Buying Investment Property Learn How to Find Real Estate Investment Properties That Will Make You Money by Daniela Andreevska January 16, 2018February 17, 2019 by Daniela Andreevska January 16, 2018February 17, 2019 Real estate investing is first and foremost a business, and the purpose of any business endeavor is to make money. Thus, to learn how to invest in real estate is equivalent to learn how to make money in real estate. Maybe the most beautiful aspect of real estate investing is the diversity of options to invest and make money. Many experienced real estate investors and other real estate professionals would agree that the best way to make money in real estate is by buying investment properties and renting them out to tenants, as either traditional rentals (long-term rentals) or Airbnb rentals (short-term rentals). This means that investing in real estate for a profit boils down to learning how to find real estate investment properties that will make money for the investor and ultimately the landlord. If you are a new real estate investor looking for an answer to this important question, you have come to the right place. Here we will investigate how to find real estate properties that will make money in both the short term and the long term. How Do Real Estate Investment Properties Make Money? There are two basic ways in which real estate investment properties – or essentially rental properties, also known as income properties – make money for the real estate investors. First, in the short term, rental properties make money by being rented out to tenants who pay a monthly (or maybe even a nightly rent), which translates into monthly rental income for the real estate investor, or landlord. These investment properties have to be positively geared properties, i.e., properties for which the rental income exceeds the operating expenses, in order to make money rather than lose money. Second, in the long term, income properties make money by undergoing real estate appreciation, which simply means that their value goes up over time. Obviously, the best real estate investments are those which make money for the investor in both the short term and the long term. So, to make money in real estate, you have to learn how to find real estate investment properties which generate positive cash flow every month while simultaneously increasing in value over time. How to Find Real Estate Investment Properties That Make Money in the Short Term and the Long Term? 1. How to Find Real Estate Investment Properties That Make Money: Focus on the Location Location location location… Any real estate investor will sooner or later hear (probably many, many times) that location is everything in real estate investing. Of course, this statement is an exaggeration, but nonetheless location plays a key role in finding the best real estate investments. Location will determine the best property type (single family home vs. multi family home vs. townhouse vs. apartment vs. condo, etc.), the kind of tenants you should target (college students, young professionals, millennials, young families, retirees, etc.), your optimal rental strategy (traditional vs. Airbnb), how much rent you can charge (and thus your rental income), your operating expenses (including property tax, property insurance, property management, etc.), and eventually the rate of real estate appreciation. Try to find a location which faces high demand for rental properties accompanied by relatively low supply. Also study the regulatory environment governing both traditional rentals and Airbnb rentals. Look for an area which is expected to undergo major infrastructure and economic developments in the near future as this will push real estate appreciation up. So, all in all, pay close attention to location when learning how to find real estate investment properties with high return on investment. To start searching for the best places to invest in real estate in the US housing market, click here. 2. How to Find Real Estate Investment Properties That Make Money: Choose Undemanding Income Properties Different real estate properties yield different return on investment, which means that they make different amounts of money for the real estate investor. It is generally impossible to summarize that one property type makes a more profitable investment property than another property type. Both single family homes and multi family homes can be good and bad real estate investments. The same holds true for apartments and condos, and so on and so forth. However, there is one general rule which landlords should keep in mind: simple, undemanding real estate properties make better rental properties. Think about it for a second. You are aiming to buy an investment property to rent out to tenants, which means people who don’t have the money to buy their own home at the moment, which most likely means that they are looking for affordable housing options rather than luxury rentals. So, by choosing an uncomplicated, simple, but still nice investment property you have a higher chance to attract tenants right away (because you will charge reasonable rent), which means you will eliminate high vacancy rates. And we know that high vacancy rates are one of the worst enemies of landlords. Related: Why You Should Invest in Single-Family Properties and Not Multi-Family Properties Another benefit of investing in undemanding real estate properties is that your operating expenses will be low. And remember: your cash flow in real estate investing is the difference between the rental income and the operating expenses, so the lower the operating expenses, the higher the positive cash flow. Yet another benefit of buying investment properties which are rather simple is that they will undergo relatively higher real estate appreciation. After all, land is the main asset which appreciates over time in real estate, and regardless of how luxurious and amazing your investment property is, it is essentially built on the same area of land. So, when learning how to find real estate investment properties that will end up being profitable real estate investments, choose simple ones 3. How to Find Real Estate Investment Properties That Make Money: Do Not Neglect Out of State Real Estate Investing When learning how to find real estate investment properties that will generate strong positive cash flow, we should come back to the notion of location in real estate investing. Location can mean a lot of things: urban vs. rural location, college towns or university towns, city center vs. suburbs, a particular state, a particular city/town, a particular neighborhood, etc. When talking about location, real estate investors should also consider the distance between their home and their investment property. Many beginner real estate investors are hesitant to go for out of state real estate investing as they prefer to be close to their rental property. While this is perfectly understandable, it is important to emphasize that investors should never overlook the option of investing in out of state properties. This is particularly important if you live in an overpriced housing market or in a real estate market which simply does not offer good investment opportunities. So, if you want to make money in real estate investing, you should keep all options available, including out of state investing. Remember that many times properties for sale away from home are able to generate much higher rental income, will require less operating expenses, and