When you are just a beginner real estate investor, buying an investment property may seem like a new and exciting activity. Still, even one mistake may turn it into a disaster. So, how to ensure success when buying your first investment property? We have created a checklist that will help a real estate investor through the process of buying an investment property. Ready to know how to make money in real estate as well as how to select the best real estate investments? Say no more! Here are the steps you should follow if you aim for success, of course. So, do not waste your time and let’s explore the process of buying an investment property.
#1 Buying an Investment Property: Types of Real Estate
Let’s make it clear: the idea of buying an investment property is too broad and vague. There are many types of real estate properties on the market. All you need to do is to pick one, which you find as “your thing.” However, we are here to ease up the process of the decision making. Therefore, we will present the most profitable real estate investments. What are they? Keep on reading to find out!
Rental Income Property
An income property is a type of property that was purchased for one single reason: to make money, through price appreciation, renting, etc. There are two types of real estate strategies, you can decide on when buying a rental property. Airbnb rental properties and traditional income properties are your choices. Let’s explore both types of rental properties.
An Airbnb income property is a type of short term rental. Tenants or Airbnb guests rent out a property for a short period of time, typically around a week. If a short term rental property is located in the right area and is maintained well, the real estate investor has all the chances to make good money. Airbnb rental properties are known for generating greater rental income per night than long term rental properties. Consequently, such properties are more profitable.
However, why should a real estate investor consider buying a rental property for long term rental purposes, when Airbnb rentals are so profitable? Well, traditional rental properties are considered as another one of the most profitable real estate investments. Why you may ask? First of all, a landlord knows with whom he/she is dealing. The reason for this is that a real estate investor completes a prior background check on the potential tenants. Another thing, is that a lease agreement is being signed. Thus, it is ensuring the landlord that for a certain period of time, he/she will receive a constant rental income.
Many successful real estate investors tend to own a couple of long term rentals in order to generate greater rental income. Ready to invest in traditional rental properties? You choose the right location! How? Make sure to read “The 10 Most Profitable Locations for Traditional Rentals in the US Housing Market at the End of 2017: Cash on Cash Return.”
Fix-and-Flip Investment Property
Buying a rental property not for you? If you are more of a dynamic real estate investor, investing in fix and flip is for you! Fix-and-flip investment strategy is seen as one of the most profitable real estate investments. It’s best applied when a real estate investor plans on making money fast. All you need to do is to buy an investment, renovate and sell it later on for a higher price. Where is the trick here? Well, you need to find a property for a price below the market’s value. Moreover, it should have minimal requirements for repairing. Lastly, you should decide on a price you want to sell it for, and then negotiate to make a profit.
So, how can you find the most profitable real estate investments? Two options: you hire a real estate agent who does the real estate market analysis and investment property analysis for you. Another possibility is that you conduct the real estate market analysis as well as an investment property analysis yourself.
#2 Consider Hiring a Real Estate Agent
Are you new to the real estate industry? Then, consider hiring a real estate agent. “Why?” you would ask. Buying your first investment property is a tricky activity with many underwater rocks. What is meant by that? To put it simply, you may end up with a negative cash flow income property, for instance. The biggest advantage of a real estate agent is that he/she has a well-developed network. Therefore, it will not be very difficult to find the property of your dreams. Additionally, the real estate agent has the access to different real estate investing tools, like a rental property calculator. This makes the process of selecting as well as buying an investment property faster.
Hiring a real estate agent sounds great, but he/she will not work for free! Depending on their experience, a real estate agent might cost you a lot. Consequently, many beginner real estate investors conduct analyses by themselves when planning on buying an investment property. Interested to know if you need a real estate agent? Make sure to read “Do You Need to Find a Real Estate Agent to Buy Investment Property?”
#3 Buying an Investment Property: The Rental Property Calculator
Conducting real estate market analysis as well as investment property analysis is a necessary activity when buying an investment property. However, it will take you months to compare properties in order to find “the one.” This is especially true if you plan on buying an investment property in a huge city. Calculating cap rate, cash on cash return, return on investment, etc. are the crucial parts when planning on buying the best real estate investments. This is why you should use a rental property calculator. This way, you will be able to save time and skip having the headache of conducting analyses manually.
When your goal is selecting only the best real estate investments, you should use Mashvisor’s rental property calculator. This tool will provide you with both the results of real estate market analysis and investment property analysis. You will also need a detailed neighborhood analysis and suggestions for financing strategies, right? Mashvisor’s rental property calculator is the must-have tool which will instantly provide you with this information. Using Mashvisor’s rental property calculator is the answer to the question “How to make money in real estate?” Curious to find out more about the rental property calculator? The make sure to read “Rental Property Calculator: The Must-Have Real Estate Investment Tool.”
To start looking for and analyzing the best investment properties in your city and neighborhood of choice, click here.