Buying a real estate property is one of the smartest investment choices anyone can make. This decision alone has transformed the lives and financial prospects of an ever-expanding number of people. In fact, because inventories are low, the recent influx of interested investment property buyers has pushed local housing markets across the United States through the roof.
This activity bears a storm of ominous questions each modern investor must face: how do I beat the competition? Where can I find affordable investment properties for sale in my area? High levels of competition mean real estate investors are required to put on their creative caps in order to beat the market.
There are many ways you can find investment properties for sale, and this list is anything but exhaustive. However, here you’ll find some simple ways to get your property search started before the rest of the investing world finds out. But before we discuss how to find an investment property, there’s one underlying question that you, as a prospective landlord, must ask yourself first:
Are You Cut Out To Be A Landlord?
Owning an investment property and reaping the rewards of residual income streams sounds like the modern investor’s dream. With the right level of financial stability, many real estate investors leave their professional employment and ride their proverbial white horse off into the sunset.
But the realities of being a landlord can be far from the reaches of this vision. Landlord duties require time, patience, and a set of skills that an individual either possesses or needs to learn.
How is your dexterity when it comes to a toolbox? Are you prepared to visit your tenants at 6 pm on a Thursday to unclog toilets? Of course, you could hire a property manager to address operational issues, though you’ll find that cuts into your profit margins.
What Are Landlord Responsibilities?
Among the obligations of being a landlord, you will find:
- Searching for the right property in a desirable location
- Negotiating good deals with the seller
- Preparing the unit for tenants
- Finding reliable tenants
- Tending to ongoing maintenance and operational demands
After considering the not-so-glamorous realities of real estate investing, many investors may find that they lack the time and experience to undertake a project of this magnitude. But there is a simple way to enter into real estate investing without the time commitment, zero experience, and no ongoing responsibilities!
Crowdfunding with Professional Investors
If the reality of a rental property investment makes you want to run for the hills, there is another option. Crowdfunding or multifamily real estate investing is where professional investors scour the market for historically profitable commercial real estate projects, such as multifamily properties, and pool investor capital to fund the investment.
By participating in crowdfunding initiatives, investors gain equity in profit-generating real estate, receive regular quarterly dividends from rental income, and don’t have to perform any management or maintenance duties. Thursday night just freed up!
If you prefer a passive investment in income-producing commercial property, crowdfunding platforms may be right for you. By working with professionals like People’s Capital Group, investors can simplify their investments while gaining access to properties they don’t have the financial muscle to afford on their own. If you’re someone who wants to experience lucrative returns without compromising your already busy life, get in touch with the investing experts at People’s Capital Group today.
Alternatively, if you like to sink your teeth into investment projects and have the knowledge and skills to manage a rental property, here are some great ways to find investment properties for sale!
How To Find Investment Properties For Sale
When you know you’re serious about real estate investing, finding investment properties becomes a strategy game. There are common ways to search for rentals, unconventional methods, and the downright old school! In this list, we will discuss a range of approaches to provide a broad perspective of the advantages and drawbacks of each.
Multiple Listing Service
A multiple listing service (MLS) is a large database where you can find investment properties for sale by all real estate agents in your area. Of course, using an MLS to find properties is one of the most common ways investors search nowadays. When you search sites like Realtor.com, you are accessing multiple listing services. These websites are distributed to thousands of public property search platforms, like Zillow, so properties are easily available for all to see.
As a result, competition is high and market inventory is typically low across the United States. This option may take less time if you’re flexible with your cash, though you may get into bidding wars and pay a little more than other investment options.
You’ll need a real estate agent or broker to represent you if you go down this route. It also pays to have financing pre-approval when you use an MLS, as most sellers ask for confirmation that you have the financial capacity to buy before they enter into a contract with you. With these two tools, you will find it easier to beat the crowds and secure good deals on investment properties.
