One of the most recurring questions in real estate investing is how to find the best rental properties in any market. Whether you are a beginner or an experienced real estate investor, finding a good rental property is somewhat challenging. In this blog, we will show you how to find the best rental properties to become the successful real estate investor you aspire to be.
How to Find the Best Rental Properties: Online Property Finders
The internet has an unlimited selection of real estate websites that allow users to search for rental properties to rent or invest in. Real estate investors can use these websites to find all sorts of investment properties, from single family homes for rent, through apartment condos for rent, to commercial property for rent. In other words, if you have a specific rental listing in mind, then for sure there is an online property finder designed specifically to look for that type of property.
How to find the best rental properties online? Check out these websites.
Mashvisor is an online real estate analytics platform designed to help real estate investors find and evaluate investment opportunities in the US housing market. Based on large amounts of data and property listings, Mashvisor uses specially developed formulas to provide investors with important real estate metrics used to determine the profitability of a given investment property.
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Mashvisor’s property finder tool utilizes AI technologies to provide you with listings guaranteed to match your investment preferences. One of the special features of our property finder tool is that it sorts out investment properties from best to worst, saving the trouble of comparing different investment opportunities manually. So, the next time you are wondering how to find the best rental properties, keep Mashvisor on your mind!
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How to Find the Best Rental Properties: What to Look For
When shopping for an investment property, it is important to know how to measure its performance and project its return on investment so that you can exactly predict what to expect from investing in that property. As a real estate investor, you will eventually come across several real estate metrics that determine the profitability of an investment. The most important are:
Cap rate is a ratio that expresses the profitability of a real estate investment by dividing its net operating income (NOI) by its current market value. Cap rate is considered to be the purest form of rate of return because its calculation is independent of the financing method. Generally, a higher cap rate corresponds to a higher return on investment. But what exactly is a good cap rate?
Find out here: What’s a Good Cap Rate for Investment Properties?
Positive cash flow properties are properties that have a rental income higher than the operating costs. While it is advisable to look for investment properties with a positive cash flow, a well-informed real estate investor can turn a negative cash flow property into a positive one.
Occupancy rate is the percentage of time a rental property is occupied or leased out to a tenant. This real estate metric is important especially to investors who are interested in short-term rental properties like Airbnb. Intuitively, higher occupancy rates are deemed favorable for both Airbnb and traditional rental strategies.
How to Find the Best Rental Properties: Conduct Real Estate Market Research
Real estate market research, also known as rental market analysis (RMA), is a process that helps real estate investors assess the rental potential of a specific property market. Conducting real estate market research should tell you whether or not the potential investment property will have a positive cash flow. So, how to conduct a rental market analysis? Follow these 4 steps:
1- Evaluate the neighborhood
A “good” neighborhood is a subjective statement. The first step of RMA is to assess the area in general. Some factors to include when evaluating a neighborhood are accessibility, good school area, nearby amenities and businesses.
2- Find comparable properties
Identifying rental comps is an important step to calculate the average rental price per square foot. Start by looking for at least 3 properties of the same size and physical condition. Other important features include proximity to each other and the number of bedrooms.
3- Calculate price per square foot of rental comps
Using rental data, calculate the average price per square foot for the rental comps. Since it is rare to find properties that are 100% identical, adjustments have to be made to account for differences.
4- Determine the cost of listed properties
A quick analysis of the neighborhood housing inventory will show the costs of these properties. Based on the average rent per square foot, you can easily find how much rent to charge for each listed property. Consequently, a positive cash flow property will have a lower monthly cost than rental income.
How to Find the Best Rental Properties: Tips on Researching Investment Properties
Consider the following investment tips the next time you are asking how to find the best rental properties in any market.
Get to know the neighborhood
As mentioned earlier, evaluating the neighborhood you are considering investing in is an important step before buying a rental property. Find as much as you can about the neighborhood, and if possible drive around to get a real feel for the surroundings.
Research the economic situation of the area
Employment and population growth are good indicators for a healthy housing market. How to find the best rental properties? Look for cities with high job and population growth for cash flow and equity growth.
Related: 10 Most Profitable Airbnb Locations for Cash on Cash Return
Do you have a free Mashvisor account? Click here to use our Property Finder and find properties in a matter of minutes!