One of the most difficult parts of investing in profitable real estate is finding rental income properties for sale. See how it can be made easy.
Table of Contents
- Can Buying Rental Properties Make You Rich?
- How to Find Rental Income Properties for Sale: A Step-By-Step Guide
- 5 Tips on Finding Rental Income Properties for Sale
Investing in real estate can be fun and profitable if you make the proper choice. Notwithstanding the income and other financial benefits they provide, investing in real estate might be intimidating for a first-time investor.
One can employ a real estate agent in the search. In fact, realtors can be a precious resource when searching for income properties. They can bring insight beyond what a data-driven listing can provide.
However, a realtor is just one of many available resources at one’s disposal when searching for profit-generating income property for sale. Realtors are also generally focused on a specific geography. Their first-hand knowledge of properties and neighborhoods only goes far in a wide-ranging search.
One’s real estate network is also a key to finding off-listing income property for sale. Some of the best property deals can happen outside the formal sales process. However, it is more similar to hitting the lottery than a traditional business plan.
Real estate is a complex industry with many land mines that may ruin your profits. That’s why it’s critical to conduct thorough research before diving in—where Mashvisor can help—so you’re aware of all the benefits and drawbacks of real estate investment.
Can Buying Rental Properties Make You Rich?
Yes. Real estate can be an excellent method to generate income if done correctly. The fact is that a single rental property will not make you wealthy at once. Even two or three units will not be enough (however, it may sometimes work).
For example, if you obtain $300 in cash flow per door every month from a rental home, investing in a duplex will only bring you roughly $7,500 per year. Moreover, three of them will make $22,500 each year.
Compared to a high-income earner’s annual pay of $400,000, that is just a fraction. You’d need a lot of property before you could even think about working less.
So, why should a lawyer, for example, invest in rental properties? The quick answer is that real estate investing isn’t all about the rental property’s income.
The solution varies based on where you are in your investment journey. An investor travels through three different phases while creating a rental portfolio. Each is frequently linked with an initial barrier that most investors face. Let’s see what those phases are and what you can do to overcome them.
- The first phase is when you are just starting. You’re thinking about buying your first rental property, or you’ve already bought one, but the work involved doesn’t seem to match the profit.
- The second phase begins after you’ve acquired numerous additional properties. The cash flow is starting to move, but it is insufficient to make a substantial difference.
- The third phase occurs after you’ve increased your cash flow and replaced some of your revenue. You’re excited about being able to cut down at work and earn some financial independence. However, the procedure feels sluggish, and you’d like to see your cash flow improve faster.
What Is the 2% Rule for Investment Property?
According to the 2% Rule, if the monthly rent for a specific property is a minimum of 2% of the purchase cost, the investor will most likely generate a positive cash flow. The formula is as follows:
Monthly Rent / Purchase Cost = X
If X is lower than 0.02 (the decimal equivalent of 2%), the property value is not 2%. If it’s 0.02 or above, you’ve located a 2% property. That can help determine if a house is likely to generate cash flow.
How Much Profit Should You Make on a Rental Property?
For a single-family property, most landowners make between $16,000 and $55,000 annually in gross revenue. It indicates that the average owner gets a net income of $6,000 to $22,000 annually after expenditures. In reality, some renters earn far more than this, while others make less.
Your actual profits will be determined by a variety of circumstances. You should anticipate earning far more if you own a massive apartment complex in a metropolitan area than if you own a little duplex in the countryside.
Furthermore, your income will be determined by how effectively you maintain your property and how smoothly you run your business.
To overcome the difficulties mentioned above, we’ve put together a step-by-step guide on how to find rental income properties for sale. It is beginner-friendly, and with the help of Mashvisor, you can make a wise decision without putting too much effort or time.
How to Find Rental Income Properties for Sale: A Step-By-Step Guide
Many resources are available to real estate investment professionals looking to find income properties for sale. They are so many that figuring out how to find an income property can become a bit confusing.
