Real estate builds wealth more consistently than any other type of investment.
It is no surprise then that over 90% of all millionaireshave invested in real estate. Property investments are appealing for many reasons.
Not only do real estate properties offer reasonable returns on your investment, but the property value is always appreciating. You’re also your own boss and who doesn’t love that?
In short, property investment is arguably the best form of passive income available.
Done right, a few good investments could put you on the path to retirement at the ripe old age of 40. But as with anything else, getting started is the most difficult part.
Are you looking to start investing? If so, check out this guide to learn how to find investment properties worth both your time and money.
How to Find Investment Properties
With proper research and guidance from a professional, you should be able to get the most ideal property to help you get started.
While looking for property to invest in, it’s important you know about the Opportunity Zone Funds program. This program is an alternative to 1031 exchange.
The government created this program to incentivize private capital investments in projects needed to revitalize distressed communities. Those who invest in it enjoy capital gains tax incentives that are exclusive to enrollees.
The following guidelines should help you locate potential investment property perfect for you.
1. Do Your Homework
There many types of investment properties in real estate. And one isn’t necessarily better than the other. It’s about what’s right for you.
Start by researching the different types of investments. Which one suits your time, budget, and demand? Another major factor is what type of income you’re looking to make.
For example, are you looking to bring in lots of money right away from renting out your property? Then a single family home with a short-term rental strategy would be a good idea.
However, if you prefer the safety of a consistent rental income with laid back property management, an apartment unit with a traditional rental strategy would suit you better.
The key is to know what you want before getting into real estate.
2. Decide Where to Invest
The location of your property directly impacts its success. Good property in a bad location will do you no good.
Your choice of location should be guided by the type of real estate investment as well as the type of rental strategy you want.
Take the New York City real estate market for example. Here, you’d see better returns on multi-family homes than on vacation rentals.That’s because of the strict short-term rental regulations enacted here.
Real estate analytics can help you choose the right market by offering data on listing prices, occupancy rates, cap rate, and more.
Be sure to do your homework about all aspects of your potential investment before shelling out any money.
3. Choose The Right Neighborhood
Now you know why it’s important to find the right market (and how it’s done). But that’s not the same as finding the right neighborhood.
For example, a market search analysis of New York City will only give a general perspective of how real estate is doing in New York collectively. This means you won’t receive specific information abouthow individual neighborhoods are doing.
This means you’ll need to do a neighborhood analysis of the market you’ve chosen.
Additionally, ensure that the features of the neighborhood you’re analyzing complement the type of property and investment strategy you’ve chosen.
For instance, if you want a long-term single family home, choose a neighborhood in close proximity to a good school district.
When looking for the best neighborhood, be sure to go for those with low crime rates and high walk scores.
4. Narrow Down Your Options
Now that the research is done, it’s time to choose a profitable investment property. You’ll likely find several properties for sale in the neighborhood you’ve chosen. Before conducting an investment property analysis, first consider:
Comparing Cap Rates
Look at the cap rates listed for the various properties. Compare those cap rates to the neighborhood and market cap rate to determine whether they’re good or not.
Performing a Comparative Market Analysis
If you already have your eyes set on a particular property in that neighborhood, look for other similar properties in the area sold within the last six months.
Compare those prices to what you’re currently being asked to pay. Then you can eliminate any overpriced properties.
5. Conduct a Thorough Investment Property Analysis
After comparing cap rates and performing a comparative market analysis, you should have narrowed down your list of potential investment properties to just a few viable options.
Now it is time to do an investment property analysis on the property you’re eyeing.
Here, you want to calculate the expected rental expenses in addition to figuring out your investment property financing.
Start by determining the current rental income that the property churns in. Having the answers to these questions will allow you to predict the potential cash flow.
At this point, you should be able to figure out if the property will be a positive cash flow or negative cash flow investment.
When it comes to investing in a property that offers a great return on investment, you want a positive cash flow every single time!
Start Investing Today
Hopefully, this article has answered the question of how to find investment properties.
Real estate investments have brought fortune to a lot of people. However, property investment takes a lot more than just buying a home and renting it out.
You need to choose not only the right location but the right type of property for your needs and budget. With careful planning and plenty of research, you can make a tidy profit out of this industry.
Do you own a rental property you’re looking to sell fast? Check out this article! And keep coming back to see our most recent tips and tricks for boosting business and living a cost-effective lifestyle.
