How To Find Investment Properties: A Guide

Whether you’re hunting for your first rental property or you’re an experienced real estate investor looking to boost your cash flow, picking the right investment opportunity is critical. But more important is knowing where to start looking for investment properties. Follow our guide to learn the best ways to find an investment property.

Why Buy An Investment Property?

As veteran real estate investors know, investing in real estate offers many benefits. You can grow passive income, build wealth and generate tax-saving opportunities. You can also create a path to greater financial security and generational wealth. The first step to starting your journey is to get preapproved for a single-family or multifamily home loan so that you have the necessary financing in place and ready to go when real estate opportunities arise.

Motives for real estate investing 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 later, 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, learning how to find the right investment property is key to building a viable income stream or business.

How To Find Investment Properties: 3 Common Ways

For those wondering how to find a good investment property, it helps to have a general sense of where to start and what to keep in mind up front.

1. Work With A Real Estate Agent

A real estate agent or licensed REALTOR^® can be an important partner in your search for investment opportunities. Whether you’re interested in flipping houses or buying rental properties, few know the areas or markets that you’re looking at 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 time to focus on repairs or property management.

Even if you’re looking to expand potential investment opportunities by buying foreclosures and real estate owned (REO) properties, agents can serve as trusted counselors to aspiring real estate investors.

2. Use The Multiple Listing Service

The multiple listing service (MLS) offers a comprehensive database of properties for sale in your region. Only licensed real estate agents or real estate professionals can access the MLS. So you must be prepared to act quickly when your agent tells you about a property of interest that’s become available. This 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 who can answer any questions you might have when you find a property and are ready to make an offer.

3. Browse Online Auctions

Online real estate auctions can also be a helpful source of leads and buying opportunities as you embark on the search for an investment property. While some real estate auctions still take place on courthouse steps in select states, they typically 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 out of any projects you’ve invested in and use it to finance future purchases.

How To Find Off-Market Investment Properties

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. While the search for an off-market property can be tough, it could help you find the hidden gem you’ve been looking for.

Explore Neighborhoods

One of the best sources of potential leads is to drive around a desired neighborhood and look for homes that are for sale, about to hit the real estate market or are in relative disrepair.

There’s nothing stopping you from 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 inquire about the property.

Likewise, you always have the option of putting up signs or fliers in the neighborhood letting property owners know that you’re an aspiring buyer.

Spread The Word

Similarly, don’t underestimate the power of word-of-mouth marketing to let people know that you’re shopping around for an investment property. Letting your real estate agent know to put the word out among their network of local professionals is a good idea as well.

Talk to co-workers, friends and family members about what you’re in the market for so they know to come to you if they hear about or see any properties that might be of interest to you.

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. 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.

In addition, don’t forget that many investors still find great real estate deals in their local or target market’s Craigslist classified listings. This can be a helpful resource for finding investment properties that are being offered for sale by owner.

Check Out Preforeclosures And Foreclosures Online

Preforeclosures and foreclosures can offer opportunities for patient and persistent real estate investors who are willing to put in a little extra work. Several online websites provide information about these properties. Investors should perform 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 for off-market properties can come from a homeowner who’s considering a short sale. This real estate transaction could 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, keep in mind that short sales usually mean that these homes are being sold as-is.

Factors To Consider During Your Investment Property Search

Determining what to look for in a potential investment property depends entirely on your financial goals and plans for new real estate investments. You’ll want to consider several factors when starting your real estate investing journey.

• Location: Owning a desirable property in a popular location and in a high-demand area that’s growing economically is often the fastest way to ensure a positive return on your real estate investment.
• Property taxes: If the property that you’re considering comes with high property taxes, it can hurt annual cash flows, real estate investment profits and your ability to resell the real estate holding.
• Repairs: 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 overall profits.
• Profit metrics: Investors are strongly advised and encouraged to plot budgets, map out financing figures, and otherwise do the math needed to understand the potential return on investment (ROI) before forking out the purchase price for it.

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 or multifamily homes, and each single-family home can include up to 4 units. (Several of which can be rented out if so desired.)

You can also use conventional mortgages, Federal Housing Administration (FHA) loans, or Department of Veterans Affairs (VA) loans as needed to purchase a multiunit home − although these loans do have owner-occupancy requirements.

The Bottom Line: Take Your Time Finding An Investment Property

Finding investment properties isn’t an exact science, but with some time, planning, and research, you’ll find the perfect real estate acquisition. 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 take a shot at real estate investing? Begin the approval process so you can set up your property search for success.