3 Best Property Investment Opportunities in 2023

Real estate is one of the lucrative ways to invest in 2023. But what are the best property investment opportunities for the best returns?

Many people dream of owning rental income properties to build a consistent income stream and generational wealth. The only problem is that real estate investments can be quite capital-intensive, which prices out many beginners from the market.

Table of Contents

1. Best Property Investment Opportunities for You in 2023
2. How to Find Profitable Markets for Property Investments
3. Key Takeaways
4. Frequently Asked Questions

But it doesn’t mean you should take the sidelines and watch your friends take action and benefit from their investment. Arming yourself with the right information and tools can make the difference between success and failure.

However, after two upsetting years, you might not know what step to take. The good news is that many real estate and investment experts predict that 2023 will be calmer and more balanced. Nonetheless, you’ll still need to deal with the consequences of past trends.

It is why we’ve compiled this comprehensive guide to help you understand what property investment opportunities are suitable in 2023. 

In addition, we’re also going to look at how Mashvisor’s Market Finder can help you make the right investment decisions.

Best Property Investment Opportunities for You in 2023

The current housing market can be quite nerve-racking. With rising mortgage interest rates and property prices, it can be tempting to hold on to your hard-earned money and ignore great property investment opportunities.

But real estate is a long-term game. Potential investors should get into it with the long haul in mind. 

That said, let’s look at three of the best property investment opportunities for you to consider in 2023.

1. Rental Properties

Buying rental properties is the most common way of investing in real estate. It involves buying a property, leasing it out to tenants, and collecting monthly or annual rent from them. 

There are basically two strategies to follow when becoming a landlord:

Short Term Rental Strategy

This strategy involves leasing out short term rental properties, commonly known as Airbnb rentals, to guests for a minimum of one night. Short term rentals have increasingly become popular in the past few years since many travelers and vacationers choose Airbnb rentals over hotel rooms. 

The best thing about the short term rental strategy is that you get to choose your nightly rate so you can maximize your income potential. On the other hand, short term rentals require more maintenance, since you must ensure the property is cleaned and restocked every time a guest checks out.

Long Term Rental Strategy

This is also known as the traditional rental strategy, where you get long term tenants to lease your property for a long period, say six months or one year. 

Unlike short term rentals, long term rentals assure you of an income at the end of every month for as long as the lease lasts. It’s also less demanding in terms of maintenance since your tenants take care of the property like their home.

So, why should you invest in residential properties instead of commercial properties?

Residential vs Commercial Real Estate

Firstly, the residential real estate market is easier to gauge than the commercial market. It makes the former less risky since it’s easier to forecast any changes and adapt to trends.

Secondly, you need less capital to get started with residential properties. With $20,000, you can place a 20% down payment on a property selling for $100,000. The required amount would reach hundreds or thousands if you were to invest in commercial properties. Besides, you can even get it for cheaper if you can find off market properties or distressed sales.

One downside to residential properties is that you need to be hands-on with the running and management. You must make decisions on what to upgrade, repairs, and contractors to hire for these tasks. If a tenant fails to pay rent or damages your property, you must know how to handle such a situation.

It may be a disadvantage for investors who wish to invest passively or newbies who don’t have a lot of experience.

However, if you wish to earn passive income from your rental property, you can choose to hire a property management company to oversee the day-to-day running of your investment. While you’ll need to pay a certain percentage of your rental income, it can take a huge burden off your shoulders. It will allow you to focus on other businesses or investments.

2. Flipping Houses

You’ve probably heard of flipping houses through popular reality TV programs. It involves purchasing properties that need repairs, fixing them, and selling them for a handsome profit.

TV programs tend to glamourize house flipping since you can make quick profits. Typically, you’ll need to find an undervalued property that needs renovations or cleaning up. Once you’ve made the needed changes, you sell the property at market value. 

The sale price needs to be considerably higher than all costs, such as buying price and rehab costs, to leave you with a good profit.

What You Need to Know About House Flipping

While you can make some good profits if done right, you need to have a keen eye for value to identify properties with good profit potential. Not all properties that need repairs make good flipping projects. You need to be able to identify what can be fixed and how much you can fetch from the sale.

A simple miscalculation can eat up all your profits and even lead to substantial losses. If you can’t find a buyer fast enough, you’ll also need to pay the loan interest and property expenses until you find a buyer.

Due to the many repairs needed, house flipping tends to be demanding financially. Many house flippers tend to choose non-conventional methods of financing since they plan to hold the property for months instead of years. The closing costs for conventional mortgages are also high.

You need more hands-on experience and skills than those required by becoming a landlord. You’re also responsible for overseeing repairs and upgrades to ensure they’re done right. Make sure they’re completed within the budget. All this time, you’re also looking for a client since you’ll make profits after selling.

If you do your due diligence and nail it, house flipping can be one of the most profitable property investment opportunities in 2023.

Related: Flipping Houses for Beginners: What You Need to Know Before Starting

3. House Hacking

House hacking is another great property investment opportunity for investors in 2023. The strategy involves buying a multifamily property, living in one of the units, and renting out the rest to tenants. You essentially get to live for free since the rental income covers the mortgage payments and other property expenses. 

