Are you a young – or not so young – enthusiast looking for a way to make some extra money or for a new career path? Are you looking for the best opportunity to invest the money you have managed to save up? If so, how about real estate investing for beginners? Contrary to what many might be thinking, real estate investments are not for experienced professionals only, and real estate investing for beginners is a totally viable option for making money.
If you are new to the world of real estate investments, you might wonder what the single most important factor which decides the success or failure of your investment property is. Luckily for you, we have the answer to this real estate question readily available for you: LOCATION. That is, location is at the core of real estate investing for beginners. If you want to be off to a good start in real estate investing and to be quickly making profits through solid return on investment, you must choose the best location for your rental property. But what is location in real estate investing? And what is the best location for an investment property? Even more so, how do you choose the best location among so many options? For answers to these real estate questions and many others, just keep reading and you will soon be an expert on finding the best location for real estate investing for beginners.
What is location in real estate investing?
Whether in real estate investing for beginners or professionals, location is a combination of many factors. Location includes the country, the state, the city/town, the neighborhood, the street, the exact address… Location can be urban or rural. Location can be close to your own home, far from it, or even out of state. But most importantly, location is what will (majorly) decide whether you will succeed or fail as a real estate investor.
Why is location so important in real estate investing?
You must already be tired of hearing how important location is in real estate investing for beginners and in general, but you might still be wondering why… Location is so important because it will drive the factors that will determine the profitability of your rental property. Location will decide how much demand there is for rental properties; what types of rental properties are most demanded; the composition of the tenant pool; the rent which tenants are able and willing to pay; the best rental strategy (traditional vs. Airbnb); etc. Ultimately, all these indicators will factor in how much rental income you receive and thus whether your cash flow is positive or negative and how big or small your cap rate and cash on cash return are.
What is the best location in real estate investing?
That’s an easy question to answer: The best location in real estate investing for beginners and beyond is the location which will bring you the highest return on investment. You want a location which has high demand for and relatively low supply of rental properties. You always want a location where rents are high, while property prices are reasonable. You want a safe location whose inhabitants will not destroy your investment property beyond reason. Depending on your personal situation, you might want a location which is close to you so that you can take care of your rental property on your own and check up on your tenants. Or you can want a location which is out of state (because of higher return on investment), if you are ready and can afford to hire professional property management services.
How do you choose the best location in real estate investing?
Finally, we come to one of the most important questions in real investing for beginners: How do you choose a location which will bring you the most profit from your investment property? You need to perform the following steps to achieve this goal:
1. Do a lot of research
First and foremost, as a new real estate investor, you must read a lot of real estate investing resources. Start out by reading about the general state of the national real estate market and then start focusing on specific states and cities which seem to be performing better than others at the moment. Remember that the housing market as well as the rental market is a very dynamic one, so what was the best real estate market to invest in yesterday might not be so profitable today. Use up-to-date sources.
2. Research carefully your selected locations
After your preliminary research, you should be able to identify a few housing markets which look like a better option to invest in than others. Continue your research by zooming on these markets as the potential location for your first rental property. Investigate the area, the surroundings, the inhabitants, etc. Check whether most people are homeowners or renters. Check what real estate properties are dominating the market. Check whether the area is safe (crime rate). Look at the infrastructure including roads, public transportation, proximity to schools, hospitals, and shopping facilities, and anything else which makes for a good residential location.
3. Conduct real estate market analysis
When you have selected a few possibly good locations, it is time to move to real estate market analysis. For each potential market, find and analyze rental properties similar to one that you are planning to and able to afford to buy to see the property price, the rental rate, the turnover, the occupancy rate, the vacancy rate, the cap rate, and the cash on cash return. In this way, you will end up with all the real estate comps to use for the analysis of your own property.
4. Find property listings
Once you know which market seems to be the best for your first rental property, go through different sources to find available property listings. Look at all available details and go check personally the ones that you think might be suiting.
5. Perform investment property analysis
Finally, it is time to do investment property analysis for the few preselected properties. Focus on the expected rent and expenses to decide whether you will have positive or negative cash flow and how big, compared to the property price. Use the real estate comps which you have gathered during the real estate market analysis. Or even easier, use an investment property calculator like Mashvisor’s, which will provide you with all crucial figures related to the return on investment. This will save you lots of time and energy.
Ultimately, the place with the investment property which will bring you the highest profit is the best location for your first rental property. That’s the lesson you have to learn in real estate investing for beginners.
There are many important questions in real estate investing for beginners, and how to find the best location for your first rental property is definitely one of them. The information above must help you in choosing the most appropriate location for your own particular case.
For more tips on real estate investing for beginners and beyond, keep reading our blogs on Mashvisor. And don’t forget to use Mashvisor’s rental property calculator when you look for your ideal investment property.