On a mission to find a profitable piece of residential real estate?
You know that solid real estate investments are the result of solid research, but how do you get started?
In this article, we’ve outlined the 6 steps you must take in your real estate research if you want to consistently find ideal rental properties for sale with strong ROI.
The 6 Steps of Real Estate Research
Conduct City-Level Real Estate Market Analysis
First on your list of real estate research steps is conducting market research for real estate on the city-level.
If you don’t know where to go for trusted resources or how to research real estate, look no further! Mashvisor consistently posts blogs about different real estate markets and shares city data to help inform your investment research.
Some of the information we share includes real estate market predictions such as whether a city is a seller’s or buyer’s market. Other research in our blogs details renter population, economic growth, and affordability, which are also good indicators of a strong market. In addition, we include metrics such as a city’s cash on cash return for both traditional and short term rental properties.
Information from blogs on Mashvisor and other real estate investor websites is an excellent place to start gaining an idea of the cities you might want to invest in. Remember, there are many profitable rental properties out there, and not all of them will be in the neighborhood where you live. Keeping your options open to opportunities in other cities and even states could make a huge difference in the rental income you bring in.
So, do some research on profitable rental markets, and come up with a list of cities you want to check out.
According to Mashvisor’s real estate research, the #1 market for 2021 is Raleigh, North Carolina. Check out this article about the Raleigh housing market.
Research City Rental Laws
Before moving further in your real estate analysis, you should research rental laws for the cities on your list. This is an important step that you don’t want to skip! It could save you unnecessary time spent conducting real estate research for cities that are more tenant-friendly or prohibit the rental strategy you want to use.
For example, if you’re hoping to start an Airbnb business, you should research city-level Airbnb regulations before conducting any Airbnb market research. Through contacting city governments, you might find out that short term rentals are illegal in certain cities on your list.
While traditional rental properties are largely legal everywhere in the US, you should still research laws pertaining to them anyway. There might be regulations regarding how landlords should operate their businesses that you will want to be aware of.
Conduct Neighborhood Analysis
Once you’ve narrowed down the city or cities you want to invest in, the next step in your real estate research is to narrow down on specific neighborhoods that are profitable.
The trouble some real estate investors run into is skipping this very crucial step. They read an article saying rental properties in a particular city are bringing in high returns, and then make the mistake of believing they can profitably invest anywhere in that city.
This is not true! When metrics are given for cities, they are only representing an average of all the investment properties in all the neighborhoods in that city. From one neighborhood to the next, landlord income and ROI can look very different, so you must be diligent at this phase of your real estate research.
How do you conduct neighborhood analysis?
Luckily, Mashvisor has the perfect real estate investment tool for this job: the real estate heatmap. With the heatmap, you can easily spot the most profitable locations in a city based on visual data. You can quickly determine the areas with the most affordable listing prices, as well as the highest cash on cash return and rental income. In addition, you can search by Airbnb occupancy rate.
After completing this step of your real estate research, you should have at least one, if not several neighborhoods that are profitable and within your price range.
Find Investment Properties for Sale
At this phase of your real estate research, you can start researching investment properties for sale. While there are a number of websites that post property listings, not all real estate investment software is created the same.
Mashvisor’s property finder uses predictive analytics and machine learning algorithms to deliver customized search results based on the extensive criteria you choose. Our property finder displays listings from the MLS, auctions, and other valuable resources. We also have a unique real estate research tool called the property marketplace, which is perfect for investors interested in finding off market properties.
Once you’ve curated a list of properties that meet your budget and are located in the neighborhoods you’ve identified, you can move on to the next phase of your real estate research.
Perform a Comparative Market Analysis
If you’ve never heard of performing a comparative market analysis, don’t sweat it. With the right tools, it’s actually quite simple.
A comparative market analysis, or CMA, is a process investors use to determine the value of a property. In order to do this, you need to collect a list of real estate comps, or comparable properties to the one you are analyzing.
Before innovative technology such as Mashvisor’s software, investors had to search for properties that meet a list of criteria and use real estate investment analysis spreadsheets to organize this data. Now, you can use Mashvisor’s software, which automatically provides real estate comps for each property in our search engine.
Real estate comps will help you determine if an investment property you’re analyzing is priced fairly. Mashvisor also provides rental comps which will give you an idea of what the rental income for a particular property should be. This is helpful for setting your own prices.
Conduct Rental Property Analysis
Last but not least, your real estate research process requires rental property analysis. This last step will help you determine the profitability of an individual property. While an entire neighborhood may be performing well, as mentioned before, this is only an average. It does not mean every individual property will be equally lucrative.
For this step, you will need to calculate a number of metrics, such as cash on cash return, cap rate, cash flow, and return on investment. In order to do so, you’ll need specific rental data and accurate estimates.
Real estate investors who want the most accurate results in the least amount of time use Mashvisor’s rental property calculator. Our calculator automatically analyzes rental properties using the most up-to-date data, so you don’t have to spend hours trying to find it and plugging numbers into formulas.
Using the 6 steps outlined above, you can conduct real estate research that is accurate and informative, leading you to purchase a successful real estate investment property.
To get access to our real estate investment tools, click here to sign up for Mashvisor today and enjoy 15% off.