Buying rental property has been a popular real estate investment strategy for many years. Here are some of the advantages of owning rental property as a real estate investor:
- Passive income – One of the main benefits of investing in real estate is that you can enjoy passive income for a long time. This passive rental income could come in handy during retirement.
- Tax benefits – Landlords are also entitled to tax deductions for expenses incurred when running their investment property business. These include property insurance, mortgage interest, maintenance costs, travel expenses, legal fees, and property taxes. There are even tax breaks for property depreciation.
- Appreciation – Since real estate usually appreciates over time, investment properties for sale are likely to be worth more after several years. In this way, you get to make money in the long term when you decide to sell your income property.
- Hedge against inflation – Rental rates and property values usually increase in direct proportion to the cost of living. This makes investing in real estate one of the best ways to protect yourself against inflation.
- Independent decision making – When you invest in real estate, you get to be your own boss. You get to make decisions about how your investment properties are managed and how much rent to charge per month.
However, merely buying a rental income property for sale is not enough. Successful real estate investing is about purchasing real estate for sale that has a high profitability potential. This article will cover some useful search tips suitable for real estate investing for beginners.
How to find rental properties for sale
Here are the steps you need to take to learn how to find investment properties for sale with promise to comprise profitable opportunities:
Step #1: Conduct neighborhood analysis
So, how can you tell if some investment properties for sale will be more profitable compared to others? Though it is not possible to predict the future, you can do some neighborhood research and make an informed investment decision.
Here are some indicators that real estate for sale is likely to be profitable:
- Low property taxes – Owning rental homes means that you will have to pay property taxes. Since the amount charged varies from one area to another, be sure to visit the municipality office for tax information. Investing in an area with low property taxes means that you can make a higher return on investment as your recurring expenses will be relatively low.
- Lots of amenities – Does the area have amenities like parks, gyms, restaurants, and malls? Is the home close to public transportation? The more the amenities around a rental, the higher the rental rates and the higher the chances of retaining long-term tenants.
- Good schools – If you are planning to invest in family-sized homes, consider the ratings of local schools. With good schools nearby, there will be demand for multi family and single family homes for rent.
- Growing job market – Areas with a lot of job opportunities tend to attract more tenants. To research the job market for specific areas, visit the U.S. Bureau of Labor Statistics (BLS) website. In addition, look out for news about major companies moving into the neighborhood. A growing job market means that most of your future tenants will not have to worry about unemployment, which translates into ability to pay rent on time.
- Future development – Visit the local municipality offices or their website to learn about the developments that have been planned for the area. In many cases, a lot of construction projects means that the area is growing. Meanwhile, also look out for developments which could have a negative effect on the local housing market.
- Low crime rate – People want to live in a place where safety is guaranteed. Therefore, neighborhoods that have a reputation of low crime are more likely to attract long-term tenants. Be sure to do your research on the rates for both petty and serious crimes in the area.
- Not in a flood zone – If you purchase a home in a flood zone, you might be required to get flood insurance. This extra insurance will eat into your profits and reduce your cash flow. Buying a home in a location that isn’t prone to natural disasters will help you save cash on insurance costs.
Step #2: Identify profitable areas
Selecting a potentially profitable location is crucial for your success in real estate investing. For this, you need a tool called a real estate heatmap. This real estate investment software relies on real estate comps, current trends, and predictive analytics to show investors the best places to invest in rental property. On the Mashvisor heatmap, real estate investors can narrow down their investment property search using the following filters: listing price, traditional and Airbnb rental income, traditional and Airbnb cash on cash return, and Airbnb occupancy rate.
Step #3: Find investment properties for sale
When it comes to finding a profitable income property for sale, there are several strategies you could use. These include checking local newspaper ads, visiting real estate websites, hiring a real estate agent, driving around a neighborhood, and attending open houses. However, the problem with these methods is that you cannot analyze the profitability potential of potential investment properties without having to collect and organize rental comps on your own. This is why you need a real estate investment software platform like Mashvisor.
Whether you are looking for condos, single family homes, apartments, or multi family investment properties for sale, you will find them on our online marketplace. The vast supply of investment properties for sale includes MLS listings, foreclosures, short sales, auctioned homes, bank-owned homes, tenant-occupied rentals, and off market properties listed by other users. To find listings that match your criteria, you can use filters like your location, budget, expected rental income, expected cash on cash return, type of property, rental strategy, and others.
To start searching for the most profitable traditional and Airbnb rental properties in the US housing market, sign up for a 7-day free trial of Mashvisor followed by a 15% discount for life.
Step #4: Conduct an investment property analysis
Analyzing real estate listings will show you their profitability potential. To perform this analysis, you need a tool like Mashvisor’s rental property calculator. Also known as the investment property calculator, this tool will help you crunch all the important numbers that will show you whether or not an income property is viable. You don’t have to spend weeks collecting data and making calculations using spreadsheets. The rental property calculator can do all this within minutes.
Based on predictive analytics and rental comps, the investment property calculator will provide estimates for expected one-time startup costs, recurring costs, rental income, occupancy rate, cash flow, cap rate, and cash on cash return. The calculator will also show you the optimal rental strategy (traditional or Airbnb) for investment properties for sale.
Whether you want to buy Texas, New York, California, or Florida investment properties for sale, Mashvisor will help you find the best deals. Don’t forget to conduct a real estate market analysis (also known as comparative market analysis) to estimate the value of the home being sold. CMA helps you assess the current value of a property based on the prices of similar properties (rental comps) that have been sold recently to ensure that you don’t overpay for your property. To start analyzing profitable opportunities across the US market, sign up for Mashvisor now.
Related: What Makes a Good Income Property?