The key to real estate investing is finding a range of viable properties from which to choose. Whether you intend to flip houses, extract value or collect rent, you need a steady stream of properties that suits your needs.
How do you find these properties? It can be challenging to unearth profitable deals, but in this guide, we will show you how to uncover hidden gems you can turn into a goldmine.
Basically, you need to perform a real estate market analysis on the area you’re searching. Here’s how it’s done.
Build Your Network
To be a successful property investor you need a good team in your corner, people who can help you find, buy, and maintain these properties. This team might include:
A real estate agent. Agents can help you identify off-market listings—properties that are for sale but haven’t been listed online by the seller. They can also negotiate a lower asking price to help you get better deals.
Contractors and maintenance specialists. Even if your property is in good shape now, it will need some updating and maintenance over time. Making connections with people who can make necessary repairs now will save you a lot of time and money down the road.
Property managers. Collecting rent and taking repair requests can be a daily hassle that many property managers, especially those with large portfolios, don’t want to deal with. Property managers can relieve this burden, giving you time to find more properties.
Real Estate wholesalers. These are people who work directly with potential sellers to negotiate the right to sell a property. Then they assign the contract to a buyer at a higher price point to make a profit. This can save you a lot of time. They can be referred to you by a real estate agent or found online.
Going Beyond the Comps
With normal real estate transactions, you or your real estate agent would do what is known as a comparative analysis, using the prices of similar homes in your neighborhood to price your home, what agents refer to as “checking the comps.” They look at things like the sale price, square footage, lot size, number of bedrooms, and other amenities. But these considerations are only a piece of the puzzle.
Long-term investors, looking to earn an income from a property for years, need to go beyond the comps to make other considerations. Is there a scarcity or overabundance of homes compared to demand? What are the buyer demographics regarding properties in a particular neighborhood? Is the area prone to flooding? Wildfires? Tornadoes? All are long-term considerations the investor must make when evaluating a property’s investment value.
Know What Amenities Sell
Whether you’re looking for resales or rentals, if you’re going to invest in you must know what sells. You must know what property features are enticing to potential renters or owners. Things like hardwood floors and modern kitchens make properties much more appealing. Just keep in mind that this will vary by region. For example, in Arizona buyers and renters may expect a backyard pool, while in colder climes central heating is more important than air conditioning.
Match these amenities to your prospective renter/buyer. A family with small children might want carpet. Older empty-nesters might prefer a single-story house.
Gather Intel
Now that you know what terms and concepts to keep in mind when looking for investment properties, it’s time to start your search. Successful investors use a wide range of services and tools to gather investment property information. These sources include:
Real estate agents. They are your eyes and ears on the ground, especially if you don’t live in the area in which you’re searching for properties.
The U.S. Census Bureau can provide a wealth of data on new home construction
The National Association of Homebuilders offers info on new and existing home sales
The local county registers of deeds and tax assessors offices
Local newspapers
Be Aware of Market Shifts
A thorough market analysis must include an area’s economic history so you can plan for future shifts, both good and bad. Is the company that employs half the town about to close and lay off workers? Is a new company coming to town offering new jobs? The U.S. Bureau of Labor Statistics can provide you with information on job quality and availability for specific areas.
Other things to keep an eye on: shifting mortgage rates, government policies that affect property demand, and signs of a boom or recession.
Environmental factors
As noted earlier, weather and climate can have a profound impact on future property values. Is the property on a flood plain? Could it be wiped out by a tornado or hurricane? Is the region earthquake-prone?
What about air, water, and soil quality? Traffic patterns? Is the home near the site of a future freeway that will take most of the yard when it gets built? Knowing these factors now will save you a future headache. A big part of property investing is knowing when it is best to walk away from a deal. We know this is a lot to cover, but by gathering this information you’ll be able to make wiser purchasing decisions and walk away from bad deals. Once you have all of this information in place, use our property investment search engine to find the property that’s right for you.