Whether you are buying your first income property or already own multiple-income properties, Mashvisor can help. Our site offers valuable tools to make your search more efficient. Here is a guide to how Mashvisor can help any real estate investor find the best income property for sale.
Step 1: Conduct an Investment Property Search
Mashvisor’s original mission was to help make life easier for real estate investors looking for income property for sale. Finding investment property is more difficult in some ways than finding a personal residential income property for sale. The criteria used to evaluate one’s home purchase are not the same as those for rental property.
One smart way to start a search for the best income property for sale is to use a heatmap. Heatmaps help an investor searching for a new condo, townhouse, single family home, or multi-family home sort the available options in a given area.
Rather than showing many small hard-to-understand numbers across a large screen, a heatmap simplifies searches with colors. Mashvisor includes heatmaps that will allow you to quickly determine where the best values for income property for sale are located. Areas with the best rates of a selected metric are shown in dark blue, while poor rates are shown in light blue.
Using Mashvisor’s Real Estate Heatmap
Mashvisor’s heatmaps will help you to narrow down geographical areas with income property for sale that will likely provide the best return on investment.
Once you’ve found the locations with income properties for sale that look promising, find information on the neighborhoods in which the properties are located. You simply click on a given neighborhood, and the platform will display a summary of the real estate analytics in that neighborhood.
The information shown is very helpful. It includes the median home price, traditional and Airbnb rental incomes and cash on cash returns, and occupancy rates. Mashvisor can even suggest whether a neighborhood would be better for long-term rentals or the neighborhood favors Airbnb properties for sale.
Step 2: Narrow Down the Options During Search
After you’ve found which area offers the best selection of income property for sale, it is time to use real estate data to compare properties. Your goal will be to create a list of good income properties for sale and to filter out those that are not as promising.
For example, Mashvisor can help you to sort properties based on top-down metrics. The metrics may include your budget, square footage, and the number of bedrooms and bathrooms. This type of search will work for you regardless of whether you are searching for an Airbnb or traditional income property for sale.
How much data you want to evaluate when searching for income property for sale is really up to you. One can pull together a list of just a few properties for more scrutiny in person at this point or evaluate many at once. Mashvisor will help you either way.
Investors who opt to consider multiple properties can even export Airbnb, traditional, and MLS data if they choose. It puts much of the same industry data into your hands that realtors can access. Using data this way can be demonstrated by one of Mashvisor’s associates. It’s free to try, so go ahead and give it a go.
Step 3: Conduct an Investment Property Analysis
Due to numerous factors, rental property investment research can be complicated, especially for a beginner. Even yet, you don’t need to be a real estate specialist to evaluate an investment property. Anyone with an organized approach and the right tool can achieve it.
Whether you’ve created a list of two-income properties for sale to compare or a list of many to evaluate further, conducting an investment property analysis is your next step. Using a rental property calculator can be very helpful at this point to determine which property will give you the best result long term.
Rental property calculators are tools that will factor in many different variables. For example, the cash invested, interest rate, depreciation, and other costs help you find the most profitable income property for sale. Mashvisor provides a rental property calculator you can use in your search.
Mashvisor Property Analysis Calculator
Although you can still analyze the above data using an investment property research worksheet, it can be time-consuming and exhausting. Spreadsheets are prone to errors as well. The property analysis calculator from Mashvisor is the most exact and effective method for locating property data and computing key metrics.
Mashvisor’s calculator provides users with quickly generated property data using predictive analytics and machine learning approaches. It allows you to do a property evaluation in minutes from the comfort of your smartphone or computer.
All you need to do is enter some general information about your financial needs, and the calculator will handle the rest. The software is fast and accurate since it uses both traditional and predictive analytics.
The list of performance indicators includes both Airbnb and traditional rental strategies. As a result, determining the most successful rental plan for the property under evaluation is significantly easier.
