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How to Search for Investment Properties: Best Tips and Tools

Whether you’re just getting started in the rental business or buying your hundredth rental home, finding a profitable investment property is crucial. However, you’ll have to know how to find them. If you don’t know how to search for investment properties and need help finding resources, just keep reading. We’ll go over five steps to finding the perfect property and tools to help find available properties. 

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Contents of This Article:

How to Search for Investment Properties: 5 Steps to Follow

Searching for an investment property can be challenging if you don’t know your strategy or investment goals. Ultimately, investors want to make a profit. But in order to do so, you have to find the right investment property. Here are five steps to follow if you’re looking for an investment property that meets your goals. 

  1. Come Up with a Strategy
  2. Choose a Location
  3. Find Desirable Neighborhoods
  4. Perform a Property Analysis
  5. Negotiate an Offer

Come Up with a Strategy

The first step in finding an investment property is deciding on a strategy. There are several aspects that you’ll want to consider. Do you want to invest in a vacation rental? Or are you taking a more traditional route? A traditional or long-term rental strategy offers consistent income each month and long periods of tenants. That way, you don’t have to worry about filling vacancies in a short-term rental. 

On the other hand, vacation or short-term rentals offer higher profits but can be a bit riskier. For instance, with more people in and out of your rental home on a regular basis, property damage is more likely. Additionally, it’s hard to predict your profits since renters aren’t guaranteed monthly. 

Before looking at properties, consider your budget, financing options, target ROI, and location. 

Choose a Location

Once you’ve decided what type of rental home you’re looking for, it’s time to choose a location. So, if you have a particular state, neighborhood, or city in mind, that’s a great place to start searching. That said, keep your investment goals in mind while choosing a location for your rental property. 

For instance, traditional rental investments generally do better in thriving economies and areas near job opportunities. On the other hand, vacation rentals do great in tourist towns and travel destinations. You don’t have to go too in-depth to find a general location for your investment. Next, you’ll look into desirable neighborhoods. 

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Find Desirable Neighborhoods

Finding a state or city to invest in is the first step. Then, to take it a little further, you’ll have to find the right neighborhood for your property investment. While looking at different neighborhoods, consider the proximity to amenities, crime rate, job market, economy, and accessibility.  

To find neighborhoods and properties that align with your investment goals, there are several resources and tools to consider. For instance, if you’re looking online for rental properties, you’ll want to perform extensive research and look at several different sites to find possible investment properties.

Whether you’re investing in a short-term or long-term rental home, you’ll want to find a property with that’s close to public amenities in a safe and secure neighborhood. Additionally, consider the accessibility in terms of transportation and proximity to local attractions. 

Perform a Property Analysis

Next, completing a property analysis is crucial once you’ve found a property that you’re interested in. After all, you want to determine whether your investment will meet your profit goals. Your property analysis should estimate your gross income, expenses, net operating income (NOI), cash flow, return on investment (ROI), and capitalization rate. Here’s how to find these numbers. 

  • NOI = Income – Operating Expenses
  • Cash Flow = Income – Expenses
  • ROI = Cash Flow / Investment Cost
  • Cap Rate = NOI / Property Price

To find the gross income of your investment, you’ll add up all sources of income, including tenant rent payments, utilities, fees, etc. On the other hand, to find your expenses, you’ll add up everything you spend on the property. Some common costs include insurance, taxes, mortgage interest, utilities, and property management fees. 

Negotiate an Offer

Once you’ve crunched the numbers and feel comfortable with your investment, it’s time to negotiate an offer. This process can be lengthy, but it starts with placing an offer and waiting for a response from the owner. If they like your offer, the process can be quick. However, if they want to counter your offer, you’ll have to continue negotiating. 

Once everyone agrees on a price, it’s time to find a financing option that aligns with your needs. For instance, find a mortgage solution that will help you secure the property but won’t cause financial stress later. 

Once you’ve found financing, you can proceed with a property inspection and appraisal. If you find things you don’t like during this time, you may decide to cancel the purchase. However, if everything looks good and you feel comfortable, you can proceed and close on the property. 

Best Places to Look for an Investment Property

There are several ways you can find a profitable investment, whether working with a realtor or looking online for properties. Keep reading as we review some of the best tools and resources to find an investment property. 

  • Search Online for Properties- Several websites can help you find properties for sale. Some of the most common real estate websites are Zillow, Realtor.com, and Trulia. You can find properties in specific locations, learn more about properties, and find reliable comp information to estimate the profitability of a property.  
  • Work with an Agent- Realtors or real estate agents can help you find properties and walk you through the buying process. From the initial search to closing on the property, agents can assist with paperwork, negotiate deals, set up inspections, and more.
  • Go Directly to the Seller- If you come across a property in a location you like, you could reach out to the seller directly to find out more information. 

Finding Properties on Your Own vs. Working With an Agent

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If you’re trying to decide whether you want to work with an agent or learn how to search for investment properties on your own, there are a few factors to consider. When you work with an agent, they essentially take care of everything. They’ll help you find properties, ensure you’re preapproved for a mortgage, help negotiate deals, guide you through paperwork, and handle communications with the seller.  

On the other hand, if you buy an investment property without an agent, you have more responsibility. For instance, you’ll have to search for properties, communicate with sellers, negotiate offers, work out reasonable financing, and carefully read through and sign closing paperwork. 

That said, if you’re experienced in the real estate industry, you can save money by finding and buying properties independently. However, if you’re new to investing in real estate, it’s best to work with a professional to ensure a smooth buying process. 

Either way, buying real estate can be a lucrative investment strategy for anyone willing to invest time and effort. After all, the work doesn’t stop once you’ve bought the property–you have to prepare it for prospective renters! That said, if you need help preparing your rentals, look into rental property management in Washington, DC

Managing Your Investment Property

Knowing how to search for investment properties is just the beginning. Once you’ve closed on the property and ensured it’s ready to rent, it’s time to market your property to prospective tenants. However, if you’re a busy investor, you may not have time to market your properties, screen prospective tenants, and sign paperwork regularly.

Need More Advice? contact us today!

Luckily, with Bay Property Management Group, you don’t have to! We take care of all things property management–from tenant screening to maintenance, eviction services, rent collection, and more. So if you’re looking for a trustworthy property management team, contact BMG today. We offer comprehensive rental management services in Baltimore, Philadelphia, Northern Virginia, and Washington, DC.