Real Estate Agents
Real estate professionals know how to find investment properties in their markets. When you work with an agent, you have access to local market information and a good stream of available properties at your fingertips. Real estate agents can also offer you key insights into properties in your local market that need to be sold sooner rather than later.
Buyer’s agents tend to keep a great network of brokers and seller’s agents. Strong networks can help your real estate agent match your desires to available properties valued within your price range. Additionally, agents are experts at negotiating good deals and understanding where and when to look.
We mentioned above that real estate agents have a great set of networks. And rightly so: real estate is a people’s business. But not everyone wants to work with an agent. With a little effort, your network could be as pristine and diverse as that of an agent!
For a start, everyone has an existing network comprising their inner circle and the relationships built throughout their career. Informing these people that you are looking for a deal is a great lead generation exercise. Additionally, you can put yourself out there and connect with like-minded investors in your community and the location you want to invest. Networking attracts people that can help your journey, as well as ideas and opportunities.
How Can I Network Effectively?
As you discuss your objectives, be as specific as you can about the kind of deals you want. That way, contacts are more likely to remember you and give you a call once something comes up. Keep in mind that networking is a game of generosity, so it works better when both parties mutually support one another.
For instance, imagine that you want to find turnkey duplexes, but all that’s coming up for you seems to be a duplex in dire need of renovation. If you meet an investor interested in flipping, you have a lead to send their way! They’re more likely to reciprocate the support when you’re already helping them.
Where Can I Network?
Modern technology makes real estate investor networking easier than ever before. Social media sites like Facebook, Instagram, and Linkedin are a great way to scour communities and groups specifically created for investors. You can find deals on investment properties, guidance, and opportunities in one place!
Local real estate investing clubs and meet-ups give you the chance to network with investors in person, which can enhance the authenticity of the connections you build. You may also be interested in building relationships with developers, lenders, insurance providers, home appraisers, and Realtors… You never know who can help you find investment properties!
Find Local Wholesalers and Turnkey Sellers
For a real estate investor that wants to avoid the queues and competition of multiple listing services, off-market sellers can be your best friend. Off-market sellers don’t list their properties on listing services, meaning you need to go out and find them.
Some real estate brokers maintain buyer lists and send out emails to these lists when they have good deals on investment properties. Many lists operate on a first-come, first-served basis. By being a part of these groups, you may find less competition than MLS in the off-market niche. Moreover, by building relationships with the distributors and explaining exactly the kind of deal you’re searching for, sometimes the off-market sellers will give you a call first.
Understandably, it’s unlikely that you will be at the top of their list if you reached out 18 months ago and haven’t followed up on the relationship. Authentically connecting with the individuals you hope to work with on a personal and professional level will open many more doors.
Search For Sellers on Craigslist FSBO
Modern technology can offer us a lot when it comes to finding investment properties, but there’s something to be said about the old-school ways of searching too! Craigslist is a great example of how to find investment properties for sale that aren’t listed on an MLS. What may prove to act in your favor is that Craigslist still requires investors to perform manual searches as the platform endeavors to stay away from high-tech automation.
Searching may eat into your free time. But there are plenty of individuals who are prepared to forfeit a few hours of their time to secure hidden gems in the far reaches of the real estate investment properties market.
You’ll find turnkey rental properties and distressed properties in dire need of renovation on this platform. Furthermore, wholesalers, owners, investors, and turnkey sellers all hang out here. It may pay to do further due diligence on the deals you’re scouring, as there can be scammers and spammers present on predominantly anonymous sites like Craigslist.
Search Further Afield
Struggling to find an investment property locally? How about searching for investment properties in real estate markets further afield? Some areas tend to be more scarce than others, and you may just find your dream investment property in another place.
If you’re in the market for rental investment properties, it’s well-known that affordability can be a challenge in highly desirable locations. But there are many areas in the US where developing job markets drive population growth and rental demand accordingly.
It’s easier than ever to check out turnkey rentals with virtual tours, video sharing, and online meetings. You can partner with someone out of town nowadays and overcome the limitations real estate investors have historically faced.