will appreciate more in value over time. To start searching for the best investment properties out of state, click here. 4. How to Find Real Estate Investment Properties That Make Money: Conduct Real Estate Market Analysis and Investment Property Analysis One of the first things that any real estate investor aspiring to succeed in this business needs to learn is how to perform real estate market analysis and investment property analysis. This is an obligatory step in the process of how to find real estate investment properties that enrich your investment portfolio and make money for you. After you have done enough research and selected a possible housing market to invest in, you have to conduct real estate market analysis. This will help you evaluate the overall state of the local housing market as well as rental market in addition to understanding the property price levels and the rent levels. If you conduct proper real estate market analysis, you will never overpay for your investment property and you will know how much rent you can charge for your rental property. At the same time though you should also perform investment property analysis of the few investment properties that you have selected in the local housing market in order to be able to compare your potential property to other properties in the area. Related: How To Perform A Real Estate Market Analysis Although analyzing a real estate market and an investment property might seem like a very time-consuming and demanding job, learning how to find real estate properties that will make good money is impossible without going through these steps. You have to make sure that you buy an investment property at the right price and that you set the right rent in order to have a profitable real estate investment. Related: How To Do Investment Property Analysis 5. How to Find Real Estate Investment Properties That Make Money: Use an Investment Property Calculator In order to find real estate investment properties that will generate positive cash flow, it is best for a real estate investor to use an investment property calculator, also known as a rental property calculator. This real estate investing tool will eliminate the need to conduct real estate market analysis and investment property analysis while producing the same – or even better – results in a much shorter time. A good investment property calculator will calculate all various measures of return on investment related to a rental property such as rental income, cash flow, cap rate, cash on cash return, etc. Knowing the expected values for these metrics is of crucial importance before buying an investment property as it will help you know whether you will make money from it and how much money exactly. Thus, if you want to be a successful real estate investor, do not underestimate the power of a good rental property calculator. Related: Why An Investment Property Calculator Tells You More Than Just Numbers 6. How to Find Real Estate Investment Properties That Make Money: Use Mashvisor Technology has become the best friend of any real estate investor nowadays as it offers numerous opportunities how to find real estate investment properties that will make money. A top choice among the best real estate websites is Mashvisor. Mashvisor’s two main features – Mashvisor’s investment property finder and Mashvisor’s investment property calculator – have optimized the process of searching for, analyzing, and finding the best real estate investments. Mashvisor gives its users the opportunity to search through numerous investment properties across the US with readily available calculations for the expected return on investment metrics including rental income, cash flow, cap rate, and cash on cash return as well as startup costs, operating expenses, and Airbnb occupancy rate. All these calculations are based on traditional and predictive analytics, which makes them highly accurate and reliable estimates. To sign up for Mashvisor to find the best real estate investment properties in the US housing market, click here. Related: What’s a good cap rate for investment properties? 7. How to Find Real Estate Investment Properties That Make Money: Choose the Best Rental Strategy After all, regardless of how an amazing rental property you buy, whether you will be able to make money from it or not depends largely on how you manage it and how you rent it out. That’s why it is of crucial importance to set the right rental strategy for your income property. Basically, you can decide to rent out your investment property either as a traditional rental or as an Airbnb rental. To make this investment decision, you will need to rely on the results of your real estate market analysis and investment property analysis to know which rental strategy yields higher return on investment in terms of cap rate and cash on cash return. Alternatively, you can use Mashvisor’s investment property calculator, which suggests the optimal rental strategy for each available investment property based on traditional and predictive analytics. Once again, Mashvisor will help you in how to find real estate investment properties that make money with the appropriate rental strategy. Related: Four Things to Consider Before Purchasing an Airbnb Investment Property 8. How to Find Real Estate Investment Properties That Make Money: Consider Hiring a Real Estate Agent When wondering how to find real estate investment properties that will turn into highly profitable rentals, you might want to hire a real estate agent, especially if you are a beginner real estate investor. Despite all the resources available out there, a real estate agent is still a professional who could make your deal a much better one. If you decide to hire an agent, remember to look for one who specializes in investment properties and who is well aware of the local housing market. There are so many real estate agents and real estate brokers that you should be able to find the best one for your particular case and your investment goals. And the best real estate agent will show you how to find real estate investment properties with high profitability potential. Hopefully this guide on how to find real estate investment properties that will make money for you will make you feel more confident as a new real estate investor. To keep gaining more and more knowledge about the exciting world of real estate investing and to find the best investment properties in the US housing market, sign up for Mashvisor. Start Your Investment Property Search! START FREE TRIAL Start Your Investment Property Search! START FREE TRIAL Investment CalculatorLocationMaking MoneyOut of State InvestingProperty SearchRental Strategies 0 FacebookTwitterGoogle +PinterestLinkedin Daniela Andreevska Daniela is Marketing Director at Mashvisor. She has been writing about real estate investing for a number of years. Previously, she worked in economic policy research and fundraising. Daniela holds a Master degree in Middle East and Mediterranean Studies from King’s College London. Previous Post Cap Rate vs. Gross Rent Multiplier: Advantages and Disadvantages Next Post Homeowners Associations: Should Real Estate Investors Join or Pass? Related Posts How to Find Owner Financed Homes in Fort Worth Investing in Single Family Homes: How to Spot Great Opportunities Buy Multifamily Properties: “A, B, C, D” Which Property Classification Suits You? What Is the Best Type of Miami Investment Property? 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