How To Find Investment Properties: A Guide
Scott Steinberg8-minute read
February 19, 2023
Wondering how to find investment properties?
We don’t blame you: No matter if you’re on the hunt for your first rental property, or an experienced real estate investor looking to boost your cash flow, picking the right investment opportunity is critical. Whether you’re looking to determine how to find off-market properties, what to look for in an investment property, or how to manage single- or multifamily home financing, fear not − we’ve got you covered here.
Read to start hunting for a home, apartment, or condo to add to your real estate investment portfolio? Simply scroll down to get the latest expert tips and insights on how to find the best investment properties and off market properties near you!
Why Buy An Investment Property?
As veteran real estate investors know, there are many benefits to investing in real estate. Not only can doing so help you grow passive income, build wealth, and generate tax-saving opportunities, it can also help you create a path to greater financial security and generational wealth. The first step to getting started on your journey is to get preapproved for a single- or multifamily home mortgage so that you have the necessary financing in place and ready to go when opportunities arise.
Motives for investing in real estate and finding investment properties or foreclosures may differ based on individual situations and financial objectives. For example: House flippers generally look for houses to buy at a low price and sell for a higher price down the road, while rental property investors are typically seeking homes to hold onto that can generate passive income over an extended period of time. But regardless of your goals and motivations, or what flippers are looking for, learning how to find the right investment property is key to building a viable income stream or business.
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How To Find Investment Properties
For those wondering how to find good investment properties, or what to look for, it helps to have a general sense of where to start, and what to keep in mind up front. Following, you’ll find a number of useful hints, tips, and suggestions.
With A Real Estate Agent
A real estate agent or licensed REALTOR® can be an important partner in your search for investment opportunities. That’s because whether you’re interested in flipping houses or buying rental properties, few know the areas or markets that you’re looking at shopping in better than a local real estate professional. Bearing this in mind, developing a strong working relationship with a good real estate agent can help lead to a steady source of tips and leads, and help you free up your time to focus more on repairs or property management.
Truth be told, there’s little reason to go it alone here, even if you’re looking to expand potential investment opportunities by buying foreclosures and REO properties. Between their contacts, connections, and sources of insight, agents can serve as trusted counselors to aspiring real estate investors.
On The Multiple Listing Service
The multiple listing service (MLS) can also be one of your best friends, as it offers a comprehensive database of properties for sale in your region. Of course, because everyone else (including other real estate investors) has access to it too, the trick is to be able to act quickly when a property of interest becomes available. That means knowing the area and having proof of funds or a mortgage preapproval letter in place to support any offer that you plan to make. Again, it helps to have a real estate agent (or real estate attorney) handy to answer any questions that you might have in the event that you’re ready to make an offer as well.
Through Online Auctions
In the age of constant connectivity, apps, and smartphones, online real estate auctions can also be a helpful source of leads and buying opportunities as well. While some real estate auctions still take place on courthouse steps in select states, more often than not, they occur online for buyers to take part in nationwide. Note that auctions generally require aspiring buyers to have enough cash on hand to complete the sale. If needed, you can then arrange for delayed financing to take your cash back out of any projects you’ve invested in to use for financing future purchases.
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How To Find Off Market Properties
Be advised, though: Not every property will appear on the MLS, and many properties (those for sale directly by a motivated owner) may largely be sold via word of mouth. House flippers on the hunt for hidden gems that with relatively minimal effort or work that they can do themselves can quickly be flipped for a big profit at resale will especially want to keep an eye out for off-market properties.
One of the best sources of potential leads here is simply to drive around a desired neighborhood and stay on the lookout for homes that are up for sale, soon to hit the market, or in relative disrepair. There’s nothing stopping you from trying the direct approach of knocking on the door or noting the address of the property and looking into it to see who owns it, then contacting the owner to make an appointment. (Hint: You can use the address to look up the owner in public records and databases, or by asking your real estate agent for assistance.) Likewise, you always have the option of putting up signs or fliers in the neighborhood letting property owners know that you’re on the lookout for aspiring buys.
Talk To Everyone
Similarly, don’t underestimate the power of the grapevine and word of mouth marketing to drive awareness for the fact that you’re shopping around. Letting your real estate agent know to put the word out amongst their network of local professionals is a good idea as well. In addition, while it’s important to be respectful of others’ feelings and situations, you might also keep an ear out for impending home sales due to a job change, aging parents, or an impending divorce − situations that commonly lead to the sale of homes.
