When it comes to investments, real estate is always a solid choice. While there are many factors investors should consider when choosing an investment property — such as location, job growth, rent prices, and population growth — one of the most important things to look at is cash flow.
It is essential to opt for an area and type of property that will give you a good return on your investment.
Here are more reasons to invest in real estate: 12 Ways to Generate Income in Real Estate
If you still question yourself on how to know if a rental property is a good investment, this article has you covered!
1. Spread the Word!
When planning to buy a real estate property, the first thing you want to do is to spread the word. This can include friends, relatives, neighbors, or even your colleagues.
By doing this, you will get some leads on potential properties that might be up for sale. There’s also a chance that one of them is currently selling their property and is willing to give you a great deal as you are someone they know and trust.
How to Properly Spread the Word
If you are unsure about how you can start looking for potential sellers, here are some tips:
- Start by creating a list of individuals you know who might have some connections to the real estate market or even those who don’t. Ask them if they know someone and if they can recommend any good investment properties.
- Follow up with them! This might be a little tedious, but it will be worth it in the end. After you’ve asked for recommendations, make sure to follow up with the people who have given you leads. Offer them a small incentive. One of the most effective ways you can have someone help you is by offering them a small incentive.
- Free and easy to do
- Higher chance of finding a good property that is not yet listed on the market
- Can be tedious and time-consuming as you have to follow up with every lead
- Not a smart option for someone who has a small social circle
2. Check Ads
Start with the most classic way of finding ads, the newspaper. Today, newspapers are not everyone’s first choice when it comes to finding an investment property.
The reason is that most people now use the internet as their primary source of information. Although this is true, newspapers are still a great way to find potential properties.
How to Check Ads
Here are some tips for checking ads:
- Start by looking for local newspapers. This can be a little tricky if you’re not familiar with the area, but you can try to look for the most popular ones in the area you’re interested in.
- There’s a specific section in each newspaper where real estate properties are being advertised. Once you’ve found that section, start looking for any good investment properties.
Note every contact information of the seller that is being advertised. You will need this later when you start negotiating with them.
- Less likely to bump into the competition as there are not many people searching through newspapers
- Less likely to bump with real estate agents and directly buy properties from the owner
- Not as big of a market as online advertisements
- Takes time as newspaper ads come on a weekly or monthly basis
3. Drive Around Your Target Area
One of the easiest ways to find investment properties is by driving around your target area. While this method might not be as effective as the others, it is still a good way to get the ball rolling. By driving around your target area you can get an idea of what’s available and what kind of prices they are selling at.
How To Do It
Here are some tips on how you can start driving around your target area:
- Start by familiarizing yourself with the area
- Look for “For Sale” or “For Rent” signs
- Note down the contact information of the seller
- Contact them and start negotiating a deal
- Can see the property for yourself and get a feel of the area
- Can immediately start negotiating with the seller once you’ve found a potential property
- Additional expenses such as gas
- No guarantee of finding a property
4. Use Real Estate Websites
For a wider range of options, you can start searching through real estate websites. These websites are a great way to find investment properties as they list down all the available properties in a certain area. You can also filter your search to find exactly what you’re looking for.
How To Use Real Estate Websites
You can start searching for properties on Zillow, Trulia, or Mashivisor — the top three real estate websites.
Compare their fees and other features to see which one suits you best, and filter your search by price, location, or type of property.
- Easy to use and search for properties
- Can find a wide range of options
- Competition is high as many people are searching through these websites
5. Network With Other Real Estate Professionals
Another thing you can try to know how to find good investment properties is to connect with other real estate professionals.
These people are always updated with the latest information on available properties. You can also get some insight from them on where to look for good investment properties.
How To Network With Real Estate Professionals
One of the best ways to connect with other real estate professionals is to join investing clubs and events that are being held in your area.
You can also try to connect with them online through social media platforms or forums. Facebook and LinkedIn are great examples of social media platforms where you can connect with other real estate professionals.
- The chance to learn from the professionals
- Professionals tend to have more connections, which you can use to find good investment properties
- Might need to pay a fee to join certain clubs or events
6. Hire a Real Estate Agent
If doing it yourself doesn’t seem like your thing, then you can always hire a real estate agent. These agents are professionals who know the ins and outs of the real estate market.
They can help you find good investment properties that fit your criteria. Not only that, but they can also guide you if you are someone who is just starting in the world of real estate investing.
They can also help you with information, negotiation, and the paperwork involved in buying an investment property.
How To Hire a Real Estate Agent
It is important to hire a well-experienced and reputable real estate agent. Make sure you know what you are looking for in a real estate agent.
That means you should be familiar with their experience, expertise, and success rate. Further, always ask within your social circle for referrals if they know anyone who can help you.
Check out our guide on how to pick a real estate agent.
- Chance to work with industry experts
- Gain access to listings that are not available to the public
- Agents will charge a commission fee
- Might not be able to find an agent that meets all of your criteria
Characteristics of Good Investment Property
A good investment property always has a good location. A safe neighborhood, good schools, nearby public transportation, and other amenities are all important factors to look for in a good location. Expect to pay more, since these kinds of properties tend to be expensive.
Demand for Housing
Another thing to consider is whether the location has a high demand for housing. If more people are looking to buy or rent in the area than there are properties available, then it’s a good investment. Population growth is also a good indicator of demand.
Always compare prices of similar properties in the area to get a good idea of what a competitive price is. This will help you know if you’re getting a good deal on an investment property.
Few Repairs Needed
You don’t want to end up buying a property that needs a lot of repairs. This will eat into your profits. Try to find a property that is in good condition and doesn’t need much work.
Positive Cash Flow
Since it is an investment, it is important to consider if the property can bring in a positive cash flow. This means that the rental income should be more than the mortgage, taxes, insurance, and other expenses associated with the property value over time.
Finding good investment properties can be daunting at first. But with the right strategy and a bit of research, it is possible to find properties that will be profitable in the long run.
Keep these characteristics in mind when looking for your next investment property.