It’s true that it takes a lot to succeed when investing in single family rentals. Any successful real estate investor can attest to the hard work and forethought that goes into buying a single family home for investment. Not to mention, what it takes to manage the rental property to produce a positive cash flow afterward.
You definitely need to have the proper investment property financing and rental property management in place. But, all that can mean nothing if you don’t find one of the best single family homes for sale on the market.
So, what’s the one thing you need to succeed with a single family home investment property? Thorough and accurate real estate investment analysis. Really, this is the one and only answer you need to succeed when buying any investment property.
If you want to buy the best investment property and make money, then let us teach you how to perform single family rental market analysis followed by property analysis.
How to Identify the Best Single Family Markets
The first step of your real estate investment analysis should be identifying the best single family market. This is a 2-step process. First, identify the best city to invest in real estate. Then, hone in on the profitable neighborhoods for investing in rental properties.
The Best City for Investing in Single Family Rentals
Single family rental market analysis begins with finding and analyzing the right city. Before you start your search, you need to decide what your preferred real estate investment strategy is. That’s because the best cities for flipping a house are not necessarily the best cities for Airbnb investment. So, this decision is step #1.
Once you know which strategy you want to implement with your single family investment, you’ll have a clearer picture of the type of city you’re looking for. For example, when it comes to long term rentals, you’ll want a city that:
- Displays economic, job, and population growth
- Has an affordable cost of living
- Sustains a low crime rate
If you want to invest in Airbnb rental property, the city should:
- Attract tourists (year-round is ideal but seasonal is typically okay)
- Have no strict Airbnb regulations outlawing real estate investors from operating short-term rentals
If you want to go with the fix-and-flip real estate investment strategy, look for cities that:
- Still have cheap investment property for sale
- Have low competition for flipping houses
- Have a low average days on market
As a new single family home investor, don’t allow yourself to feel overwhelmed by this information. Take the time to figure out which investment strategy makes sense for you first. Then, finding a city can be as simple as visiting a few of the best real estate investor websites.
These sites will analyze and list the best cities to invest in real estate for you, making the decision much easier. For example, if you Sign Up to Mashvisor, you will be updated with our current lists on the best places to invest in for all kinds of strategies. Not only do our lists take into account many of the previously mentioned characteristics, but they also include the following housing market data for each city:
- Median Property Price
- Traditional Rental Income
- Airbnb Rental Income
- Traditional Cash on Cash Return and Cap Rate
- Airbnb Cash on Cash Return and Cap Rate
- Airbnb Occupancy Rate
- Price to Rent Ratio
That way you get the entire picture, allowing you to choose the best city for investing in single family rentals.
The Best Neighborhood for Buying a Single Family Home
Your search for the best single family homes for sale can’t end once you identify the right city. Every neighborhood is its own little real estate market and needs to be analyzed like one. While some real estate websites will help you out by listing the best neighborhoods to invest in, online research can be a little harder when it comes to neighborhood analysis.
In order to find the best neighborhood for investing in single family homes, real estate investment tools will be your best bet. You can start with a heatmap tool, which is ideal for neighborhood analysis. This is how it works:
Enter in the city that you decided is best for investing in single family homes. From there, the best heatmap analysis tools will have filters that investors can use to find the best neighborhoods. For example, Mashvisor’s Heatmap Analysis Tool has the following filters:
- Listing Price
- Traditional Rental Income
- Airbnb Rental Income
- Traditional Cash on Cash Return
- Airbnb Cash on Cash Return
- Airbnb Occupancy Rate
If you set any one of these filters, the heatmap will show you how each neighborhood in your desired city fares for that metric. For example, if you want to find cheap single family homes for sale, use the Listing Price filter. Any neighborhood colored red will be the prime place for investing in single family rentals on a budget.
Of course, cheap investment property isn’t always profitable. So, you would need to use another filter like Traditional Cash on Cash Return. Now, you’re looking for neighborhoods that were once highlighted red for low Listing Price that are now highlighted green for high Cash on Cash Return. You may have just found a neighborhood that is ideal for investing in single family rentals! That’s the power of this real estate investment tool.
How to Find the Best Single Family Homes for Sale
You’ve completed the first step to investing in single family homes and that’s a market analysis. Now it’s time to find investment property that will bring you a good return on investment.
Because you pinpointed the best neighborhoods for investing in single family rentals, you already narrowed down the list from hundreds of thousands of investment properties to likely a couple of hundred. Still, that’s a whole lot of single family homes for sale. So the next step is finding the best one through investment property analysis.
Naturally, you can’t run the numbers on each and every one of these potential income properties. Again, just like with the rental property market analysis, you need a real estate investment tool. For this task, the best one is the investment property calculator.
Investment property analysis of single family homes requires a look at a bunch of different metrics such as:
- Property Financing (Down Payment and Interest Rates or All Cash)
- One-time Start-Up Costs (Closing Costs, Renovation Costs, etc.)
- Recurring Rental Property Expenses (Taxes, Insurance, Property Management, etc.)
- Cash Flow
- Cash on Cash Return
- Cap Rate
- Occupancy Rate
- Investment Payback Period
And the Investment Property Calculator allows you to easily factor in all of these metrics to make sure you perform a quick and well-rounded analysis for investing in single family rentals. Again, you don’t want to do this for every investment property in the neighborhood. That’s why Mashvisor’s Investment Property Calculator will give you a quick preview of the homes for sale as you use the Heatmap:
You can find a few from the Property Listings displayed above that fit your budget and desired return on investment by using a few more filters. Once you have a few in mind, visit the Property Analysis page for each. This is where you can interact with the investment calculator and enter in your own financing information to make the analysis more accurate.
Once you do this, you can see the Cash Flow for the rental property as well as what the ideal Rental Strategy is- Airbnb or Traditional.
You will also find a comparative market analysis ready with rental comps as well as an investment payback period analysis. See what these will look like here.
Related: How to Easily Find Real Estate Comps
Once you compare a few different investment properties and their analyses, you’ll know which one is the best for investing in single family rentals with your chosen strategy.
Becoming a Successful Single Family Home Investor
Investing in single family rentals starts with finding an income property that you can be confident will produce a good ROI. From there, the success depends on you and your ability to negotiate a deal and carry out your strategy.
If you want to get started now on the path to success, do it with a 14-Day Free Trial with Mashvisor.