You’ve come to our website, so you must be looking for opportunities to invest in real estate. That’s a great start of the new year! Whether you are a new real estate investor or an experienced one, you must know that researching investment properties is the very first step towards making money in this exciting business. Any real estate investor should first put the needed time and effort to conduct thorough research instead of purely relying on someone else’s opinion – even if this is a real estate agent or another real estate professional – if planning to make money with real estate investments. For you, beginner real estate investors out there, we’ve prepared a list of the best tips to select a property that will provide you with a good return on investment.
Tip on Researching Investment Properties #1: Get to Know Your Location
Location is (nearly) everything in real estate investing, as you’ve heard many times. Your rental property’s value will be greatly determined by the surrounding area. Thus, you need to find out as much as possible about the neighborhood where you plan to invest your money. As a first step, make sure to just drive through the neighborhood, especially during different parts of the day. While your location of choice might be a lively neighborhood during the day, it might be rather too quiet at night. Or the other way around, it might have a nice quiet environment at day time and then turn into a wild mess at night. Remember, a good real estate investment location is one which offers a little bit of both: a lively atmosphere where security is not an issue.
If your initial feel for the neighborhood is good, then take it a step further, get out of your car, and take a walk. Go into the local stores and other businesses and talk to the people who live and work there. After all, these will be your neighbors and/or your tenants. Moreover, talking to local businesses and residents will let you see if the location is destined for growth. The best investment properties are located in areas that are primed for growth.
Tip on Researching Investment Properties #2: Study the Local Future Development Plans
As we’ve just said, the future of the real estate investment location is one of the main factors determining how successful an investment property will be. Thus, the next tip on researching investment properties before you buy a property is to talk to the local government or city council to find out the plans in the pipeline for new developments in your neighborhood of choice. This will straightforward tell you if more people will be moving into the area in the coming months and years or not. Future infrastructure developments are a good indicator of the expected job growth in coming years, which will show you whether more people will be interested in housing and if your property will increase in value. After all, these new migrants would be your future tenants, and their wages will determine how much rent you can charge for your investment property.
Tip on Researching Investment Properties #3: Get Data on Real Estate Comps
Now we are coming to the heart of the real estate investing business: real estate market analysis. In researching investment properties, you absolutely necessarily need real estate comps. These are real estate properties which have been recently closed in your local housing market or are currently being listed. A part of researching investment properties is finding out what price properties similar to the one you intend to buy have been and are selling for to determine if this property price level fits your budget.
To get real estate comps data, you can either talk to a local real estate agent or you can conduct real estate market analysis, also known as comparative market analysis (CMA) on your own. Or, your best alternative as a smart real estate investor would be to use Mashvisor, which will allow you to get all necessary numbers on the local housing market of any US city and neighborhood within a few minutes.
Related: How to Easily Find Real Estate Comps
Tip on Researching Investment Properties #4: Find Out the Local Rent Levels
Your next step in researching investment properties if you plan to rent out yours is to know the potential for rental income before you buy a rental property. If you are planning to buy a single family home, you should determine the current rent being charged as well as what other similar singly family properties are charging to get an idea of your future rental income potential and the expected return on investment for your rental property. If you are interested in buying a multi family home, then you should do the same but focus on this particular type of investment property. Once again, that’s an area of researching investment properties where Mashvisor can be particularly helpful as it will show you the expected rental income for both traditional rentals and Airbnb rentals in the local housing market of any US city and neighborhood.
As a real estate investor in rental properties, you are probably going for the buy-and-hold real estate investment strategy, so you plan to keep renting out your future investment property for a few years before you sell it back to take advantage of real estate appreciation. Thus, you should talk to your real estate agent to determine if rents are expected to go up, remain stagnant, or go down in the neighborhood. Moreover, you should research local statistics such as population growth, job growth, median income, and taxes to determine the viability of investing in real estate in any particular area. Most of this information is available online through state and local government websites.
Related: How Much Can I Rent My House For?
Tip on Researching Investment Properties #5: Visit Properties for Sale
One of the most important tips on researching investment properties is to actually visit real estate properties for sale in the local housing market of your choice. Ask your real estate agent to take you to a few properties for sale which match your budget, investment goals, and personal preferences. It is important though to visit even properties within your price range which you are not interested in too, as this will give you a good idea of the value in the neighborhood in addition to what real estate properties are available and how they would appeal to your target tenants.
When visiting specific properties for sale, make sure to also check out their access to local businesses, schools, and public transportation, instead of the actually property only. Also take the opportunity to talk about all these aspects with your real estate agent as this real estate professional is most knowledge about all these factors which will determine the profitability of your future investment property. Always remember as a real estate investor that the neighborhood is as important as the rental property in the world of real estate investing.
You are now ready to get into the journey of researching investment properties to buy your first (or next) rental property. To make the process of researching investment properties easier and to buy the best rental properties in the US housing market, make sure to sign up for Mashvisor.