As a new or even seasoned investor, finding the best markets to invest in is crucial to long-term success. But what are the characteristics that define a market as among the best? Here are seven tips for all investors wanting to find the best real estate markets to invest in when it comes to rental properties or a buy-and-hold strategy.
1. Look for a rent-to-value ratio of 1%.
One of the quickest, easiest ways to determine if a rental property is a smart investment is the rent-to-value (RTV) ratio. For example, if a $100,000 property will rent for $1,000 per month, the RTV is 1%. Generally, if a property meets the 1% RTV, it is a viable investment to consider. A and B Class neighborhoods and properties may fall below the 1%. That doesn't necessarily mean they are bad choices. However, if the RTV falls below 0.9%, you may not be getting the best return for your investment. If your aim is to maximize cash flow. 1% RTV is important.
