Q:

How do investors shop for rental properties?

A:

Quick Answer

To shop for rental properties, investors look at investment property websites, realtors and real estate offices, print media, and online and offline auctions. Realtors generally look for properties that are cash flow positive, beneficial in the long term and of good quality. Most realtors analyze properties for the 1 percent rule, which means the gross monthly rent equals at least one percent of the purchase price.

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Full Answer

Long-term property ownership is the key to real estate success because holding quality property for a long period of time usually results in higher equity. Fast and easy money in real estate is often too good to be true. Cash flow positive properties result in profits at the end of the month, as opposed to properties with low investment returns. If the monthly rent subtracted by expenses and mortgage equals a positive gain, then the property is considered cash flow positive.

A simple method to check the 1 percent rule is to divide the estimated monthly rent by the purchase price to equal the percentage. If the percentage is over 1, it passes the rule and is considered a good property. In general, properties that pass the rule bring in around 12 percent of the purchase price in revenue each year. In addition, investors look for quality property in desirable areas with low crime rates, good schools and many amenities.

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