Determining Good Rental Location
Are my methods for determining an area with good rental potential correct:
Checking local estate agents for current home rentals for SFRs and at what rates.
- inquire into rental demand by enquiring into tenants recieved by local agents per month.
-For particular cities, nearby mass transportation links - light rail, subway, bus.
-With respect to schools should I be looking out for ISD SAT scores by county. Info usually available off county websites (i) can somebody recommend where else to get this info from.
Q1- How can I determine the prospect for property appreciation and where can I find figures on citywide or countywide property appreciation, beyond looking at annual tax assesment figures.
Q2: Giving a brief rundown what are the immediate considerations and contributors to regional and locale property market appreciation. retail, commercial development . ongoing housing community construction. New school builds.
Where on the web(internet) beyond county websites can someone check recent property sales in a neighborhood and or town and city.
I currently use county tax assesments here in Texas.
Beyond this I am aware that a buoyant property market is signalled by recent, above market sales. (Q3): how does someone determine what the threshold is for the fair market value of SFRs in an area (based upon home specs)
Q4: What are other signs for the latent potential of a buoyant or soon to be property market?
Q5: Companies are not moving into areas all the time and so what other factors cause rental housing demand to an area?
Q6: When more businesses are relocating to an area in mass, over an expanse of 6 - 18 months. would this be deemed a good sign of
upcoming rental housing demand.
These are all I have for now and if anyone could help me answer these. Please add anything i've left out aswell, do not feel obligated to stick to answering just those i've asked.
You definately want a target market of tenants coming from somewhere. We get most of our duplex tenants from Vanderbilt. We have been able to concentrate on that market instead of spreading ourselves too thin trying to find tenants with expensive advertising. (Advertising can eat you alive).
Over time you can learn a lot about your market. That way you can give them what they want, and you won't be wasting your money on what doesn't matter to them.
Whichever neighborhood you choose, I'd buy several properties that are close to one another. That way you won't find yourself running all over town from one property to another and you can know your investment neighborhood like the back of your hand. That knowledge comes in handy if there is an "active" neighborhood association.
Cordially,
Alice
You know, I 've heard that before, staying within a particular market; it is a good point. My concern is when a market becomes too saturated with rental property with other all too eager investors, will begin to sap the life out of a market and siphon off , once, achieveable cash flow.
But beyond my cynicism what should be a good indicator of whether I should look to a particular neighborhood rental market:
- standard of the nearby schools
- Asking local agents/management companies what the local rental market is like.
what other indicators should grab my attention. With about 15 or so notable suburbs here in the DFW area I need some things to narrow down my scope.
Winter, I think you are making this more complicated than it need be.
All of the locational factors you want to analyse have already been analysed by the marketplace to a level beyond your ability to deal with the mass of data. And the result all of that analysis is easily available-- in the price of the rental unit. It is not necessary to do detailed analysis of the quality of the schools-- the renters in the market have already done that for you. They pay more to live near the ammenities they like (the joys of capitalism, wisdom of the market place and all that).
Now then, as to the issue of a market becoming saturated this is more difficult.
In real estate we usually talk about a market being over-built. I.e. there are more apartments (or office spaces or warehouses) than people who want to live in them the result is pressure to lower rents or cope with higher vacancy rates. But knowing whether the local school has a good average SAT score won't help much there. Tracking new housing starts (which can be done at the local bulding permit office) is useful but it is always difficult to know how many units will saturate the market.
Other things which are often tracked to try to get at this information: Price trends, Foreclosure rates, absorption times. However you have put your finger on one of the great inefficiencies of the Real Estate market. No-one has actually been able to develop a methodology to determine with any accuracy how many more units can be built in a given market before prices will soften.
But I also think I hear another question in your post. How can you make sure that other investors have not driven prices up to an unsustainable level? This one is, again, pretty simple. Buy on Cap rates. There are many posts here about how to figure and use capitalization rates. Come to understand this powerful too.
I agree with CK, you are running dangerously close to the paralysis of analysis. If you determine it can cashflow and is roughly in an area you can live with, buy it. It might be nice to know some of those things you mention to tell future tenants but to use them as criteria on what to buy is a cost/benefit that I can't see paying off. Cost being the time used to analyze and benefit being the payoff.
GL
Quite right, in respect of 'analysis paralysis' with the view of rental property However , in the light of capital appreciation as principal determinant of the investment , then those mentioned are all contributing factors.
For me primarily annual capital growth potential would be of higher importance than rental yield and substantial cashflow. Any marginal, net gains would be reinvested back into the property for its sustenance.
winter59,
It is really much easier than you think. It does partly depend on your resources and goals though. Obviously, you don't want to invest in areas where you drive through and you see a lot of trash blowing around and unemployed males hanging out. Beyond that it, people will pretty much live anywhere, even in locations that you could not dream of living in. If you have plenty of cash, you can simply buy homes in nice neighborhoods, but don't get caught buying in "transitioning" ones. These are easy to find. Simply look at the tax records (online in most areas) and see if prices have been falling in a neighborhood in the past few years. I am actually getting ready to buy a couple of homes in such a neighborhood that has already transitioned, but I am a buy and hold forever landlord. Hopefully this will help get you started.
I wish I had the problem of buying too many properties. The biggest difficulty we have in one of our farming neighborhoods is that too many private people have moved in and remoldeled the houses so they can live in them themselves. That drove prices up and we can't find any more rehab properties with "problems". Alas- it was better in the good ole days.
Cordially,
Alice