How to Choose the Best Place to Invest in Real Estate

A big part of succeeding in real estate investing is finding the best place to invest in real estate. Therefore, here is our guide for all real estate investors on finding profitable locations when buying an investment property.

What are the general criteria for the best place to invest in real estate?

When picking the best place to invest in real estate, here is our list of the general criteria you should be looking for:

Related: What Makes for the Best Places to Invest in Real Estate?

#1. Best place to invest in real estate: Economy

The better the economy, the higher the demand for real estate housing! When buying an investment property, a rental property, in particular, make sure you check the economy in that area. Check to see what major employers there are. Also, check to see the number of employees and their needs. As for how to know all that and what to look for, here are some pointers:

  • The job status: By that, we mean that you should check whether the employment rate is going up or down. If it is going down, then skip the place altogether!
  • Average salaries: Another important thing to check is what the average salary looks like in that area. Is it going up or down?
  • How diversified the job market is: What types of jobs are there? Is it a military base or is it a major software corporate?

#2. Best place to invest in real estate: Population

The population growth is directly related to the job market. People tend to move to places that are economically flourished. That explains why the demand for rental properties is high in locations where major employers are located.

#3. Best place to invest in real estate: Crime rate

It only makes sense for people to look for the safest place to live in. You have to keep in mind that any stolen or broken item is a financial loss for real estate investors. Therefore, do not let the property prices fool you, and check the crime rates at any location you choose to invest in.

#4. Best place to invest in real estate: Schools and transportation

When investing in rental properties, it is important that you check any school districts as well as transportation. People are always looking for easy access to everything! They want to be able to get anywhere,  anytime. Therefore, buying an investment property that is close to transportation points is the best option in terms of location.

As for schools, well, it makes sense to look for rental properties close to schools or universities. That is, especially, if you are intending on renting out to families.

#5. Best place to invest in real estate: Laws and state regulations

The most important thing to consider before buying an investment property is the law. The number one thing you must avoid in the real estate investing business is any legal violations. Check out the state legislation in that location, and make sure to follow the procedures. If you think they are too strict, there are always other places where you can invest. In particular, choose locations with landlord-friendly regulations on the landlord-tenant relationship. Laws and regulations are especially important if you are considering Airbnb rentals.

#6. Best place to invest in real estate: Taxes

Some states or even cities have their own tax regulations. Some states might have higher tax rates than others. Do proper research, and find out what the tax system is in that area.

#7. Best place to invest in real estate: HOA restrictions

One thing you must know when investing in rental properties is the HOA. It stands for the Home Owners Association, which you will be a part of if you are investing in condos. So, being a part of the HOA means that: 1) You must pay annual fees for services and facilities; and 2) You will have to abide by their rules are restrictions. For example, sometimes, you will find condos for sale that have rent restrictions. This means that you won’t be allowed to rent out the property which is the whole point of buying rental properties. So, make sure you check that out.

Related: The Best Tips for Real Estate Investors to Deal with an HOA

What are the specific criteria for the best place to invest in real estate?

Now that we have mentioned the general criteria, here is our very specific criteria that you must take into consideration when picking the best place to invest in real estate:

#1. Best place to invest in real estate: Real estate market analysis

The best way to always spot the best place to invest in real estate is performing a real estate market analysis. Essentially, you will compare your investment property to other properties that are similar to it in that specific location. This gives you a better understanding of the market price as well as the appreciation rate. The reason why real estate market analysis is considered a specific criterion is that it deals directly with the location you are looking to buying an investment property in. Therefore, there is no way for you to go about finding the best place to invest in real estate without performing this step.

#2. Best place to invest in real estate: The property itself

The profitability and the potential of an investment property are not all about the location. It also has to do with the property itself. Therefore, in order to be able to spot a profitable property, you should learn to conduct investment property analysis. This includes calculating the capitalization rate of a property as well as the cash on cash return. Basically, these real estate metrics are the ones used to estimate the return on investment a real estate investor would have on an annual basis from a certain investment property.

However, you don’t have to do all calculations manually in order to calculate these metrics. You can get Mashvisor’s investment property calculator and save your time and efforts on calculating these metrics. If you are investing in rental properties, this tool is a must. Besides the metrics that you get to calculate, it is great for detecting positive cash flow properties. Positive cash flow rental properties mean that you will be able to make money in real estate. Otherwise, a negative cash flow property is the last thing you want in this business.

Related: Real Estate Questions: What Is a Good Return on Investment?

#3. Best place to invest in real estate: A real estate agent

If you are a beginner real estate investor, then we strongly recommend that you work with a real estate agent. An agent is a professional, and therefore, he/she always has access to the best sources when it comes to buying investment properties. He/she will also help you perform the real estate market analysis as well as the investment property analysis we have mentioned before.

Finally

As always, when it comes to real estate investing, Mashvisor has what it takes. On Mashvisor you will find a variety of real estate resources of education as well as listing rental properties and real estate analytics tools that every real estate investor needs in order to succeed in the real estate business.

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