Smart Money Podcast
Choosing the right investment property is the most important part of real estate investing. It's better to wait for the right deal than to jump into one that ends up costing you money.
FindOffMarket finds off-market and wholesale properties across Canada and the US, so you can see new deals before they're gone.
Here are a few things to consider before you look for an off-market or wholesale investment property:
- Location
- Base price
- Repair costs
- After repair value (ARV)
- IRR (internal rate of return)
- Investment strategy (BRRRR vs. flip vs. rental)
What is the best location for an investment property?
High cost of living (HCOL) areas often have lower rates of return than less densely populated, low cost of living (LCOL) areas. The down payment and mortgage payments are usually larger, while the rent is not much higher, so as a ratio it ends up worse. If you need help managing properties outside your own area, read our guide to property managers, who can help.
The math and the one percent rule
The three most important figures when you evaluate an investment property are the base price, the repair cost and the after repair value. The potential profit = after repair value (ARV) − repair cost − base price.
Another important check is the one percent rule, a measure of how much cash flow the property generates. The goal is to have the mortgage payments be less than 1% of the down payment plus repair cost. For example, on a $1M property with a 20% down payment and no repair costs, the 1% rule says the minimum monthly income should be $1M × 20% × 1% = $2,000 a month.
Want to run these numbers on a real listing? Our free calculators do the math for you.
Investment strategies
Many real estate investment strategies can work, depending on your appetite for risk, available capital and experience. Some of the most common are:
- BRRRR: buy, rehab, rent, refinance, repeat
- Short-term rental, such as an Airbnb or a cottage
- Long-term rental
- Fix and flip
- House hacking: buying a multi-unit property and renting out the other units to cover your costs
Where do I find the best investment properties?
You can work with a real estate agent and look at listed properties. Those usually draw many competing offers, and the agents' commission adds to the cost.
You can also join the mailing lists of individual wholesalers, but then the deals are spread across many inboxes and you have to keep checking all of them.
Or use FindOffMarket: we bring off-market and wholesale listings from across Canada and the US into one place, check that they're still up, and tag each one with the investment strategies it fits. Start with: