Knowing how to find investment properties is what separates good from great investors. It isn’t as easy as firing up Zillow and looking through a few of the first properties you see. It took me over a year to find my first cash-flowing rental property and another year to find a self-storage facility worth purchasing. But, because I took my time, both those properties have appreciated generously and brought me some stellar monthly cash flow!
By this stage, you’ve done your preliminary research about different ways to earn passive income. You’ve compared REITs vs rental properties, investigated the different types of rental properties, narrowed in on the best state to buy a rental property, and are now ready to find the perfect one. If you’re just getting started on your investment property journey, here’s how you too can find properties that work for your goals!
9 Ways to Find Investment Properties
Finding investment properties is a daunting task for most people. There are many routes to take when looking for an investment property, but here are some of the most effective ways to get in the game:
1. Hire a Realtor
Realtors are the best way to find properties that fit your criteria. They have access to local MLS systems, which means they can search for properties in your area and send you a list of homes that match what you’re looking for. Realtors can help inexperienced investors figure out which neighborhoods and property types fit best with their investing strategy.
Best For: New investors and investors who are purely looking for on-market deals. If you’re buying your first property, this is where you should start!
Skip If: If you’re looking for off-market deals to flip, BRRRRs, or undervalued properties—this probably isn’t the best way to go.
2. Surf the MLS
This is the most common way that realtors find deals. But, once your realtor gives you MLS access, you have free reign to see ALL the deals on the market. This allows you to aggressively analyze deals as you see fit.
The best part about this method is that you can get direct access to the data and make your own decisions on what makes a good deal!
Best For: New investors and investors looking for on-market deals. This will help you beef up your analyzing/underwriting skills if you’re just getting started!
Skip If: If you’re looking to flip, BRRRR, or even wholesale real estate—this strategy won’t get you the under-valued off-market deals you need.
3. Check Out Real Estate Marketplaces
Real estate marketplaces, like Zillow and Realtor, are great options for those who don’t have access to the MLS or an agent/realtor currently working with them. This is the easiest way to find on-market deals and analyze them to see if they’ll turn a profit. That being said, real estate marketplaces won’t show as many details as the MLS will.
Best For: Those who are just testing the market and trying to see what homes are available for sale. House hackers and single-family rental property investors will find real estate marketplaces especially easy.
Skip If: If you want an undervalued deal. The next steps will show you how to find properties you CAN’T find on real estate marketplaces/the MLS.
4. Drive the Neighborhood
The best way to find undervalued deals is by driving around neighborhoods and looking for signs of distress. This can include: Trash on the lawn or curb, overgrown grass/weeds in the front yard/backyard, and mud and dirt stains on windows and siding (indicating water leakage). This practice is so common that it’s often dubbed “driving for dollars” by real estate investors!
Best For: Those looking for off-market deals: wholesalers, fix and flippers, and investors who aren’t scared of a bit of rehab/work.
Skip If: If you want a move-in-ready rental property or house hack, this is often not the road to take. For newbies buying your first property, on-market may make more sense.
5. Try Direct Marketing and Mailers
Direct marketing is the practice of sending your offer directly to sellers through different forms of mail. This includes postcards and letters. Direct marketing can be a great way to reach a specific niche market that you wouldn’t normally have access to or sellers who are just too stubborn to list their property.
Best For: Wholesalers, experienced investors, and those in markets with low inventory.
Skip If: If you’ve never done a real estate deal before, knowing the ins and outs of negotiating with off-market sellers, getting the correct contracts together, etc. may be a bit too much to handle.
6. Connect with Wholesalers
If you don’t have the time or expertise to find off-market deals yourself, you can use a wholesaler. A wholesaler is someone who finds properties for you and then gives you the exclusive right to purchase them at a discount from their initial price. They typically make their money by taking a cut off each one that they sell to you, or charging an upfront finder’s fee.
I used a wholesaler to buy my first self-storage property!
Best For: Commercial investors, busy investors, and those who don’t have the time to run direct-to-seller marketing campaigns.
Skip If: If you’re low on cash, and looking for 5% – 10% down deals, then you most likely won’t have enough cash to pay the wholesaler their fee.
7. Attend Auctions
Auctions are pretty self-explanatory: the property is sold to the highest bidder! This can be facilitated either as a live or online auction, so if you’re buying a rental property out-of-state, you can still make a bid! Auctions are usually held on the courthouse steps in front of investors who are there to bid on properties that are being sold by foreclosure or bankruptcy. But be careful, if you win the highest bid, you’ll need to pay for the property outright!
Best For: Flippers, BRRRRers, and those willing to put in serious sweat equity on a property. You’ll also need to ensure you have funding lined up for the property if you win the bid!
Skip If: If you’re inexperienced in investing, or don’t have a ready-to-lend hard money lender, private money lender, or cash sitting around, bidding on properties could be a waste of time.
8. Start Networking
As soon as you get the idea of becoming a real estate investor, start networking! You can do this through local REIA groups, your real estate agent, and just by asking around. You’ll want to find other investors who are willing to share their knowledge with you so that you don’t have to learn everything on your own. Plus, they may send deals that don’t fit their buy box your way!
Best For: Brand new investors regardless of skill level or preferred property type!
Skip If: Don’t! There’s no reason not to network!
9. Check the Local Newspaper
Newspapers, although incredibly outdated, are one of the EASIEST ways to find FSBO (for sale by owner) properties AND new rentals in your market. But why would you care about renting when you’re trying to buy?
Here’s a tip: When you see an owner trying to rent out their property, give them a call or text, tell them you’re an investor, and ask them “do you have any other properties you’re looking to offload?” If they say “yes,” then you’ve found a deal worth analyzing. If they say “no,” then they may give you a call the next time they’re thinking of selling!
Best For: Beginners looking for a low-effort way to find off-market deals.
Skip If: Across the board, this strategy works for almost any property type except HUGE properties (multimillion-dollar apartment complexes, etc.)
What to Avoid When Finding an Investment Property
There are a lot of things to keep in mind when you’re looking for an investment property, but there are also things that you should avoid. Here are some of the most common:
Skipping Fundamentals
The most important thing you can do is learn the fundamentals. This means knowing how to evaluate a property, how to estimate potential cash flow, and how to calculate how much money you’ll make on an investment after all costs are accounted for. It’s not just about finding a deal; it’s about knowing whether or not that deal will work!
Exceeding Your Budget
A lot of people get caught up in the moment. They see a great deal and want to get it, even if it’s outside of their budget. You can avoid this by having a clear idea of how much you want to spend before you start looking for investment property deals. This will help you to avoid overpaying for something that doesn’t fit into your overall plan.
Finding a Property That is TOO Unique
It can be tempting to find a property that no one else is looking at. You might think it’s a great investment because no one else has discovered it yet, but this isn’t always the case. If you’re not careful, you could end up with an investment property that doesn’t have any buyers or renters. Instead of trying to find something unique and different, look for properties that are worth what they cost and can make money for you in the long run.
What Makes a Good Investment Property?
A good investment property makes you money. But, you’ll need to become an expert at finding which types of real estate, in what areas, and with which amenities make you the most.
Low Crime Rate
A good investment property is one that’s located in a low-crime area. You don’t want to be spending your time, money, and energy on security systems and repairs because of the neighborhood. If you can find a property in a low crime rate area, this makes it easier for you, and your tenants, to enjoy your investment.
Good Schools
Another important factor to consider when investing in real estate is the school district. You want to be sure that the property is located in a district that has good schools so your tenants who have children can attend school without worry. Once a tenant finds a great property in a great school district, there is a VERY low chance they’ll optionally move out. Good schools keep your tenants happy—and paying rent on time—so you’re not spending money on finding new ones every year.
Solid Owner-to-Renter Ratio
A solid owner-to-renter ratio is another important factor to consider when investing in investment properties. This refers to the percentage of homes that are owned by their occupants, as opposed to those that are owned by real estate investors or landlords. If you find a neighborhood with a high owner-to-renter ratio, this means the neighborhood, and neighboring properties, will usually stay in good condition—and thus, it will be easier for your tenants to feel safe, and secure, in your rental!
Fair Property Taxes
Property taxes are another important factor to consider when investing in investment properties. These are the taxes you pay on your home, and they vary by state, county, and municipality. The best way to find out how much property tax you’ll be paying on a new property is by checking with your local government. These taxes can eat into your profit, so make sure you know them before you buy!
Great Location
Location is important for any investment property, and it’s especially true when looking for rental properties. The location of your rental will determine how much rent you can charge, and how many tenants are interested in living there. If you’re looking for a great investment opportunity, then make sure to find a property that has plenty of amenities—such as nearby schools or shopping centers—and is close to public transportation, such as buses or subways.
Comps Check Out
Comps, or comparable sales, are important when it comes to buying rental property. Comps help you determine the value of an investment property by comparing it to similar properties that have recently sold in the area. You can use this information to determine whether a property is priced right for your market or if there’s room for negotiation. Remember, you DON’T want to be buying a property that exceeds the local comps!
Strong Price-to-Rent Ratio
A strong price-to-rent ratio is another indicator that a property is priced right for your market. The formula is simple: divide the purchase price by annual rental income and then divide that number by 12 to get your monthly rent.
For example, if you buy a property for $100,000 and it yields $1,000 per month in rental income, then your price-to-rent ratio would be 8.3 ($100,000/$1,000)/12). The lower the price-to-rent ratio, the faster you can pay off the property.
Finding a property with a good price-to-rent ratio, great schools, and low crime is challenging, but not impossible!
Pro Tip: Use the gross rent multiplier (a quick and easy calculation) as a “sniff test” for whether or not an investment property is worth your time, in addition to the price-to-rent ratio.
How to Find Investment Properties FAQs
Now you know how to find potential rental properties and some key factors of a good deal. But, before you start making offers, check out these commonly asked questions we have answered below!
When you visit a property, look for any major issues that could cost a lot of money to fix. We’re talking about foundation, plumbing, and electrical problems. These fixes can be very expensive to repair and will delay your time to rent out the property.
Most investment property loans will require 20% down. So how do you get around this? House hack or do a live-in flip! Both of these only require 3.5% or 5% down to get started. If you’re buying a vacation rental property, you can also use a 10% down, second home loan!
Various types of properties can be good investments, including single-family homes, duplexes, triplexes, and apartment buildings. However, the best type of property to invest in depends on your budget and goals. Look at cash-on-cash return, return on equity, and don’t forget to throw your tax benefits in the mix!
