To a new real estate investor, it could seem like only luck would find you an income property with high rental income.
The truth is, any investor can find truly profitable cash flow properties with a great return on investment. You can do this whether it is your first or twentieth rental property, because, contrary to popular belief, it doesn’t require experience.
While experience in real estate investing is helpful, the main factors that drive the profitability of your investment decisions are based on numbers and analysis. Fortunately, using real estate analysis is something anyone can learn to do, and you can get results time and time again, systematically.
How to Find Properties with High Rental Income
If the thought of gathering data, making complicated calculations and comparisons, and conducting rental property analysis overwhelms you, realize that you are not alone. Many investors are unaware of how simple this process can be with the help of real estate investment software.
With the right real estate investment tools, you can:
- start an investment property search,
- estimate rental income, and
- conduct rental property analysis.
If you are reading this article, you don’t have to look any further. Mashvisor can provide you with all the tools you need to find rental properties that promise high rental income.
As you begin your search for high rental income properties, the first question to ask is, “where should I invest?”
Maybe you already have a city in mind. That’s great- but not every neighborhood within a city is the same. You cannot expect the same rental income throughout an entire city.
That isn’t to say, however, that some cities don’t perform better on average than others. If you aren’t sure where to start investing, check out this post on the 50 Best Cities for Rental Income.
Once you decide on a city, you can use Mashvisor’s Real Estate Heat Map to conduct real estate market analysis that will help you determine the most profitable neighborhoods.
Real Estate Heat Map
- Listing prices
- Traditional and Airbnb rental income
- Traditional and Airbnb cash on cash return
- Airbnb occupancy rate
The Heat Map will show you colors indicating the profitability of certain areas. Green means high profit, where red shows underperforming neighborhoods.
With both traditional and Airbnb data displayed in an easy to use visual format, you can determine:
- Neighborhoods you can afford
- Neighborhoods that yield high rental income
- If a traditional or Airbnb investment property will perform better in your neighborhood of choice
You no longer have to collect neighborhood data on your own. Mashvisor will quickly show you the best locations within the city of your choice. Mashvisor’s ability to provide top-notch rental market analysis makes it faster and easier than ever to narrow down your search for high rental income properties.
Investment Property Search
So, where can you start searching for investment properties for sale?
Rental Property Finder
By using Mashvisor’s Property Finder, you can search for income property based on a series of filters:
- Location (search in an unlimited number of cities at once with an Expert Plan)
- Number of bedrooms/bathrooms
- Rental strategy (traditional or Airbnb investment property)
By using predictive analytics and drawing from credible sources, such as the MLS, Mashvisor’s Rental Property Finder will bring you the best possible search results for your needs. The tool pulls up a list of top-performing properties for sale in the location(s) of your choice based on a number of criteria, one of which is rental income.
To start looking for and analyzing the best investment properties in your city and neighborhood of choice, click here.
Rental Property Analysis
However, just because you locate a profitable neighborhood and find properties within it, doesn’t mean you will automatically be getting a high rental income investment. You must evaluate each property individually to calculate your returns.
This will take you into the last phase of your rental property analysis, where you can analyze individual properties to determine if they are truly profitable.
The best way to do this is with cutting-edge real estate investment software such as Mashvisor’s Rental Property Calculator.
Rental Property Calculator
Typically, real estate investors would have to sift through real estate data and make hefty calculations in order to find rental properties with high rental income. While you can certainly do the math by hand, I recommend using Mashvisor’s calculator. This tool automatically estimates the monthly traditional and Airbnb rental income for every listing based on rental comps.
But remember, rental income cannot be the only number you look at. That’s why it’s best to use a tool that can provide much more. After inputting basic numbers like the money down and financing information, Mashvisor’s Rental Property Calculator automatically determines three important metrics:
- Cap rate
- Cash on cash return
- Cash flow
Cap Rate= Net Operating Income/ Value of the Property
When buying rental property, the cap rate is an important metric to calculate. This real estate metric focuses on the market value of a property to determine if you are getting a good deal. It is expressed as a percentage that reflects how much you will make on the value of the asset.
Cash on Cash Return
Cash on Cash Return= Annual Net Cash Flow/ Actual Cash Invested
This metric illuminates how much money you will make back on only the cash you’ve invested. For instance, if you are financing, it will only take into account the down payment and other financing costs.
For reference, investment properties that show at least an 8% cash on cash return are considered desirable.
While every number the calculator provides you with is important, when it comes to finding properties with high rental income, this metric is a good indication of high-income performance.
Cash Flow= Gross Rental Income – Monthly Expenses
Finally, the last number our calculator will produce is the monthly cash flow a property is capable of yielding.
The Rental Property Calculator can estimate rental income, and combined with your expenses, it will determine your net monthly cash flow.
This metric is your best indicator of whether you have a high rental income property, given your personal definition. The cash flow in this equation is the money you will walk away with each month in hand, before income tax.
As long as your cash flow is a positive number, you are making money on your investment. If it is a negative number, you are losing money.
What is considered a high rental income property will vary from investor to investor, so it is a good idea to establish your income goals before starting to look for investment properties for sale. Remember to be realistic in your goals given the area you are investing in and how much you have to spend.
Want to get access to all of the tools you need to find high rental income investments? Sign up for Mashvisor now and get 15% off.