Beginner InvestorsHow to Invest in Rental Homes as a Beginner: The 2021 Guide by Charles Mburugu May 11, 2021May 10, 2021 by Charles Mburugu May 11, 2021May 10, 2021Real estate investing can appear very complex and confusing for anyone just starting out. This article offers a comprehensive guide on real estate investing for beginners. You will learn how to analyze the real estate market, find profitable rental homes for sale, analyze the investment potential of income properties, and choose the most appropriate rental strategy. We will also share a few ideal locations for the best real estate investments in the US housing market in 2021.So, here are the steps to investing in top-performing traditional and Airbnb rental properties:Educate yourselfWhen it comes to real estate investing, there is so much to learn. The more you know, the less your chances of making mistakes in the process. Therefore, before you start looking for rental homes to buy, take some time to study. Read real estate blogs, read books, watch YouTube videos, and listen to real estate podcasts. Attend local real estate networking events and conferences. Make friends with some experienced real estate investors and glean valuable insights about buying investment property for sale. With time, you will become a pro in buying rental property.Know your market Understanding the market is a very crucial aspect of real estate investing. The best way of doing this is through real estate market analysis. Proper real estate analysis involves the following steps:Conduct neighborhood analysis – The neighborhood where a rental property is located will determine its investment potential. A good neighborhood should have amenities such as shopping malls, public transportation, good schools, parks, and hospitals. Such factors will enhance your chances of attracting and retaining tenants.Neighborhood analysis should also involve assessing the potential performance of the area. You can do this using the Mashvisor real estate heatmap. This tool will help you find the best places for investing in rental property based on metrics like listing price, rental income, cash on cash return, and Airbnb occupancy rate.To get access to our real estate investment tools, click here to sign up for a 7-day free trial of Mashvisor today, followed by 15% off for life.Perform rental property analysis – Property analysis involves looking at the characteristics of specific rental homes. This includes the size or square footage, number of bedrooms and bathrooms, number of floors, construction age, and proximity to local amenities. You should also consider features that might boost the home’s rental value such as a swimming pool, fireplace, balcony, or garden.Investment property analysis is also very important when assessing rental homes. Once you’ve found an ideal neighborhood for investment, you need to find the most profitable rental property for sale. Mashvisor’s investment property calculator uses predictive analytics and machine-learning algorithms to provide accurate real estate data analytics. This tool will show you the expected rental expenses, rental income, cash flow, occupancy rate, cap rate, and cash on cash return on hundreds of thousands of house listings across the US.To start looking for and analyzing the best investment properties in your city and neighborhood of choice, click here.Check real estate comps – Real estate comps are simply homes that are comparable to what you are thinking of buying. They should be located within the same neighborhood and be similar in terms of size, age, features, and number of bedrooms and bathrooms. You can find real estate comparables by looking at listings of similar rental homes sold in the last three months. You should also consider expired listings or pending listings of comparable homes to see what price is too high for the property you are considering purchasing.Related: How to Find Real Estate Comps in 2021Determine a price range – Once you’ve done your research, you can then establish a price range for your home. Based on the value of the real estate comps you found, set a ceiling value and a floor price.Decide the market value – Take into account all the factors in order to decide where your home falls within the determined price range. This will be the market value of your home.Choose a strategy for your rental homesWhen you invest in a rental property for sale, you will need to choose between two rental strategies: traditional and Airbnb. Understand the benefits and downsides of each before making a decision.Here are some of the aspects you need to consider when comparing the two strategies:Pricing – Tenants of traditional rental homes usually sign a lease agreement which dictates the amount of rent to be paid, usually set up based on rental comps in the area. This means that you will get to earn the same amount of rental income for the duration of the lease.With Airbnb rentals, you can be more flexible with your pricing. Since rent is charged on a nightly basis, you can adjust your rates based on various factors like the season, demand, or day of the week.Upfront and ongoing expenses – A vacation rental usually involves a higher upfront cost since the home needs to be fully stocked and furnished. Ongoing expenses are also likely to be high because you will need to restock often and ensure the property remains in pristine condition. Some of the expenses that come with Airbnb rentals include furniture, bedding, towels, appliances, kitchen utensils, cable TV, wi-fi, and cleaning services.If you opt for traditional renting, the operational costs are not very high. If you have good tenants, they will take responsibility for the general maintenance of the home. It is only on rare occasions that you will be called upon to deal with emergencies. Day-to-day expenses for traditional rentals include water, sewage, trash removal, and garden maintenance.Demand – Lease agreements for traditional rental homes usually run for 12 months or more. This means that landlords are assured of a steady income.On the other hand, vacation