5 Tips on Finding Rental Income Properties for Sale
Here are several tips to consider when looking for rental income properties for sale. Take note of each one to ensure success in your real estate investments.
1. Choose Your Rental Property Investment Wisely
Investing in real estate and properties for sale should not be taken lightly. It involves doing a lot of research, considering several factors, and weighing the pros and cons to ensure success. Some real estate investors do not bother researching the properties they are eyeing, leading to impulsive decisions that may result in failure later.
When choosing rental properties for sale, make sure to visit the properties you’re planning to buy physically. You also need to do a real estate market analysis to get an idea of the potential return on investment. Also, don’t forget to review the property’s tax history and condition.
2. Look Beyond Your Local Area
You can find an investment property for sale not only in your local area but in other towns or states, as well. Broaden your search. Look at areas with high occupancy rental opportunities, high per-capita incomes, low unemployment rates, and healthy local economies.
For example, local real estate investment or even local property ownership may be out of the question if you reside in a high-priced area, such as New York or San Francisco. You should seek regions with strong market fundamentals but much cheaper property expenses.
If you reside in a region where real estate values are low or dropping, you may want to find properties for sale elsewhere.
In any scenario, you may discover that the return on investment (ROI) is higher somewhere else than in your local area. It is a major reason why many people buy outside their home region.
3. Look for Rental Income Properties for Sale With High Cash Flow Potential
The money left over at the end of each day is referred to as cash flow (i.e., your profit after paying all expenditures). While it may sound simple, acquiring solid income flow property isn’t as direct as it may appear.
Purchasing the wrong property for sale might result in “negative” cash flow. It means you’ll need to cover the expenses out of your own pocket. No real estate investor wants to be in such a scenario.
If the property is located in an area with good security and public amenities, it will face fewer risks, which means that you will most likely get a stable income from it. However, if the property offers a potential for high returns, it can also come with more risks. Therefore, it may not be as profitable as you hope.
Again, Mashvisor’s investment property calculator can significantly help in such a situation.
4. Create a Home Inspection Checklist Before Buying the Property
Make sure you’re getting your money’s worth by inspecting the property before buying it. It is an essential step because most sellers will focus only on the property’s best features. Moreover, you need to get it inspected so you don’t miss the ones the sellers may not tell you.
It will be helpful to prepare a home inspection checklist just to make sure that everything is inspected. Some of the things that you may want to include in your checklist are the foundation, roof, pest control, plumbing fixtures, electrical panel and power outlets, paint, and rain gutters.
5. Decide if You Need to Hire a Professional
After purchasing your rental property, it’s time to manage it. You can be the property manager if you are available 24/7, can screen potential tenants, and are knowledgeable about the different landlord-tenant laws. Otherwise, hire a professional to manage your investment property.
Although employing a property management firm provides some benefits, it can be costly. Aside from the cost, hiring a property management firm is not for everybody. Consider the following aspects to see if hiring a management firm is good for your business.
- You own a large number of properties or rental units
- You do not reside close to your rental property
- You’re not looking for hands-on managing
- You lack the time to attend to oversee the property
- You can afford the price of it
Conclusion: How Predictive Analytics Can Help You
Every state has wonderful cities, and every city has nice neighborhoods with good properties. To connect all three, lots of effort and analysis are required. When you identify perfect rental income properties for sale, keep your hopes reasonable. Also, ensure your personal finances are in good shape to allow you to wait for properties to begin generating revenue.
In addition, predictive analytics can also be a very valuable tool. Predictive analytics uses big data from the past to help predict future outcomes. It enables investors to obtain objective information to help guide their investment decisions.
Mashvisor offers predictive analytics tools to help you search for the best income property for sale in your area. Hence, for your real estate investing needs, you can use Mashvisor, which is a leading resource in finding rental income properties for sale. We can help investors in every step of the process.
To get access to our real estate investment tools, click here to sign up for a 7-day free trial of Mashvisor today, followed by 15% off for life.