A successful real estate business starts with proper investment property research. So, how do you go about that process?
Of course, when thinking about research, Google is the first thing that comes to mind. However, when it comes to a profitable property search, this is not the case. So, here is a step by step guide for researching investment properties:
1. Get your finances in order
Before getting to the investment property research, your finances are actually priority #1. Did you think of an investment property financing method? Are you applying for a mortgage or are you paying in all cash? Or, are you going to use other creative financing methods such as real estate partnerships?
You need to also review your financial situation. Do you have any debt that you need to take care of? Do you have any money saved for a down payment? Also, do you have enough money to support yourself for at least 6 months ahead?
To help you figure out your financial situation and properly plan it, read How to Get Your Finances in Order Before Buying an Investment Property.
2. Investment property research starts with a location! Choose one
Now that you’ve figured out your whole financial situation, let’s move on to location. Every successful real estate investor knows that location is a major contributing factor to success. Therefore, make sure you are wise about it.
To start a neighborhood analysis right now in your city of choice, click here.
As for the location criteria, you should look for areas with high rental demand. Locations with universities, specific employment industries, and vacation locations could be great choices for a lucrative real estate business.
3. Go ahead and research an investment strategy
Next, it is time to decide on an investment strategy. So, what you need to do is to research some of the investment strategies that are best for you and best for the location of your choice. If you are a beginner investor, you might want to go with more basic strategies until you acquire enough experience to engage in riskier ones.
For example, traditional rentals, turnkey investment properties, and buy and hold real estate make for perfect strategies for beginner investors. On the other hand, fix-and-flip, REITs, and commercial real estate investments require more knowledge and experience, so they are a better fit for seasoned real estate investors.
4. Put together a list of investment property criteria
Here, by criteria, we mean what do you want your investment property to look like? In other words, decide how big you want the rental property to be. Also, how many bedrooms, bathrooms, and what amenities and facilities will your rental property need to make you a profit?
Moreover, decide what your budget is. You don’t want an investment property that is so expensive that you can’t afford it nor do you want a property that is way too cheap. After all, if it looks too good to be true, then it probably is. So, don’t fall for these traps and make sure you know what you’re looking for in your investment property research.
5. Visit the right real estate websites
If there is one thing we can offer you at Mashvisor, it’s the many lists of the best real estate websites for all your investment needs. That is especially if you are conducting a property search. But, we are also one of these sources where you can find ALL types of listings of investment properties for sale and analyze them too! So, go ahead and try our Property Finder Tool to find the best real estate investment.
Do you have a free Mashvisor account? Use our Property Finder to find lucrative investment properties that match your criteria in a matter of minutes!
6. Choose the top 3 properties that make sense
Since you have found a few investment properties on real estate websites, it is time to choose your top 3 favorites. Make sure they meet MOST of your criteria if not all. And this leads us to the next step: the comparative market analysis.
7. Conduct comparative market research
Comparative market research (analysis) is a crucial part of the investment property research. Comparative market research is basically when you compare a property to other similar ones located within the same location. How do you do that? Through a real estate comps search, of course!
Find comparables for each of the investment properties you have on your favorites list. If you’re using Mashvisor, you’ll find that every listing on the platform is accompanied by a list of real estate comps!
Make sure that the price is reasonable in comparison to the comps and that your investment is worthwhile from the get-go. This leads us to the next stage of analysis: the investment property analysis.
8. Choose the property with the highest potential returns
In order to find the best properties with the highest returns, you will have to conduct an investment property analysis. This process consists of the various methods of property evaluation such as calculating cash on cash return, capitalization rate, and the rate of return expected from the property. The higher, the better of course!
Related: What Is a Good Cash on Cash Return?
9. Make an offer to the owner
Well, at this point you are left with the one rental property that made sense among the other options you found in your investment property research. So, what you do is you contact the owner and make an offer. Once you get a response, don’t settle. Try to negotiate a better price and then close the deal.
10. Repeat the investment property research!
Now that you have found a profitable rental property to add to your investment portfolio, you have completed the investment property research process successfully. What do you do now? You now know the fundamentals of how to invest in real estate. So, all you have to do is repeat the same process when searching for investment properties next time!
How can Mashvisor help you?
Mashvisor can help you a great deal when it comes to buying an investment property. We offer you the must-have investment property tools as well as the means to real estate market research. This, of course, includes the best market research tools.