rentals are affected greatly by seasonality. During the high season, Airbnb hosts enjoy good occupancy rates and high incomes. However, the story is different during low seasons.Rules and regulations –Airbnb rentals are usually subjected to numerous laws. Some cities don’t even allow short-term rentals on non-owner occupied houses. If Airbnb is allowed in a location, you might still be required to get a permit. In addition, you may have to get permission from the homeowners association if the rental property is in a gated community or a condo. Since these laws vary from state to state and from city to city, you need to do your due diligence before investing in vacation rental homes.Arrange financing There are many methods for financing an investment property for sale. Here are some of the most common ones:Conventional mortgage loan – This kind of real estate investment loans are offered by banks and other lending institutions. To qualify for such a loan, you will need to meet the lender requirements. In most cases, you will be required to have a good credit score, a low debt-to-income ratio, and the ability to make a down payment of at least 20%.Related: 10 States with the Lowest Mortgage Rates in 2021Home equity loan – If you already own property, you can leverage your home’s equity value to purchase a second home. You can use up to 80% of a property’s equity to invest in an income property.Private money lenders – These are individuals or groups that loan cash to real estate investors in return for a specific interest rate. Loan fees and terms can be tailor-made for each individual investor.Real estate partnerships – This is where several real estate investors pool their resources together to buy rental homes. Joining real estate partnerships is a great way to expand your portfolio fast and leverage other people’s skills.Cash financing – If you can afford it, paying for rental property in cash is a great option. It is simple and fast while involving only little complications. You can negotiate a lower home price, avoid paying interest, and boost your cash flow.Related: The 6 Best Real Estate Investment Loans in 2021Best places to invest in rental homes in 2021Now that you know how to get into real estate, it’s time to consider where you should buy a property. We’ve used Mashvisor’s real estate data analytics to provide you with a list of the best places to invest in real estate properties to rent out this year:Best cities for traditional rental investment1. Butler Township, Pennsylvania real estate marketTraditional Cash on Cash Return: 8.29%Median Property Price: $64,900Average Price per Square Foot: NATraditional Rental Income: $680Price to Rent Ratio: 82. Eight Mile, Alabama real estate marketTraditional Cash on Cash Return: 6.76%Median Property Price: $143,950Average Price per Square Foot: $89Traditional Rental Income: $1,158Price to Rent Ratio: 103. Marion, Indiana real estate marketTraditional Cash on Cash Return: 6.69%Median Property Price: $79,283Average Price per Square Foot: $53Traditional Rental Income: $799Price to Rent Ratio: 84. Gary, Indiana real estate marketTraditional Cash on Cash Return: %Median Property Price: $Average Price per Square Foot: $Traditional Rental Income: $Price to Rent Ratio:5. Camden, New Jersey real estate marketTraditional Cash on Cash Return: 6.17%Median Property Price: $134,650Average Price per Square Foot: $89Traditional Rental Income: $934Price to Rent Ratio: 126. Toledo, Ohio real estate marketTraditional Cash on Cash Return: 5.83%Median Property Price: $108,000Average Price per Square Foot: $86Traditional Rental Income: $876Price to Rent Ratio: 10 Find a Profitable Traditional Rental PropertyWatch our real estate video to learn more about the best places for traditional rental home investing in 2021:Best cities for Airbnb rental investment1. Wakefield, Massachusetts real estate marketAirbnb Cash on Cash Return: 9.23%Median Property Price: $639,950Average Price per Square Foot: $306Airbnb Rental Income: $6,955Airbnb Daily Rate: $195Airbnb Occupancy Rate: 66%2. Beaumont, Texas real estate marketAirbnb Cash on Cash Return: 8.45%Median Property Price: $288,284Average Price per Square Foot: $127Airbnb Rental Income: $2,525Airbnb Daily Rate: $114Airbnb Occupancy Rate: 51%3. Toledo, Ohio real estate marketAirbnb Cash on Cash Return: 8.08%Median Property Price: $108,000Average Price per Square Foot: $86Airbnb Rental Income: $1,916Airbnb Daily Rate: $106Airbnb Occupancy Rate: 64%4. Covington, Georgia real estate marketAirbnb Cash on Cash Return: 8.07%Median Property Price: $288,072Average Price per Square Foot: NAAirbnb Rental Income: $3,476Airbnb Daily Rate: $166Airbnb Occupancy Rate: 64%5. Levittown, Pennsylvania real estate marketAirbnb Cash on Cash Return: 8.04%Median Property Price: $304,590Average Price per Square Foot: $220Airbnb Rental Income: $3,569Airbnb Daily Rate: $110Airbnb Occupancy Rate: 78%6. Chesterfield, Michigan real estate marketAirbnb Cash on Cash Return: 7.95%Median Property Price: $350,524Average Price per Square Foot: $179Airbnb Rental Income: $2,245Airbnb Daily Rate: $144Airbnb Occupancy Rate: 63% Find a Profitable Airbnb Investment PropertyConclusion Anyone can learn how to invest in a condo, single family home, multi family home, or apartments for rent. With Mashvisor’s real estate investment tools, you will have all the data you need to make the right choice of rental homes, quickly and confidently.To learn more about how Mashvisor can help you find profitable investment properties, schedule a demo. Start Your Investment Property Search! START FREE TRIAL AirbnbFinancingInvestment Property AnalysisMarket AnalysisReal Estate CompsTraditional 0FacebookTwitterGoogle +PinterestLinkedin Charles MburuguCharles Mburugu is a HubSpot-certified content writer/marketer for B2B, B2C and SaaS companies. He loves writing on topics that help real estate investors and agents make better choices. Previous Post Is Owning an Airbnb Property a Smart Investment Strategy Amid the Global Pandemic? 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