, North Carolina
- Median Property Price: $282,604
- Price per Square Foot: $118
- Price to Rent Ratio: 15.
- Monthly Traditional Rental Income: $1,563
- Traditional Cash on Cash Return: 4.38%
Lakeworth, Florida
- Median Property Price: $274,990
- Price per Square Foot: NA
- Price to Rent Ratio: 13
- Monthly Traditional Rental Income: $1,729
- Traditional Cash on Cash Return: 4.36%
Mesquite, Texas
- Median Property Price: $239,044
- Price per Square Foot: $138
- Price to Rent Ratio: 13
- Monthly Traditional Rental Income: $1,516
- Traditional Cash on Cash Return: 4.08%
To start looking for and analyzing the best investment properties in your city and neighborhood of choice, click here.
Best places to buy investment property for Airbnb rental
If you’re interested in buying an investment property for Airbnb rentals, there are a couple of hot places in the US housing market right now. We’ve analyzed all the properties using Mashvisor’s investment property calculator and ranked the top five places for Airbnb investment.
Covington, Georgia
- Median Property Price: $266,352
- Price per Square Foot: NA
- Monthly Airbnb Rental Income: $2,619
- Airbnb Cash on Cash Return: 7.30%
- Average Airbnb Daily Rate: $164
- Average Occupancy Rate: 60.52%
Abilene, Texas
- Median Property Price: $275,725
- Price per Square Foot: $130
- Monthly Airbnb Rental Income: $2,824
- Airbnb Cash on Cash Return: 7.06%
- Average Airbnb Daily Rate: $172
- Average Occupancy Rate: 66.54%
Greenville, North Carolina
- Median Property Price: $282,604
- Price per Square Foot: $118
- Monthly Airbnb Rental Income: $2,512
- Airbnb Cash on Cash Return: 6.64%
- Average Airbnb Daily Rate: $90
- Average Occupancy Rate: 67.13%
Fayetteville, North Carolina
- Median Property Price: $234,815
- Price per Square Foot: $138
- Monthly Airbnb Rental Income: $2,352
- Airbnb Cash on Cash Return: 6.24%
- Average Airbnb Daily Rate: $101
- Average Occupancy Rate: 73.2%
Concord, North Carolina
- Median Property Price: $346,255
- Price per Square Foot: $170
- Monthly Airbnb Rental Income: $3,025
- Airbnb Cash on Cash Return: 5.64%
- Average Airbnb Daily Rate: $137
- Average Occupancy Rate: 52.8%
To start searching for profitable Airbnb rental properties across the US market, sign up for Mashvisor now.
The easiest way to find the best place to buy investment property
Most times, you really can’t tell on the first look if a neighborhood is profitable for investing in real estate. This is where research comes in and real estate investment tools like Mashvisor can help you figure out the best place to invest money and give you the highest return on investment.
Research with Mashvisor not only shows you available rental properties for sale. It also tells you the cheapest places to buy a house if you’re on a streamlined budget.
To learn more about how we will help you make faster and smarter real estate investment decisions, click here.