House hacking enables investors to live in properties or neighborhoods that they consider expensive and earn a rental income while at it. It’s an excellent strategy for newbie investors since they don’t need to invest in multiple properties to start earning rental income.

The house hacking strategy also works well for investors who wish to follow the short term rental strategy. You can list the other units on Airbnb and other vacation rental sites and host guests in your primary home. Managing a short term rental is easier when you live in the property.

Housie Hacking Benefits

The main benefit of house hacking is being able to live in a house that you typically wouldn’t afford by renting the property out to tenants who pay the associated costs.

Here are some other benefits of house hacking to consider:

• Great for beginners: House hacking comes with a lower barrier to entry and is a perfect way to get involved in real action. You get to live in a home that also doubles up as your investment property. While it requires you to carry out landlord tasks, it equips you with the necessary skills needed to handle and manage tenants.
• Low risk: Compared to many traditional real estate investment strategies, house hacking is a less-risky way to generate rental income. Since you also live on the property yourself, you can discover issues faster and sort them before they develop into larger problems. You can also pay off your mortgage while saving up to diversify your portfolio and build equity.
• Tax benefits: House hacking allows you to save money on tax returns as long as you can show all expenses related to your income. The most significant tax benefit you enjoy from house hacking is depreciation. You can show a loss of income due to wear and tear over a 27.5-year period; yet in reality, you’re enjoying cash flow from the property.
• Flexible financing: Financial services providers are more likely to offer you financing to purchase an investment property since they know the rental income will help you offset the loan. Besides, house hacking allows you to pay a lower down payment. With an FHA loan, you only need 3.5%-5% of the property’s value to place as a down payment.

Potential Downsides of House Hacking

Like other great property investment opportunities, house hacking comes with some potential drawbacks as well. Here are some factors to keep in mind before you get started:

• Lack of privacy: With house hacking, it’s not just you now. You and your tenants share the same property, especially if you’re investing in a single family property. It may be uncomfortable if you’ve always lived alone or if you’re a private person.
• Landlord tasks: As mentioned before, you’re now in charge of the landlord’s duties. It can be challenging if you’re managing multiple tenants. You need to fill vacancies, make purchases, schedule maintenance and repairs, track your finances, and so on. You must also ensure repairs and maintenance tasks are completed faster than if you live alone. If you have a day job, it can be a huge task.

Related: Will 2023 Be a Good Time to Invest in the Real Estate Market?

How to Find Profitable Markets for Property Investments

Now that we’ve looked at some of the best property investment opportunities for investors in 2023, what’s the next step to take if you want to get started?

Finding a lucrative investment market is always the first step to successful investing. Your location is one of the core factors to consider. It determines how much rental income you can earn from your property and how much property expenses you get to pay.

For investors who wish to follow the short term rental strategy, different locations also have different Airbnb laws and regulations. Some have banned them completely, while others have strict regulations with strict consequences for those who don’t adhere.

That said, how can you spot a good housing market to invest in?

How to Spot a Profitable Market

Here are some pointers to help you easily find a profitable housing market to invest in:

Favorable Property Taxes

Owning an investment property means that you’ll need to pay property taxes. Different markets have different property tax rates. Always visit the municipal office to see how much you’ll be required to pay for owning the property. A market with low property taxes will be more suitable for investment since your expenses will stay low and leave you with a higher cash flow.

Amenities

A good investment market will have a lot of amenities that will help you attract tenants. For example, a neighborhood with available public transportation makes a good investment location. The location should also have parks, malls, restaurants, schools, health facilities, and so on. More amenities mean higher rental rates and lower tenant turnover.

Growing Job Market

Areas with more job opportunities tend to attract tenants since the workforce will be looking for a place to stay. 

What is the job market situation like in the location? What is the unemployment situation? Are there any major companies looking to expand into the neighborhood? 

These are some of the questions that will help you understand the job market in your location. Besides, low unemployment rates mean that the majority of the population can afford to pay rent.

Future Developments

Planned developments in the area can be a huge boost in property values and rental rates. Future construction projects mean that the area is growing. You can visit the local municipality offices or their website to learn about any planned developments.

Security

People want to live in an area where their safety is assured. Neighborhoods with a low crime rate will attract long-term tenants. Always research the petty and serious crime rates in an area before investing your money.

No Risk of Natural Disasters

If your location is prone to floods, hurricanes, or other natural disasters, you may have to obtain extra insurance covers, which end up eating into your profits. Also, many potential tenants will shun your property since their lives may get interrupted anytime.

Related: 20 Best Markets for Real Estate Investing in 2023

The Best Tool to Find Profitable Markets

As you can tell, finding the best markets to invest in by yourself can be an uphill task. There’s a lot of research to be done. You need to visit your municipality office and various websites to gather the required information. In addition, you must carry out many calculations to measure the neighborhoods’ profitability.

But what if you don’t have all the time to do them?