Visit For Sale By Owner Properties
If you do spot a For Sale By Owner sign in someone’s yard, don’t be afraid to seize the moment either. Take the opportunity to make an appointment to visit and tour the property, talk to the owner about any necessary repairs or maintenance, and get a sense of why they’re selling. A little legwork can go a long way here to helping you get the jump on a prospective buy. In addition, don’t forget that many investors still find great real estate deals in their local or target market’s Craigslist classified listings, which can often prove an invaluable resource for finding diamonds in the rough that are being offered for sale by owner.
Check Out Preforeclosures And Foreclosures Online
Preforeclosures and foreclosures can offer especially good deals and buying opportunities for patient and persistent real estate investors who don’t mind putting in a little extra work. There are several online websites that provide information about these properties to investors, who’ll want to run regular searches and keep an eye out for purchases to pounce on, especially at the local or county level.
Pursue Short Sale Opportunities
Another source of leads when it comes to off-market properties can come if you hear about a homeowner that’s in financial distress. In this event, you might consider gently and respectfully reaching out and contacting them to see if they’re open to the prospect of a short sale, which may result in a financial win-win for both parties (putting much-needed cash in the seller’s pocket and a potential lucrative real estate opportunity in the buyer’s hands). For those considering these types of investments, do keep in mind that short sales usually mean that these homes are being sold as is, however.
What To Look For In An Investment Property
Determining what to look for in a potential investment property depends entirely on your financial goals and plans for new real estate investments. House flippers will naturally want to look for desirable homes in desirable areas that are undervalued, and − with a minimum of time, expense, and effort − can quickly be fixed up and resold for a tidy profit. Rental property investors will instead want to shop for affordable purchases in popular neighborhoods and locations that will be in-demand in the future and are likely to attract tenants who can provide a stable, recurring source of passive income as the property appreciates over time. In other words: There are a number of factors that you’ll want to consider when buying your first rental property.
You may have heard the oft-repeated phrase that “location is everything in real estate” − mostly because it’s true. Owning a desirable property in a popular location at an in-demand area that’s on the economic upswing is often the fastest and surest way to ensure a positive return on your real estate investment. Noting this, it’s important when shopping around (especially if you’re an up and coming rental property investor) to look for an area with a steady stream of population influx and prospective renters, like a college town or burgeoning city with a rapidly expanding business district.
Every real estate property owner pays property taxes each year to the federal government. These tax amounts can wax and wane over time. If the property that you’re considering comes with high property taxes attached, it can have a negative effect on annual cash flows, real estate investment profits, and your ability to resell the real estate holding.
What’s more, having to pay for repairs (especially parts and labor) versus being able to perform repairs yourself can also take a big chunk out of your profits. Real estate investors who are unable to perform the necessary tasks of rental property ownership will need to factor in paying for the services of contractors or a property manager. On the bright side, if you’re DIY-inclined, you’d be amazed just how much you can pick up these days when it comes to maintenance and repairs just by checking out online tutorials or watching streaming videos.
Naturally, it’s also important that the numbers add up as well. Investors are strongly advised and encouraged to plot budgets, map out financing figures, and otherwise do the math needed to understand the profit potential of any investment before forking out the purchase price for it. Helpful metrics like projected return on investment (ROI), the internal rate of return (IRR), and the gross rent multiplier (GRM) can help you make more rational vs. emotional or ill-informed decisions here.
How Can I Finance My Investment Property Purchase?
The process of getting a mortgage for an investment property is largely the same as when buying your own home.
In fact, real estate investors can hold up to 10 residential mortgages to purchase single family homes, and each single family home can include up to 4 units. (Several of which can be rented out if so desired.)
What’s more, you can also use conventional mortgages, FHA loans, or VA loans as needed to purchase a multiunit home − although these loans do have owner-occupancy requirements.
The Bottom Line: Understand Your Goals And The Real Estate Market
Finding investment properties isn’t an exact science, but with a little legwork, planning, and research, you’ll find yourself well along your way in your search to tracking down potential real estate acquisitions. It’s important to know what you’re looking for in an investment property before going into the process, and to act quickly when a property that fits this profile becomes available.
Ready to get off the sidelines and take a shot at real estate investment by buying an investment property? Apply online today so you can set your home search up for success.
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