Taking time to ensure you’re investing in rental properties that deliver the best returns can be a powerful strategy for maximizing cash flow and securing your financial future. However, simply selecting a property because it’s attractive and located in a good neighborhood won’t be enough to guarantee a high ROI. Why is this the case? Because there’re actually many important elements that should be carefully considered when searching for a property that performs well.
With all that said, this article will break down the essential elements you’ll need to look for when seeking out your next piece of real estate – let’s begin with a brief summary to get the ball rolling:
What type of rental properties deliver the best returns? Newly constructed rental properties, both single-family and multi-family homes, tend to yield the best returns, largely due to their appeal to tenants seeking long-term leases, resulting in higher retention rates. This keeps vacancies low, increases stability, and protects ROI. Also, properties in landlord-friendly states with strong economic growth, job opportunities, and quality school districts point toward promising returns.
Investment Properties that Deliver the Highest Returns
Savvy investors raise the bar when it comes to property selection; they only consider highly profitable pieces of real estate that will provide them with returns that are in the ballpark of 18+% IRR. For those who are in the game to build wealth and become financially independent, starting out with a rental property that delivers high returns such as this is crucial.
Okay, it’s time to get started. So, let’s dive into the information below so you’ll be well-equipped to find an investment property that will grow your portfolio and your wealth.
1. Profit Margins are Strong with Single-Family & Multi-Family Rental Properties
Single and multi-family properties produce lucrative, stable returns for a variety of reasons, with one being their long-term rentability. By this, I mean tenants love living in a house compared to being cramped in a small apartment with no yard.
Because tenants tend to stay longer in a home, single-family and multi-family rentals generally sport higher retention rates. This reduces tenant turnover and, therefore, reduces vacancies. When you have a low vacancy rate, your return on investment is better protected.
Along with this, homeownership is unreachable for many people at this time. Although mortgage rates have been coming down recently, they’re still up there, making it difficult to buy a home. Additionally, property prices have skyrocketed, and larger down payments are expected as well. All this is funneling potential homebuyers into rental properties that will give them the chance to live in a house without the homeownership price tag. For more on buying vs renting, dive into this post of ours, Report States Renting More Affordable Than Buying Indicating Financial Security for Investors.
2. New Construction Properties Produce Higher Returns
This is a big one to keep in mind when going after rental properties that deliver the best returns. In my book, it goes without saying that new construction properties reel in higher returns than old rehabbed rentals. Why is this the case? Well, for starters, I mentioned that tenants love living in a home, but they love living in a new home even more, and this secures a very high retention rate.
In addition to this, newly built properties justify higher rents which increases cash flow. You can charge more because everything is brand new and looks fantastic, including new appliances. You’ll also have fewer repairs with a build-to-rent property. In contrast, a rehabbed rental can chip away at your profits when the property’s older elements break down.
Build-to-Rent Properties Will Enable You to Save a Substantial Amount of Money in Taxes
Single and multi-family new construction rental properties can actually save you an incredible amount of money in taxes. This is done through a cost segregation study, which Morris Invest happens to build right into the properties. I suggest diving into the following article to learn more, A Cost Segregation Study Can Save You Thousands. Also, for those who would like to become well-versed in saving money in taxes while investing in real estate, I suggest watching this exceptional video:
Also, be sure to read our article titled, The Benefits of Investing in New Construction Properties; it will give you a full overview of why newly built rentals are so lucrative. If this has sparked your interest, feel free to get in touch with us. We can provide you with information on our new construction properties – where they’re located, pricing, specs on the neighborhood and economy, and so on.
3. Real Estate in Prosperous Locations Sets the Stage for High Profit Margins
Location is truly the key to successful real estate investing, and for good reason – it determines a property’s demand and directly impacts profitability, rental income, and return on investment. High rental demand is found in areas that have a growing population rate, as well as job growth.
Demand also rises in cities with a booming economy with Fortune 500 companies, large colleges, and healthcare systems where thousands of people are employed – people who need a place to live. Additionally, a good local school district can reel in families who often turn into long-term tenants.
Investing in an area with a thriving economy and surging population, as well as a low crime rate, is essential because it affects the vacancy rate, which can directly impact the potential for consistent cash flow from rental income.
Other things to factor in are that investing in landlord-friendly states can keep operational costs in check, especially when dealing with tenant evictions. This can protect a landlord’s cash flow and the investment itself. You’ll also want to make sure the location doesn’t have high property taxes, which can diminish your returns. You can read up on the ins and outs of “location” in detail by heading over to our article, Why Location Matters in Real Estate Investing.
As you can see, rental properties that deliver the best returns are located in areas that have a mix of factors all contributing to high demand, reliable income streams, and better than average profit margins. Morris Invest is able to build rental properties in areas that have all the essential location checklist items. Why? Because our dedication to uncovering the most rewarding housing markets is relentless. The ground team at Morris Invest spends years researching an area to determine if it can be given the green light for profitability and stability.
You can reach out to Morris Invest if you’d like to inquire about what properties we have available in locations such as these.
4. Rental Real Estate that Already Has a Property Manager in Place Performs Better
If a rental comes with an established property manager from the outset, it’s a promising sign for your potential return on investment. This is the case because it means that the investment company behind the property has a system down where they select local property managers with whom they typically have a longstanding relationship. It ensures the property managers have already been pre-screened and have a level of proven reliability.
So, what is it about having a property manager in place that can actually lead to great returns? Let’s find out:
- Maintains property’s value by taking care of repairs and performing preventative maintenance.
- Avoids frequent, costly tenant turnovers by quickly addressing tenant needs.
- Has full knowledge of the going rents for an area and this allows them to set rates that maximize profits.
- Collects rent on a schedule to ensure a steady cash flow.
- Has experience placing long-term quality tenants, which protects the property and its ROI.
Take a moment to read this related article, Financial Advantages of Using a Property Management Company.
At Morris Invest, we assign an experienced property manager to each rental we build, so you, as the investor, won’t have to search for one. Looking for your own manager is time-consuming, and if you place an unreliable one, you’ll have to keep searching until you locate a qualified applicant. The whole process could become inefficient, costly, and financially risky when it comes to the care of your property and tenants.
Power Resources for Real Estate Investors
- The Financial Freedom Academy
- Freedom Number Cheat Sheet
- 90-Day Financial Empowerment Bootcamp
- Morris Invest & SDIRA Program Overview
Morris Invest Provides Rental Properties that Deliver Exceptional Returns
Here at Morris Invest, we’re serious about creating wealth through rental real estate – that’s why we offer new construction properties in the nation’s best rental markets. Our properties deliver an 18%+ IRR, positive cash flow, built-in financing, along with incredible tax advantages. On top of that, when it comes to the steps needed to place a lucrative rental property in our client’s hands, we take care of everything – from the tenant placement to assigning a property manager.
With all that said, if you’re thinking about moving forward with investing in rental real estate, but need assistance locating a property that will deliver high returns, we can make it happen for you. Schedule a free 30-minute call to kickstart your plans of becoming financially wealthy through investment properties. Don’t wait too long because property prices are quickly rising, as spelled out in our latest post, Reasons Investing in Real Estate Early 2024 Can Provide You With Significant Financial Benefits.
Here’s a video you can dive into that will provide you with invaluable information on how to acquire a cash flowing rental property:
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