How to Find (The Best) Investment Properties: 5 Steps
Real estate investors must understand the market, define criteria, and search for properties to find the best investments. Learn more about how real estate investors are searching for properties.
When seasoned real estate investors start their search for properties, they often know exactly what they are looking for and what returns they can expect. Newer investors need to define some of those criteria before diving into the search process.
If you’re ready to dive right into searching for investment properties, use Awning. Awning gives you the same information as the MLS with additional insights about rents, repair costs, property management fees, projected growth, and even local neighborhood and school ratings.
The five steps of finding an investment property are:
- Understand the current state of the market
- Set your investment criteria
- Browse properties online
- Verify cash flows and repair costs
- Place an offer online
To find an investment property online, you’ll need to:
Understand the Real Estate Market
To know if you’ve found a great investment, it’s important to understand the current state of the market. Sometimes there are antiquated rules, like the 1% rule, that are almost impossible to find. To figure out the current state of the market, you’ll need to do some research.
The best places to research the real estate market include:
- HousingWire: For real estate news, that will keep you informed of the latest developments.
- Realtor.com: For research and statistics, to understand the overall trend of the market and how consumers, agents, investors and lenders are behaving.
- Facebook Groups: For local news and the local market. The great thing is you’re not restricted to just your local area, just join the local groups in places you’re interested in investing.
- Redfin.com: Housing trends of local markets to understand pricing, time on the market, and other factors of the market you are shopping in.
- Get pre-approved: Applying for a pre-approval from multiple lenders is the best way for you to determine the current interest rate environment for your situation.
Set Your Investment Criteria
Now that you have a good understanding of the market, you’ll need criteria to filter the huge number of properties on the market. This will include deciding on the criteria for the location, features, price, and, of course, returns of the property.
The investment criteria important to real estate investing include:
- Location: You’ll need to think about the location, what neighborhood score and school score you are comfortable with, and what kind of area you’d like to invest in.
- Features: Consider the individual features of the house. Usually something with 3 beds and 2 baths is the easiest to rent, but that varies depending on the area. Something smaller might be better for an area with lots of single, young professionals.
- Budget: Your financing availability will usually dictate your budget. Here, you’ll want to think about how much you want to spend on a property, both in cash for the down payment and in financing.
- Repairs & renovations: Many investment opportunities will require repairs, and some may require significant repairs. While there may be an upside to fixing up a property, keeping it vacant and risking higher-than-expected repair costs differ from one investor to the next.
- Property management: While this isn’t necessarily a criterion, you’ll need to consider whether you’d like to work with a property manager. In some more remote areas, it may be very difficult to secure a property manager. In others, the cost may be high, resulting in lower than expected cap rates.
Browse Available Properties Online
Rather than jumping on the MLS or Zillow, use Awning. Awning was built for investors, so all the listings are complete with the insights that you need, like cash flow, appreciation, neighborhood score and more.
Here’s what to look for when browsing for properties online:
- Browse available listings: Like the MLS, you can browse all available listings.
- Browse just the top listing: On Awning in particular, you can also jump right to the short-list by reviewing our list of top properties selected by the underwriting team.
- Search by area, state, neighborhood, or zip code: If you have a location you prefer to focus on, you can narrow down by searching on Awning.
- Look up a specific address: If you’re looking to get an analysis of a specific address for a property, you can just put it in the search bar. So even if you just drove past the home, you can quickly screen it as an investment.
- Filter your results by your own criteria: When looking at properties, you can filter by price, cap rates, cash-on-cash returns, year built, monthly rent, neighborhood score, school score, and even the projected appreciation rate.
- Calculate on any property: So many variables go into determining the profitability of a real estate investment. You can adjust any of these variables for a single property or across the whole site.
Verify Cash Flows and Repair Costs
Once you’ve found a suitable investment, you’ll want to verify your estimates with actual quotes. This will mean getting in touch with inspectors, contractors, and property management companies. You’ll also probably need a budget, at least for the inspection. Spending a little here can save you a significant headache soon.
To get prepared for making an offer:
- Verify rent with property managers: By calling a local property manager, you can learn the cost of managing your property and get a good understanding of the rent they think you can get for the place.
- Verify repairs with inspectors: If you’re serious about buying the property, you’ll need to get an inspector out there to review what’s going on so that you can place an informed offer. Most often, investors place an offer first, but this step can save you some of the trouble.
- Verify major pain points with specific contractors: Call in contractors to look at the foundation, the roof, or anything else that may give you significant worry or cost a significant amount of money to repair in the future.
Place an Offer on the Property
The last step is to place the offer on the property. You know what you need to earn on the property, how much you’ll need to spend on repairs and management, and therefore which price will make the numbers work best. Once you have an offer, place it, and don’t expect to always win, especially in hot markets when you’re competing with potential owners. It’s best to lose an overpriced investment, then to win it and get stuck trying to make it work.
If you’re ready to dive into searching for investment properties, use Awning. Awning gives you the same information as the MLS with additional insights about rents, repair costs, property management fees, projected growth, and even local neighborhood and school ratings.