Real Estate AnalysisResidential Investment Property for Sale: What Makes for the Best Real Estate Market? by Eman Hamed November 22, 2019November 4, 2019 by Eman Hamed November 22, 2019November 4, 2019Everyone in real estate knows the golden rule of “location, location, location”. So if you’re looking to invest in property, whether as a first-time investor or a seasoned one, you must be looking for the best place to find a residential investment property for sale. But what exactly does this location look like? Well, every year, the PwC and the Urban Land Institute release the Emerging Trends in Real Estate report where they rank the top cities in the US housing market to invest in real estate. While each market is unique, experts who were surveyed for this report believe that these top markets all share some similar features. So if you want to know where to invest in real estate, keep reading to learn what features you should be looking for in your market of choice.Curious to know which cities ranked the highest in the report? Check out the 10 Best Places to Invest in Real Estate in 2020. Feature #1: Job Market Growth After acquiring a rental property for sale, your first task as a real estate investor is to find tenants to live in this property in order for it to start generating rental income. Logically, tenants want to live in cities that offer good job opportunities so they can work and make money. So, the first feature to help you narrow down places for buying real estate is a good job market and employment trends. You want to find a residential investment property for sale in a market where:The number of jobs is increasingThe median salary is risingThere are high-tech and high-paying jobsThere are diversified jobs with multiple industriesThese features indicate that the city’s economy is thriving, making it a great investment location. After all, a real estate rental market with a strong economy will only improve your chances of finding positive cash flow properties! That’s because there’ll be a large pool of tenants demanding rental properties, meaning lower vacancy rates which allow you to charge higher rents. Overall, rental properties are only profitable if you’re investing in a city with a strong and growing economy.Feature #2: Population Growth The next feature of the best places to buy rental property for sale is closely related to the previous one and that is population growth. Cities that have strong economic trends will naturally experience a stable increase in population as more people move there for work. Of course, there are other reasons why the population is growing in certain cities including good weather, natural attractions, cost of living, and good local politics. Overall, population growth increases the demand for rental properties as these people will want places to live. It only makes sense that these are the best cities to buy a residential investment property for sale.Besides population growth, real estate investors should also look at data that describes the composition of a population such as age, income, and migration patterns. These statistics are often overlooked but are still significant factors that affect how residential real estate is priced and what types of rental properties are in demand. For example, if you’re in a location where the population of millennials looking to start a family is growing, then single-family homes rentals would make for the best real estate investments here.Start looking for and analyzing the best rental properties for sale in your real estate market of choice. Search for My Investment PropertyFeature #3: Moderate Price to Rent RatioIf you’re not familiar with the price to rent ratio in real estate, it’s simply a measurement that compares the price of buying property to the annual price of rent in a given location. The main purpose of calculating the price to rent ratio is to estimate what’s cheaper: renting or buying real estate. A low ratio (below 15) indicates that it’s better to buy houses for sale. A moderate ratio (16 – 20) and a high ratio (above 21) tell you that’s it’s best to rent. Experts in real estate investing believe it’s better to buy residential investment property for sale in a market where the price to rent ratio is moderate. Why?A low ratio tells people to buy homes for sale because they’re affordable (meaning, there won’t be strong rental demand). A high ratio, on the other hand, tells people to rent because the prices of properties for sale are unaffordable (meaning, you might not be able to afford to buy either). The best real estate investments are, therefore, found in cities with a moderate price to rent ratio. Here, a real estate investor will have a better chance of finding properties at a reasonable price that are also in demand. Meaning, whatever you pay for a rental property, you’ll be able to reap high rental income for positive cash flow and, ultimately, a good rate of return on rental investment.Related: Price to Rent Ratio by City – Where to Invest in 2020Feature #4: Favorable Supply and Demand TrendsSo we’ve covered that the best places to buy an investment property have a strong demand for rentals. The next feature to keep in mind when deciding where to invest in real estate is a low supply of homes for sale. From a real estate investor’s point of view, this means that residential investment property for sale will have a higher value, price, and rental yield. To find whether your rental market of choice falls into this description, you need to perform a real estate market analysis.Keep in mind that while supply can be lower right now, it can expand in the future. So, try to find real estate for sale in an area where there’s little possibility that the supply of competing rentals will increase. These locations will have borders (natural and manmade), strict land development laws, or limited amounts of specific types of zoning. These make the construction of new homes more difficult or expensive. The harder it is to build new supply, the more valuable your investment property will be in both the short and long term.Other Small-Scale FeaturesWhat we’ve mentioned above are large-scale features of the best places to invest in real estate residential investment property for sale. However, investors of rental properties should also bear in mind other small-scale features that affect the profitability of real estate investments. Among the most important ones are:School District: The best residential real estate properties to invest in are in good school districts because these are safe areas and are attractive to tenants especially families or people with children looking to rent your property.Crime Rates: Safety is a top priority to consider when deciding where to invest in real estate. The best type of tenants want to live in areas where they feel safe, so always look to invest in locations with low crime rates. Plus, a high crime rate can cost you money in terms of stolen property, vandalizing, etc.Property Taxes: While they’re inevitable, it’s best to find residential investment property for sale in places with low/no property taxes. High property taxes can cut into your rental income and affect your ROI. High property taxes are not always a bad thing if you’re in a great neighborhood that attracts long-term tenants, but there are lousy places with high taxes too.Landlord-Friendly: Finally, the best cities to invest in real estate have lenient rental laws that favor landlords. For example, licenses are easier or cheaper to obtain, eviction laws and process make it easy for landlords to evict a bad tenant, and there are no strict rent control regulations. Overall, you’ll enjoy owning a residential rental property here over markets that are tenant-friendly.Related: Invest in Real Estate in the 5 Most Landlord Friendly StatesThe Bottom LineLocation is key to successful real estate investing. It takes a thorough real estate market analysis to find the best places to invest in real estate. But, understanding what features you’re looking for makes things easier. If your real estate market of choice has a good balance of these features (not just one or two), then it’s likely to be a good place to buy a residential investment property for sale. Want to start looking for a profitable rental property that yields a good return on investment in your area? Use our Property Finder to find lucrative investment properties that match your criteria in a matter of minutes! Start Your Investment Property Search! START FREE TRIAL LocationMarket AnalysisPrice to Rent RatioProperty for SaleRental YieldReturn on Investment 0FacebookTwitterGoogle +PinterestLinkedin Eman HamedEman is a Content Writer at Mashvisor. With a focus on market reports, she enjoys researching the state of the real estate market in different cities across the US. Eman also writes about trends, forecasts, and tips for beginner investors to gain the confidence and knowledge they need to make wise decisions. Previous Post Giving Thanks to Your Real Estate Clients: 11 Ideas Next Post What to Look for in a Rental Property: 10 Things Related Posts For Newbies: How to Get Started in Real Estate Investing Buying Your First Investment Property? Don’t Make THIS Mistake! The Beginner’s Guide to Rental Property Analysis Rental Market Reconnaissance: Why Investors Can’t Rely on the 2% Rule Breaking Even on a Real Estate Investment Property: Is This an Option? Real Estate Data Analytics Is What You Need to Get Rich How to Find Investment Properties Using a Property Finder Tool What Rental Property Return on Investment Can You Expect? Gross Rent Multiplier: What Is It? How Should an Investor Use It? 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