Fortunately, we live in an age where there are many software tools to make our lives easier. One of these tools is Mashvisor’s Market Finder.

Market Finder is an online real estate tool that gives investors a bird’s eye view of the US real estate market to determine the hottest markets, as well as the best property investment opportunities.

The Market Finder tool allows you to zoom in on areas that arouse your interest so you can carry out an in-depth analysis of what a city or neighborhood can offer. It provides numerous tools to help you save time and money when hunting for a lucrative location and property.

For example, the heatmap tool in Market Finder shows you a certain neighborhood’s performance for both long term and short term investment properties. The tool lets you know which neighborhoods are performing well, which ones to avoid, and which ones are neutral based on your search criteria.

How to Use the Market Finder

Using the Market Finder tool is quite easy and straightforward. You won’t have a hard time trying to navigate the page. It is to ensure that your search for a lucrative market for property investment is a rewarding experience.

Here’s how to use the Market Finder tool:

Step 1: Log into Mashvisor and go to your account’s dashboard.

Step 2: Click on Search Markets.

Step 3: The Market Finder page will load. You will see a map of the US with blue labels with numbers on them. The numbers represent the number of markets under the long term or short term rental category.

Select either long term or short term markets as your search category.

Step 4: To analyze a market, you can click any blue label on the map or manually enter a specific location in the search field.

The map will then zoom in on the location you clicked on or entered manually. You can either zoom in or out to adjust the view.

Step 5: In case you want to go back to looking for other potential markets, you can go back to the countryside view by clicking on Top Markets, located on the upper part of your dashboard.

How to Set Your Search Criteria on Market Finder

The Market Finder tool offers various filters to help you customize your search criteria. You can do so by clicking on the Filter button located beside the search bar. A sidebar will slide from the right section of your screen, showing you the different filters you need to set to customize your search.

Market Finder Filters

The filters are:

• Mashmeter Score: The Mashmeter Score is the overall grade of a certain location. It ranks from A (highest rank) to D (lowest rank). You can select one or all scores to get an overview of how all neighborhoods stack up against each other.
• School Rankings: Just like the Mashmeter Score, the School Rankings filter lets you see what each neighborhood can offer when it comes to schools and educational institutions.
• Crime and Safety: This filter shows you neighborhoods that are secure with a low crime rate and which ones you should avoid.
• Regulatory: Different neighborhoods have different regulations for investment property owners. Not all of them are investor-friendly. This filter shows you which neighborhoods have lenient laws, which ones are strict, and which ones are neutral.
• Home Value: This filter lets you only see neighborhoods where the median property prices fall within your selected price range.
• Property Type: This filter allows you to select the property type you’re interested in by choosing one or more options.
• Monthly Rental Revenue: Using this filter will only show you neighborhoods and properties that match your expected monthly rental income. Simply use the slider and place the circle on top of the minimum amount of income you expect every month.
• Occupancy Rate: This filter will show you properties that match your expected occupancy rate. Use the slider to select the occupancy rate you desire.
• Cap Rate: You can filter in neighborhoods whose cap rates fall under the four ranges provided. The lowest cap rate you can choose is between 2% and 4%. If you wish to do so, you can search for those with cap rates that are above 10% (the highest range).

Apply Filters

Once you’ve selected your filters and click the Apply Filters button located at the bottom right corner of the window.

After applying the filters, you can check which of the filters are active by clicking on Active Filters above the Top Markets bar.

If you wish to start looking for lucrative real estate investments using the Market Finder, sign up to Mashvisor today and start your 7-day free trial.

Key Takeaways

With the rising mortgage rates and property prices, many people feel compelled to sit on the sidelines and hold on to their capital. The reality is that there are some great property investment opportunities for investors. 

One way to invest in real estate properties in 2023 is to become a landlord. It involves buying an investment property and leasing your property out to tenants. You can choose to follow either short term or long term rental strategies. 

Other excellent ways include buying properties that need some work, fixing them, and selling them for a price higher than all associated costs. You can also buy a multifamily property, live in one unit, and then lease the other units out to tenants.

Most importantly, you need to use Mashvisor’s tools to make wise investment decisions. For example, Mashvisor’s Market Finder will help you search for and identify the best markets to invest in using various filters.

Book your demo today and see how our tools can help you make smart investment decisions.

Frequently Asked Questions

Below, we provide answers to some of your questions on property investments.

What Type of Property Is Best for Investment?

Residential properties are the best types of properties to invest in. The types of residential properties to invest in include multifamily homes, single-family homes, and condos.

What Is the 1% Rule for an Investment Property?

The 1% rule of an investment property is used to measure a property’s monthly rental income against its purchase price. Ideally, a property’s monthly rental income should be equal to or more than 1% of its buying price.

What Type of Real Estate Investment Is Most Profitable?

The most profitable type of real estate investment is short term rental properties. Also known as Airbnb rentals, such types of properties offer a high-income potential since you charge a nightly rate. The more bookings you get, the higher your income.

What Are 3 Ways to Invest in Property?

The three ways to invest in property are purchasing a rental property, house flipping, and house hacking.