When you invest out of town, you may need a third-party property manager to take care of daily operations (or find a partner willing to do the work). This will likely cut into profit margins but works well for many investors depending on their investment goals and strategy.
Things to Consider Before You Buy a Rental Property
Once you’ve decided how to find investment properties in a way that suits you, it’s time to look at a few factors that will pave the path to your investing success. We’ve spoken about what it takes to be a landlord and the importance of considering this role in its entirety.
There are a few other elements to ponder before making your final decision. Ultimately, this list is designed to enlighten your process and guide decision-making to ensure that you are well prepared for the next step in your investment ventures.
Pay Down Debt
Paying down debt may seem unrelated to your investment prospects, but consider the following: interest rates you pay on any high-interest debt add up significantly over time. In the same way your returns can accumulate to grow your wealth, the interest you must pay on debt over the long-term can diminish the benefits an investment can offer to your overall financial picture.
In a nutshell, when improving your overall financial gain from real estate investments, it helps to reduce the high-interest payments you’re required to make. Your personal returns, gains versus the cost of interest is a personal calculation that you will need to make. Additionally, it’s best to avoid situations where you’re unable to make payments on your debt obligations.
Buy with Cash or Finance?
Depending on your investment goals, you may choose to finance the property or buy it with cash. Usually purchasing with existing funds can increase your ongoing cash flow. On the other hand, financing your way into the property with a 20% downpayment may bring better returns on your initial investment.
Investors that attain a property mortgage through banks, credit unions, or financial institutions, are often able to use rental income to cover expenses. These could be mortgage repayments, property taxes, or maintenance costs. They may even have extra income left over once these payments are made!
If you choose to go for a rental property mortgage, here are some of the elements a lender will typically look for in an individual’s financial situation as they assess eligibility.
Credit Score – For a conventional mortgage, you need a credit score of 620 or above. You may secure better terms with the lender if your credit score is even higher.
Down Payment – When purchasing primary residences, you can pay as low as 3% on your property. However, for investment properties, you’re usually required to pay at least 15-20% upfront.
Debt-to-Income ratio – Your DTI is a percentage that expresses how much of your net taxable income goes towards paying off debt. It’s recommended that investors have a DTI between 36-45% to qualify for a rental loan.
Savings – It helps to have saved at least a few months of mortgage payments in case you run into unexpected bumps. This includes property taxes, interest, insurance, and principal.
Factor Unexpected Costs
Ongoing maintenance on a property is likely to cut into your profit margin. But unexpected costs that are beyond the reach of anyone’s control will pop up from time to time, and it helps to be prepared.
For example, natural disasters that cause damage to the property or a burst water pipe are events that need to be addressed quickly. Aim to set aside a percentage of your rental income for these costs so you are ready for when they do arise.
Undoubtedly, you’re already looking into homeowners insurance. Landlord insurance acts as an additional layer of protection to cover rental property owners when things go wrong. It could be that you face an unexpected loss of rental income along the way or that damage occurs to your property. You’ll also be covered for liability insurance should one of your tenants suffer injuries as a repercussion of property maintenance matters.
Finding a rental property can be a rewarding way to invest! Not only do you gain equity in an appreciable asset, but you receive regular payments of rental income as well. However, rentals can come with risks and responsibilities that demand time, knowledge, and experience. It’s a good idea to make sure you’re up for the task and well prepared before you jump in.
Modern life is demanding, and the time and experience required from being a landlord are overwhelming for many professionals with busy lives. If you’re still looking to invest in an appreciable asset and gain high rental dividends, crowdfunding can be a great solution.
By investing in crowdfunding platforms like People’s Capital Group, individuals receive passive income from highly profitable commercial real estate without the management responsibilities.
There’s no need to go through the mortgage application process, and you can invest with as little as $30k. This is particularly advantageous for those who want to dip their toes into the world of investment property without the long-term commitment. If you know that real estate investing is right for you but you want to avoid all the fuss, contact People’s Capital Group today.