Buying Investment PropertyHow to Narrow Down Choices during an Investment Property Search by Daniela Andreevska April 28, 2017February 3, 2019 by Daniela Andreevska April 28, 2017February 3, 2019One of the greatest things about real estate investing, no doubt, is the fact that you have virtually unlimited options. You can buy an income property in thousands of different locations across the US; you can choose between various types of properties and numerous strategies; you can go on your own or in a partnership. However, you might be surprised to hear that many real estate investors do not like having so many choices, especially when it comes to selecting and buying a rental property. Actually just like many homebuyers, some real estate investors consider the investment property search to be a real nightmare because they find it particularly hard to narrow down so many available options. If you are one of those investors, no worries – following are some specific practical tips how to narrow down choices during an investment property search.To begin with, choosing your ultimate income property during your investment property search should be based on 3 key factors: BUDGET, LOCATION, and PROPERTY. Definitely none of these comes as a surprise because any real estate investor – whether new or seasoned – would know that these are the basics of a successful real estate investment business. But let’s see how you should use each of these indicators when narrowing down your choices during an investment property search:1. Prepare a budgetBefore you even start looking at actual properties, you should sit down and calculate your finances. Prepare a tentative budget based on your available cash, financing options (such as mortgage), and expected expenses associated with buying and managing the rental property. Once you’ve seen how much exactly you can afford to spend on a property, stick to this number during the actual investment property search. Don’t buy a more expensive property than you can afford just “because you like it”.Related: How To Budget For An Investment Property and Cash Flow2. Decide on the key parameters of the propertyOnce again, even before you start looking for properties, sit down and think carefully about what kind of income property you would like to and will be able to own and manage. First of all, choose a location. Decide whether you want to go for a local investment or out-of-state real estate investing. Choose the city and the neighborhood. Decide whether you want a single-family home or a condo; how many bedrooms and bathrooms you want; what rental strategy you would go for – traditional or Airbnb (if you decide to go for Airbnb, you would need to study the local legal issues in this regard); etc. The more specific you get, the easier it will be to narrow down your options even before you get into the investment property search, which will make your life as a real estate investor much easier. But don’t forget that you are choosing the ideal investment property here, not the perfect home for yourself and your family. Don’t think about what kind of property you would like live in but what kind of property would be the most profitable as a real estate investment.3. Make listsMake a few lists for your future income property: one of the must-haves (i.e., features that you simply cannot forgo – e.g. in Houston, in the Montrose neighborhood, a single-family home, 2 bedrooms); one of the nice-to-haves (i.e., features that would have an added value but are not so obligatory – e.g. 2 bathrooms, a garage, a garden); and one of the deal-breakers (i.e., features that you simply cannot accept – e.g. a leaking ceiling, a kitchen that needs immediate maintenance). Make sure that your lists are as feasible as possible. They should be based on real estate market analysis and comps rather than just on your whimsies. For example, you cannot put down a single-family property with 3 bedrooms, 3 bathrooms, and a garage in Lakewood, Seattle when your total budget is $200,000. Once you have your budget and your lists, you are ready to submerge yourself in the actual investment property search.Related: 5 Must-Have Features of an Income Property4. Perform an online investment property searchStart looking for available properties in your selected location that match your budget and your lists from above. The more precise your selection criteria are, the more you will be able to narrow down choices. While looking at the available properties, you should start making some choices right away. For example, it is generally advisable to go for a property that costs less per square foot. Bigger properties tend to be cheaper per square foot and to get more appreciation in the long term. Also, you can rent them out for more. Once you’ve selected a few properties, check their surroundings online. Google Maps and Google Earth, among other online tools, could be very helpful in allowing you to explore the neighborhood and area before even visiting the property. It is important to narrow down your options as much as possible before starting the physical visits because they take time and cost money, especially when you decide to invest beyond the 20-mile radius.5. Stay organizedThe best way to stay organized during your investment property search is to build a simple database with the income properties that you are seriously considering. Excel would be a good option for this as it allows you to organize the available information in a user-friendly manner. Remember to input all valuable – and even what you think might be valueless – information into your database. The more properties you see, the more you will forget the first ones, so you will find any piece of information of worth.6. Start the offline visitsOnce you’ve narrowed your options down to a few properties that you can afford and that match your basic criteria, go visit them. First, make a quick round of all your top choices. There are some potential rental properties that will immediately fall off your list just because they are not as they were advertised online. While on site, remember to take photos and notes of the main features. After you have visited all properties and dropped down some, go back to those that are still under consideration. Make a more careful analysis now. Look at the details. Take more pictures and more notes.7. Use Mashvisor’s investment property calculatorAfter you have liked some properties in person, it is time to do the actual investment property analysis. Don’t worry, you don’t have to do that on your own. Simply take advantage of Mashvisor’s rental property calculator to compare prices, costs, financing options, rental income, cap rate, CoC return, occupancy rate, and others – for traditional and Airbnb. Now you can narrow down even further to those properties which offer the highest profitability – in terms of cap rate and CoC return. Also, the investment property calculator will allow you to avoid any properties that are not likely to generate positive cash flow. You will find Mashvisor’s rental property calculator to be an invaluable tool in your investment property search as your biggest support in narrowing down choices.Related: Why An Investment Property Calculator Tells You More Than Just Numbers8. Stay reasonable, don’t get emotionalThroughout this process of investment property search, you should remember to stay reasonable and not get emotional. Don’t ever forget – you are buying an income property, not your own home. Once you’ve set down priorities – remember the lists from point 3? – stick to them. Of course, you might need to make some compromises, simply because your ideal income property does not exist, let’s say. But you should not give up on the basics at the least. And always always always make sure to stay within your initially set budget. While you can go down, you should never go above what you can afford as you might lose your property to the bank if you fail on the mortgage payments or you might end up with a negative cash flow real estate investment.After reading the tips above, the investment property search should sound like a less daunting task. The key is to take a systematic approach to it; to set your priorities in advance; and to stay reasonable. And not to forget to use Mashvisor which has important figures on thousands of available properties across the US. Start Your Investment Property Search! START FREE TRIAL Start Your Investment Property Search! START FREE TRIAL CostsInvestment CalculatorInvestment Property AnalysisLocationProperty Search 0FacebookTwitterGoogle +PinterestLinkedin Daniela AndreevskaDaniela 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 Tips for Choosing the Best Mutual Fund Investments for Your Needs Next Post International real estate: China and U.S real estate Related Posts All You Need to Know About Fees When Buying a House for Investment 7 Ways to Find Distressed Real Estate Property The “How To” Guide of Performing a Comparative Market Analysis Should I Buy a Vacation Home as a Real Estate Investment? What to Look for in a Rental Property: 10 Things Long Beach Real Estate: A More Affordable Option in California Real Estate Houston Real Estate Market 2018 – Yes or No? Should I Look for Rental Properties Near Me or Out-of-State? Buying a Vacation Rental Property: How to Choose the Right Location What Are the Benefits of Investing in Real Estate? 5-Step Guide to Investing in Vacation Rentals in 2018 Is Rental Property a Good Investment for 2020?