Residential real estate investors have one sole objective in mind: to maximize rental income for wealth accumulation and long-term financial stability.
It goes without saying that real estate investing is one of the best ways to make money and achieve a good return on investment, especially in residential real estate investing. In contrast, commercial real estate investing requires more capital and entails higher risk compared to investing in residential real estate properties. Choosing the best places to invest in the US housing market right now is key to capitalize on your investments and make money.
8 Best Ways for Residential Real Estate Investors to Make Money
1. Choosing positive cash flow properties
Residential real estate investors make money by capitalizing on positive cash flow properties in booming economies. Top real estate investor websites like Mashvisor allow you to find the best positive cash flow properties in an instant, eliminating the need for any manual calculations. With Mashvisor’s investment property calculator, real estate investors calculate their cash flow returns by taking into account all the incurred expenses and cost of the investment. Moreover, top real estate investor websites identify positive cash flow properties as per cash on cash return and cap rate (for both traditional and Airbnb rentals). Don’t believe us?! Head over to Mashvisor to find out for yourself!
2. Investing in locations with high employment growth
Location, location, location is one major criterion which can make or break your investment’s rental income and earning potential. Residential real estate properties reaping positive cash flow returns are located in booming markets with positive economic indicators and an overall economic growth. Run-down homes in great locations are one of the best ways to make money in real estate investing. A successful real estate investor recognizes the best places to invest in real estate by assessing the housing market conditions as well as conducting real estate property analysis. Long story short, the best real estate investments reaping the highest ROI are located in prime locations in booming economies.
3. Choosing a good neighborhood with high rental demand
In tandem to the previous point, zooming in on a good neighborhood in a booming economy is the formula for maximizing tenant demand and high rental income. A successful real estate investor chooses safe neighborhoods with nearby amenities, school districts, parks, and entertainment venues. Moreover, residential real estate investors capitalize on good quality neighborhoods with absolutely negligible crime rate to attract reliable tenants and mitigate the risk of vacancy throughout the year. The best ways to make money is finding residential real estate properties in the the best economic markets with the lowest crime rates.
4. Choosing tenants wisely
Finding the right tenants to rent out your property is just as important as choosing a location to invest. If you select the wrong tenant, expect to incur a huge loss to your potential profits. To avoid this case, make sure to run thorough background checks on prospective tenants and request at least two references. Good quality tenants are a long term investment for landlords and residential real estate investors.
5. Having leverage to charge high rental income
Residential real estate investors have leverage to charge high rent if their rental property is in prime location and attracts high rental demand. Not only do you guarantee high tenant occupancy throughout the year, but you maximize rental income and increase your return on investment simultaneously.
6. Having leverage to finance more real estate
The more leverage residential real estate investors have, the higher their return on investment. With more leverage, real estate investors accumulate home equity and become eligible to buy more real estate investment properties with less cash. Leveraged real estate investing is at its peak when property values go up; as the value of the real estate investment appreciates, monthly mortgage payments remains constant, creating higher return on investment.
7. Keeping up with renovations and repairs
Residential real estate investors understand the real valuation of a home is correlated with the state and condition of the property. Do not neglect or delay repairs and renovations, no matter how small. Delaying will only add to your expenses and hinder your earning potential. Be proactive, not reactive!
8. Hiring a professional property manager
Residential real estate properties must be well managed and kept in the best shape in order to attract high tenant demand and low vacancy rates. Hire a professional property manager to run your real estate business and manage logistics and operations. A good professional property manager acts on behalf of the residential real estate investor and is responsible for a wide array of responsibilities, which include but are not limited to: collecting rent, hiring contractors and managing the property as well as dealing with tenant demands. Keeping your tenants happy is crucial to paying off your mortgage payments and maximizing your rental income in the long run.
The Best Places to Invest in the US Housing Market This Year
Here are the top 5 best places for residential real estate investors:
- Traditional CoC Return: 1.3%
- Airbnb CoC Return: 4.2%
- Traditional Cap Rate: 4.3%
- Airbnb Cap Rate: 7.3%
- Traditional CoC Return: 2.4%
- Airbnb CoC Return: 5.1%
- Traditional Cap Rate: 5.1%
- Airbnb Cap Rate: 7.9%
- Traditional CoC Return: 1.6%
- Airbnb CoC Return: 3.5%
- Traditional Cap Rate: 4.4%
- Airbnb Cap Rate: 6.4%
- Traditional CoC Return: 2.3%
- Airbnb CoC Return: 2.5%
- Traditional Cap Rate: 4.8%
- Airbnb Cap Rate: 5.1%
- Traditional CoC Return: 3.5%
- Airbnb CoC Return: 8.6%
- Traditional Cap Rate: 7.4%
- Airbnb Cap Rate: 12.8%
The best way to make money in residential real estate investing is the best combination of many factors and one that entails much due diligence and research. Do not invest on a whim; study the real estate market and conduct real estate market analysis as well as investment property analysis. Assess future cash flow by taking into account expenses and the cost of managing your rental property. Choosing positive cash flow properties will reap financial returns and good return on investment to align with your business plan. Stay up to date with the ever changing US housing market to make wise decisions in residential real estate investing. A successful real estate investor makes a full informed decision to grow his/her returns and capitalize on real estate investment opportunities.