How To Find Rental Properties: Steps & Tips For Investors

Thanks to the popularity of home rental sites like Airbnb and Vrbo, more and more people are searching for rental properties to start their real estate investment journey. But how do you find a property that’s a good bet to turn a profit?

Whether you’re just looking to supplement your income or make real estate your full-time gig, here’s what to look for when buying rental property and how to find rental properties with some serious income potential.

What To Look For When Finding A Rental Property

Here are key factors to look for in a property if you want to rent out a house.

• Passes the 1% rule: The 1% rule is a general guideline that many real estate investors use. The rule states that monthly rent should be at least 1% of the property's purchase price. For example, if you purchase a property for $200,000, then the home should rent for a minimum of $2,000 per month. This is a great way for investors to quickly determine potential cash flow.
• Has an affordable list price: The property must have an affordable list price to pass the 1% rule. If renters in the area cannot afford the monthly rent, then you could lose out on profitable rental income.
• Is located in a popular neighborhood: You’ll have better luck finding tenants and avoiding vacancies if you locate a property in a desirable neighborhood. Investors typically do a neighborhood analysis to see how appealing an area will be to new tenants over the next several years.
• Is located in an affordable neighborhood: You also need to find an affordable neighborhood. You’ll have a greater pool of potential buyers in areas with lower property taxes and average rent prices.

How To Find A Rental Property

If you’re a beginner rental property investor, it helps to understand where to start. Here are some tried-and-true methods on how to find a rental property.

1. Narrow Down Areas In Your Price Range

Unless you plan to pay in cash, you’ll need to determine the home price you can afford to borrow from a mortgage lender. Determining what you can afford isn’t always straightforward. Lenders look at a variety of factors, including income, down payment, purchase price, monthly expenses, credit score and debt-to-income ratio when determining whether or not you qualify for an investment loan and what you can afford.

A mortgage preapproval can help determine how much money you can borrow to purchase a rental property. This can also help when you make your offer, as it shows the seller that you’re a serious buyer.

2. Work With A Real Estate Agent

A real estate agent or REALTOR^® can help you find and vet potential rental properties. Nobody knows the market better than local real estate professionals. An agent or REALTOR^® can use their network to find potential leads and act as a trusted source of information during your search.

If you know other real estate investors, you can ask if they’d be willing to refer you to their real estate agent. You can also contact local brokers or property management companies and request a referral for an investor-friendly real estate agent. You can also do a quick search online for local real estate professionals with designations and certifications that showcase their expertise with investment properties.

3. Research The Best Cities For Real Estate Investing

You may have heard that “location, location, location” is everything in real estate. Finding a property in a desirable location is one of the best ways to ensure a positive return on your real estate investment.  Keep in mind that affordable properties are hard to come by, and there’s a great deal of demand. However, the location you choose can have a huge impact on your return on investment, and finding the best cities to invest in real estate requires a lot of research. Look for areas where people are moving to, like a college town or an area with growing business opportunities. These areas are sure to have prospective renters.

4. Look Into Up-And-Coming Neighborhoods

Once you decide on one or more cities to focus your search, you’ll need to know how to research neighborhoods.

Homes with nearby shopping and dining are sought-after by renters. Keep an eye on neighborhoods that aren’t within walking distance of hot shops and restaurants now but will be. People usually pay more for walkable neighborhoods. Look for neighborhoods that are undergoing construction in downtown areas.

5. Use Online Real Estate Search Platforms

Once you have a list of preferred neighborhoods, you can zero in on properties that fit your criteria. Consider using online real estate search platforms like Rocket Homes^SM to find properties for sale.

Type in the desired location, the minimum and maximum price and specific home features you’re looking for in your rental property. The platform will give you a list of properties for sale, including the listing price, property address, home features and the listing office. You can also save your favorite listings and connect with a real estate agent.

6. Search For Real Estate Wholesalers

You can search for real estate wholesalers for more information on potential rental properties. A wholesaler is someone who finds deals on properties and sells the contract to investors. Wholesalers will do most of the legwork for you but expect to pay a fee between 5% – 10% of the total property price.

7. Connect With A Property Management Company

Another way of finding a potential rental property is by working with a local property management company. Property managers often work with several investors at a time and may have more information on investors considering selling their property. This is also a great way to gain access to potential properties that haven’t hit the market yet and avoid bidding against other buyers.

8. Ask Around

It never hurts to ask your network for any leads on potential properties. Ask other investors, family and friends, homeowners and renters in the prospective neighborhood if they know of any properties for sale or that may hit the market soon.

Other Tips For Finding Rental Properties

Try these additional tips for finding rental properties:

• Make connections with house flippers: Build a relationship with local house flippers to help you find a rental property. Flippers buy distressed home from owners, make improvements and sell for a profit. Experienced flippers can close on a new deal several times a year, which gives you an opportunity to purchase and quickly rent out the property without having to make repairs.
• Explore property auctions: Property auctions can help aspiring real estate investors find foreclosed homes for a lower price. Foreclosed homes are the result of a homeowner defaulting on their mortgage or falling behind on property taxes. You can do an online search for more information on property auctions in your city or county. Each action has its own rules and you may need to pay in cash or at least have a mortgage preapproval.
• Search for off-market properties: You can search for off-market properties by networking with other investors and real estate professionals. If you’re really ambitious, you can send targeted mail directly to property owners in hopes of being able to purchase their property. The biggest advantage to finding off-market properties is that there’s no competition and you don’t have to bid against other buyers.
• Consider all property types: Consider other property types, such as multifamily homes, condos or duplexes, instead of single-family homes. This gives you a bigger pool of potential properties and you can rent out more than one unit.
• Know rental laws and regulations: Before choosing a property, take the time to research local rental laws and regulations. This can help narrow down your search for rental properties.

How To Find Rental Homes: FAQs

Here are the most frequently asked questions on how to find rental properties.

How long does it take to find a rental property?

The time it takes to purchase a rental property varies widely depending on several factors. In a seller’s market with high demand and low supply, finding a property that matches your criteria might take longer. The location you’re targeting could have fewer properties, or the listing price could be beyond your budget.

How do I find a rental property manager?

You can ask for referrals from other real estate investors or do some online research for property managers in your area. Real estate websites often have directories of property management companies and managers, or you can check local business directories. Another resource is to find a property management association and look through its directories of members.

How can I find the fair market value (FMV) of a rental property?

The fair market value of a home is the price a buyer is willing to pay a seller for their home on the open market. One strategy to find the FMV of a rental property is to hire a real estate agent to perform a comparative market analysis. You can also get an appraisal for an unbiased professional opinion on the home’s value.

How can I find average rent prices in a given area?

You can use the HUD’s Fair Market Rents database to find the fair market rent in your county by the number of bedrooms. You can also search real estate platforms and rental listing websites to better understand your area's average prices.

The Bottom Line: There Are Plenty Of Strategies For How To Find Rental Properties

The secret to buying a home with income potential means both knowing what to spot in a home and making sure the numbers work out in your favor. Luckily, there are plenty of strategies for how to find rental properties. All it takes is planning and research.

Ready to buy a rental property? Apply for mortgage approval with Rocket Mortgage^®.