When done in the right way, real estate is one of the most viable investments. Investment property could be commercial or residential properties such as apartments, condos, single family homes or multi family homes. Such investments allow you to build equity over time, generate passive income, generate cash flow for retirement, enjoy portfolio diversification, and benefit from appreciation.
Knowing how to find investment property is a very crucial skill for any real estate investor. Most investors solely rely on real estate investor websites and the Multiple Listing Service (MLS) to find investment property. However, to truly succeed in the real estate business, you need to broaden your investment property search beyond the MLS.
Here is how to find a good investment property without visiting the MLS:
Use a Heatmap
When it comes to where to find investment property, a thorough neighborhood analysis allows you to narrow down your search to just a few investment properties that match your criteria. However, while there is a lot of data out there on the real estate markets of major cities, nothing much is available for neighborhoods. The good news is that investors can use Mashvisor’s Heatmap Tool to get this kind of data! This real estate Heatmap uses different colors to distinguish various neighborhoods based on performance. As a result, it makes the process of narrowing down neighborhoods and finding investment property faster and easier.
Mashvisor’s Heatmap Tool works using property data and predictive analysis. After selecting a city and activating the Heatmap, it will indicate how different neighborhoods are performing using various colors (red, yellow, and green) in different shades. You can filter your search using the following metrics:
- Rental income – The Heatmap Tool will show how much rental income real estate investors can expect using each rental strategy (traditional or Airbnb).
- Airbnb occupancy rate – This metric will help you figure out if Airbnb investment is the way to go in a particular neighborhood.
- Cash on cash return – The CoC return ratio shows if the initial cash investment in a property is worth the returns. Using the Heatmap, you can see the average cash on cash return you can expect from an investment property in a neighborhood.
- Listing price – Cost is a very important consideration when trying to find investment property. Using Mashvisor’s Heatmap Tool, you can easily find neighborhoods with properties for sale that are within your budget. All you need to do is select a city or town and activate the listing price as a filter. The red color on the map will show the areas with the lowest listing prices.
To start analyzing different neighborhoods in the US city of your choice, click here.
Use a Property Finder
Mashvisor’s Property Finder can be used to locate the right investment property based on a real estate investor’s search criteria and preferences. This tool makes use of a wide range of metrics, analytics, and data comps to offer investors lists of properties that would offer a good return on investment.
Using Mashvisor’s Property Finder Tool to find investment property is easy. Choose one or multiple cities or towns you are considering for investment. You can even set a radius for your search, thus allowing you to determine how far you would like the investment properties to be from the town or city. To narrow down your options further, set specific preferences for the properties you are looking for. The main filters you can use to find investment property are:
- Rental strategy (traditional/long-term rentals vs. or Airbnb/short-term)
- No. of bathrooms
- No. of bedrooms
Based on Mashvisor’s analytics and data, the Property Finder Tool will then generate a list of properties with the best overall ratings. The results will factor in the property’s cash on cash return, cap rate, listing price, occupancy rate, rental income, neighborhood score, and Walk Score.
Do you have a free Mashvisor account? Use our Property Finder to find lucrative investment properties that match your criteria in a matter of minutes!
Use an Investment Property Calculator
Once a real estate investor has used the Property Finder or Heatmap Tool to narrow down investment options, he/she needs to carry out a proper investment property analysis. To do this, you will need an investment property calculator. Also known as the rental property calculator, this is an online tool that uses data analytics to find the best investment property in a specific market.
Mashvisor’s Investment Property Calculator is very user-friendly. All you need to do is simply insert basic details about a specific property (cash down payment, financing method, or purchase price). The tool will then show you if the investment property is viable and which rental strategy would work best. In addition, the calculator will provide the profits, expenses, and rental income you can expect from the rental property. Mashvisor’s Investment Property Calculator also offers these three main calculations:
- Capitalization rate – Also referred to as cap rate, this is one of the best ways of determining the potential rate of return for real estate. You calculate the cap rate by dividing the net operating income (NOI) by the property’s value. For instance, if the NOI of a rental property for sale is $50,000 and its value is $400,000, the cap rate would be 8%. Mashvisor’s Rental Property Calculator offers cap rate ratios for thousands of investment properties all over the US real estate market.
- Cash on cash return – This is calculated by dividing the NOI by the total cash investment. The cash on cash (CoC) return shows real estate investors what profit they can expect to generate whether they buy using a mortgage loan or in cash. Generally, rental properties with a CoC return of at least 8% are considered viable investments.
- Cash flow – Cash flow is a real estate metric that shows the amount of profit an investor can expect after subtracting all monthly expenses from the rental income. Mashvisor’s Investment Property Calculator provides estimates for all the expenses involved in managing a rental property such as insurance, taxes, mortgage payments, and maintenance costs. Investors can also adjust expenses or add any unique ones that apply to their location or the prospective rental property. Since a negative cash flow indicates that expenses exceed the profits, investors should only go for positive cash flow properties and this tool allows them to easily do that!
The Investment Property Calculator is a very handy tool for both beginner and experienced investors that want to find investment property. It will not only save you time and money but also minimize the risk of making poor decisions.
Real estate investing for beginners can be quite intimidating. Using the aforementioned real estate investment tools will drastically cut down the time spent to find investment property. In addition, investors will avoid mistakes and increase their chances of making a profitable investment decision.