1. Put yourself aside.
When searching for a primary residence, you’re looking at each home as a place where you could potentially envision yourself living. When searching for an investment property, you’re looking at it through the eyes of a business person. Don’t get your two personas mixed up. The components that make a good investment property are quite different from those that make a good primary residence.
2. Find an up-and-coming market.
While established, highly-coveted areas will likely attract plenty of rental demand, they are more than likely also highly priced – which means it will be difficult, if not next to impossible, to generate positive cash flow from your rental property. Seek out smaller areas where homes come with smaller price tags but where you’re able to charge a high enough rent to balance your books. A low rental vacancy rate is also a good sign that you won’t have difficulty finding tenants for your property.
3. Pay attention to local economic factors.
To make sure that your prospective area is a lucrative one, take a moment to look beyond the real estate market. You want to find a place that has a growing population, is generating new jobs year after year, and where wages have either remained flat or increased over the last few years.
4. Think like a tenant.
While it’s true that you won’t be living in this property, someone will be. And, in all likelihood, they’ll value things like proximity to schools, highways and public transportation. Keep an eye out for proposed improvements to a specific area – if the government is setting up to improve public transit, or if a new factory is going to be built a few blocks away, your property will likely be more in demand, and worth more money down the road.