The most reliable way to profit from real estate is to buy at the right price and in the right location. Any hard work you do with remodeling, marketing, and property management won't mean much if you overspend on a poorly located property. This is true whether you’re doing short-term rentals, long-term multifamily, or any other kind of real estate investing.
But finding a well-priced property in a solid location is easier said than done. Anyone who has ever explored Zillow knows that many cities have an overwhelming number of listings.
The key is to get clear on what you want, then follow a system for searching the market. Below, we’ll look at four search techniques that help you sift through the noise and zero in on properties that fit your investment goals.
Setting your Criteria
Before you start looking through Zillow and calling realtors, you need to establish your investment criteria. Getting clear on what you’re searching for will keep you focused and make it easier to ignore properties that don’t fit your budget or feature requirements.
- To get a sense of how much you can spend, start by getting preapproved for a loan. The bank will take your down payment, credit score, and other factors into account, then tell you the maximum they are willing to lend. (For a detailed look at financing options for STRs, check out our in-depth guide.)
- Next, decide where you want to invest. If you’re not sure where you want to buy, Joshua Tree, Mammoth, and Las Vegas are some great choices.
- Once you’ve chosen a city, you’ll need to zoom in and choose a specific neighborhood or district. The nightly rates that STR hosts can charge vary widely throughout a city. Trendy neighborhoods and proximity to attractions will allow you to charge higher rates.
- Next, define the property itself. Are you after a 2,000 square-foot single-family home? A condo in a shiny new high-rise? A duplex with house-hack potential? Whatever it is, get clear on your requirements in terms of property type and square footage. Be mindful that short-term guests will pay a premium for certain features, like a yard, pool, or rooftop lounge.
The last step is to condense your criteria down to a single sentence. For example, “a 1,000 square-foot 2-bedroom in Austin, walking distance to Sixth Street, for no more than $800,000.” Or, “a 1,500 square-foot log cabin in Gatlinburg, close to the highway, between $4–500,000.”
Start Your Property Search Online
The first step in your investment property search is to take your single sentence from above and type it into Google.
More than likely, Google will lead you to websites like Zillow, Redfin, Realtor.com, and Trulia, all of which will show you a list of properties for sale. Many of these websites pull listings from the same sources, so you may see a similar grouping of listings across these websites.
Another website to check is LoopNet.com. LoopNet specializes in listing commercial properties. If you're looking for any kind of multi-unit building, like a duplex, triplex, or apartment building, LoopNet will likely have some listings that don’t show up on Zillow or Redfin.
If your online search helps you find properties that meet your investment criteria, you can arrange to see them on your own or ask your real estate agent to set up showings. However, if the properties you find online aren’t quite doing it for you, don’t despair. Set up email alerts so that you get an email notification whenever a property fitting your criteria hits the market. You’ll need to be patient with this — sometimes, it just takes a couple of months before the right property comes along.
You can also start to hunt for off-market listings, or make an offer to an owner whose property isn’t currently listed. It’s extra effort, but you may find a great deal.
Go For a Drive
To take your property search beyond the online world, go for a drive around your target neighborhood and write down the address of any properties that might fit your investment criteria. Also, keep an eye out for properties that look to be poorly maintained or are in a state of disrepair — there could be an opportunity to purchase at a low price, add a ton of value, and make a big profit.
When you get home from your drive, take your list of addresses and write to the owners, asking if they'd be willing to sell. You can also try to look up the owners’ phone numbers and give them a call. Of course, many of the people you contact will ignore you or tell you to take a hike, but all it takes is one willing seller. With a bit of persistence, you can have surprisingly good results with this strategy.
You can also target properties with “for rent” signs posted outside. Then, call the landlord and ask if they might be willing to sell. There’s always a chance that the landlord wants an out and would entertain a strong offer.
Use a Real Estate Agent
You don’t need a real estate agent to buy real estate, but there are several advantages to working with an agent. First, the services of a real estate agent are free for buyers (sellers pay the commission of both the buyer’s and the seller’s agent).
Real estate agents have years of local market expertise and will take care of the heavy lifting involved with market research and arranging showings. It’s a lot of work, and outsourcing it to an agent will save you some serious time.
Another advantage of working with a buyer's agent is that you'll get access to pocket listings. A “pocket listing” is a listing that is hidden from the public. With a pocket listing, a “for sale” sign is not placed on the property, and the property is not listed online. Instead, the seller’s agent contacts other agents and potential buyers and tries to put together a deal. An agent with a pocket listing will usually share it first among the other agents at their brokerage. For this reason, you’ll want to look for a brokerage that sells properties you would be interested in, and establish a relationship with an agent at that brokerage.
Picking a great agent is critical to making this all work. You want an agent who is experienced enough to add genuine value, but not one who is so popular that they can’t give you their focus and attention. Find the sweet spot.
Train your Network to Bring You Deals
If you're serious about investing in short-term rentals, you should tell your friends and family to keep their eyes out for suitable properties. This is extra important if you’re investing locally. The more eyes you have scouring the community for deals, the better.
This strategy won’t work if your investment requirements aren’t specific. For example, if you tell your friends and family, “I am looking to buy a rental property,” they’ll be clueless as to how they can help you. Instead, use your single-sentence criteria from earlier. Then, if they do happen to come across the perfect “duplex on Capitol Hill with a swimming pool,” they will surely let you know.
Forming relationships with contractors can also be helpful. Contractors might enter 50 different houses in a month and may be able to tell you if the owner of a desirable property is looking to sell. You might even consider offering a referral fee to anyone who brings you a promising lead.
Does it Even Make Sense to Buy Right Now?
Seller’s market conditions have persisted throughout 2021. In most cities, an abundance of buyers has driven prices up to record-breaking levels. However, if you’re willing to dig, there are a few markets where conditions are more balanced (Mammoth, for example).
Even though many markets currently favor sellers, it’s not impossible to find a great deal. Get out there, make offers, seek off-market listings, and be persistent. As you search for the right deal, don’t be tempted by properties that are overpriced or outside of your investment criteria. The best way out of a bad deal is to never make it.