The best property to invest in with regards to residential real estate investing is the one that:
Caters to the needs of the local tenants
Let’s face it. There is not just one type of property that is the best one. Depending on the specific real estate market, the current trends in the housing market, the state of the rental market, and the overall situation in the local economy, any property type can be the best property to invest in. For example, in large and expensive cities like New York, studio apartments are emerging as the new hot trend in real estate investments. At the same time, in the suburbs of Boston the best property to invest in might be a single-family home to cater for the kind of tenants available there. Condos and apartments also have a strong potential, if you choose the right location for them. So, instead of looking for the universal best type of investment property, you should know that the best property to invest in is the one that is currently demanded in your location.
Is relatively easy and cheap to maintain
Something that is a bit more universal is the fact that the best property to invest in is a property which does not require too much in terms of both effort and money to maintain and repair. As a real estate investor, you should generally not go for overly luxury rentals that will cost you a fortune to just furnish and keep in a good shape. Instead, choose a property which is simple, yet attractive. You will be able to get much higher profitability in terms of cash on cash return and cap rate from a simple rental property with uncomplicated maintenance work. Remember that cash flow is the difference between the rental income and the expenses associated with owning the investment property, so you don’t want your expenses unnecessarily high.
Works both as a traditional and an Airbnb rental
The rental market is a very dynamic one, as proven by the recent emergence of the Airbnb rental industry. Until recently, owning an investment property and being a real estate investor basically meant renting out an income property to tenants on monthly or even annual basis. This has changed in recent years with the appearance and growth of the Airbnb short-term rental platform. When buying the best property to invest in, a real estate investor should thus aim for a real estate property which could work as both a traditional rental and an Airbnb rental. Even if your local rental market currently favors long-term rentals (because of the many job opportunities, let’s say), tomorrow it might emerge as a new top Airbnb destination (because of an increase in the number of business trips as a result of enhanced trade opportunities, for example). And vice versa, of course. A location which is a major Airbnb hub now might quickly turn into a top traditional rental market. That’s why the best property to invest in should be appropriate for both types of rental strategy.
Is in a top location
The hottest real estate market in the US changes every year, and while it is great to own an investment property in the top housing market, it is also good and profitable to have a rental property in some of the other strong real estate markets, which are more stable. Thus, as a real estate investor, when you select the location of your next investment property, you should look at real estate markets data from a few years back to see which locations have been leading the rankings in the past decade. Location is key in residential real estate investing. The best property to invest in is way more likely to be an average real estate property in an excellent location than a perfect property in a mediocre location. And when we say location, we mean a lot of things such as the actual geographical location, the state, the city, the neighborhood, the available infrastructure, the economy, the labor market conditions, the job opportunities, the security level, the schools around, the close by hospitals, the dining and entertainment options, etc. So, when hunting for the best property to invest in, don’t underestimate the importance of the property location.
Generates positive cash flow
Ultimately, the best property to invest in is one that generates positive cash flow. As a real estate investor, you make money from renting out your investment property to tenants who pay you rent (which to you translates into rental income). Of course, you have to spend some money to keep your rental property going in the form of mortgage payments, property tax, insurance, maintenance, repairs, etc. The difference between the two amounts – the cash flow – is what is left for you to spend or to save, and you always always always have to make sure that this cash flow amount is positive. Otherwise, it will simply mean that your investment property is making you lose money instead of gaining money from it. And the best property to invest in in residential real estate investing, just as in commercial real estate investing, is a property which makes money for its owner. So, before you choose the best property to invest in, make sure to conduct thorough investment property analysis to know exactly how much you will spend on your new property and how much you will make from it.
The dream of every real estate investor is to find the best property to invest in, and it is totally achievable. All you need to do to find this property is to follow the advice above. In your search of the best property to invest in in the US housing market, check out Mashvisor for thousands of available investment properties across the US.