I think it’s been well established that investing in real estate is a lucrative strategy that will give you some serious returns. Now while this is very true, you’ll only get a great return on investment if you invest in the right property. That’s why the real estate property search is a very important process that needs to be given due diligence. Here, we’ll break down the basic steps which are necessary for an investment property search. And then, we’ll let you in on a little secret which will turn 3 big steps into 1 small one.
Step #1: Determine What You’re Looking For
You can’t find investment properties if you don’t know what you’re searching for. I mean sure, you’ll find an investment property for sale in any market. But how will you know that it’s the right one for you if you don’t have any predetermined factors to compare it to? This first step may seem intuitive, but you’d be shocked at the number of investors who begin a real estate property search without first defining their search criteria and investment goals.
Here are some questions you should answer to get you started on your real estate property search:
- What type of property do you want to invest in? (Single-family residential, multi-family property, studio apartment, etc.)
- How much money can you/are you willing to put into this investment property? What’s your budget?
- What kind of real estate investment strategy are you going for? (A quick fix and flip, a buy and hold set up as a rental, or just an asset for building long term equity)
- Are you tied down to any specific investment location? Do you want to invest in your local real estate market or explore opportunities in other cities?
The point of this step is to look at the big picture of this property investment. What is it that you, as a real estate investor, want to achieve with this property?
Related: 3 Investment Property Search Tools to Find Multi-Family Real Estate
Step #2: Research the Real Estate Market
You’ve done your homework and know what you want. Now it’s time to move on to the second important step of any real estate property search- analyzing the real estate market you’ve chosen. You know what strategy you want. You know what your buying budget is. And at this point, you should know the general location you’re going to be conducting your real estate property search in (hometown, nearby cities, out-of-state).
You need to pinpoint the location you want to invest in before searching for homes for sale. Because even if you find an investment property for sale which is the right type and at the right price, if it’s nested in a bad housing market for your investment strategy, you can’t buy it. For example, let’s say you’re planning on renting out your investment property. In this case, cash flow is the number one priority. You want to search for the best cities to invest in real estate for positive cash flow properties.
The Importance of Real Estate Market Trends
Assume you’ve chosen to limit your geographic search to the same state you’re in. Check housing market trends to see which cities are top tier. Market research will let you know about the levels of price growth, home sales, property supply and demand, and rental rates. These are all important factors that play into the ultimate performance of your investment property. Especially when your strategy is renting out, conducting a real estate market analysis and finding out what kind of rental yield a market has is key.
Start your real estate property search with the major metros in your state. Using online search tools, you can quickly and easily find out which cities generally reflect positive rental performance. Start with that, then do a more thorough analysis of the housing market. The internet is a great source of information, and it shouldn’t be neglected. For example, if you were planning on investing in the Atlanta real estate market (the 9th biggest metro in the country), we’ve already got a comprehensive report for you to check out: Atlanta Real Estate Market Report. Here are market reports for a few other major cities as well:
Dallas Real Estate Market Report
Nashville Real Estate Market Report
Los Angeles Real Estate Market Report
This kind of data and information will help you decide exactly which city is the best place to invest in real estate for you and your strategy.
Step #3: Narrow It Down to the Right Neighborhood to Find the Right Property
Neighborhood analysis is a very important step if you want to ensure your real estate property search is effective and efficient. Simply choosing a city isn’t enough. There could be hundreds of listings to go through and you’ll end up wasting a lot of time screening bad investment properties that don’t meet your criteria.
One important thing is to remember that real estate is a local business. Key real estate trends can differ from one neighborhood to the next. So even if a certain city has generally positive/negative trends, it could still have certain neighborhoods that are the opposite of the city-level data. For example, let’s consider home price trends in the Los Angeles real estate market. It’s a well-known fact that LA homes are very expensive. But if you analyze the housing market and look into the neighborhoods, you’ll find that some can have a median price point cheaper by 50 percent than the city’s median. If an affordable property in a high-value market is what you’re looking for, a neighborhood analysis is a step that cannot be overlooked in your real estate property search.
Related: Real Estate Investing for Beginners: A Guide to Neighborhood Analysis
After narrowing down the search to a couple of neighborhoods, you and your real estate agent can start going through listings that meet your investment criteria. Only seriously consider and conduct a thorough investment property analysis on the real estate listings which check off all your boxes. How does this property match up to the rental market it’s in? Will it generate enough revenue for a sustainable investment? Compare the properties to each other to determine which is best. Look at key property-specific metrics like monthly rental income, cash on cash return, occupancy rate, and rental expenses.
The Easiest Way to Do Your Real Estate Property Search- Online Property Search Tool
I told you that I’d be letting you in on a way to make the extensive process of a real estate property search easy. It requires you to do only one thing, and that’s to sign up for Mashvisor.
With the click of a button, your real estate property search will go from months of work and research to just 15 minutes. You’ll find multiple property search tools each with a specific purpose. You can start with our State and City Guides, then use our heatmap analysis tool for a more interactive approach to finding the best neighborhoods. Our investment property calculator gives real estate investors all the data they need for a successful real estate property search. You’ll definitely find the right investment property for you. All of this and so much more on one platform. To start your 14-day free trial with Mashvisor and subscribe to our services with a 20% discount after, click here.
Related: Investment Property Search: 4 Must-Have Real Estate Investing Tools