Does my analysis make sense ?

Question

Hi everyone. So I'm looking to buy my first rental property and need some opinions on where to get it in the US. I'm looking to get a 2 bedroom unit, and I'd like to get one which is under 275k roughly. To determine potential cities across the US which could work for me, I used the following main criteria, some of which is pretty lenient:

Median 2 bedroom price < $275K
Median gross rent > $1000
Population growth > -7%
Population in poverty < 18%
2020 Crime Index < 450
Renter population > 30%
Rural population < 30%
Population working in this city > 25%
Days on market < 85 days

I looked at roughly 170 cities across the US where 2 bedroom houses under 275k existed in relatively large numbers. After applying the above filters, the only cities that remained were the following:

1. Dallas, TX and it's surrounding cities,

2. San Antonio, TX,

3. Some suburb cities around Atlanta, GA,

4. Some other lone cities like Florissant, MO, Lexington, SC, and Augusta, GA.

Does this make sense. Are there no other popular cities across the US which meet the above criteria ?

Most of my data is sourced from City-Data.com.

Walter Moneypenny · Answer

Good analysis @Bruce Lynn. AZ would be off the list under his criteria, as median home prices are higher, with a median sales price of almost $460k. An average 3 BR rent listing for an SFR is over $1,900. There are not a lot of 2 BR SFR's around in Phoenix metro.

Bruce Lynn · Answer

Not sure I like all your numbers?Get a 3bedroom if you can. Tougher perhaps at under $275,000, but I've seen some lately and just sent some out today to some investors. In general the lower the price the better. Pretty steep demand curve, but in Dallas/DFW area you're probably in the demand spot at under $275K.I guess rent is going to be dependent on price, but I would want a lot more than $1000rent. Target is always 1% rule, but maybe depends on what you buy, where, and quality and so many other factors. Not always easy to hit 1% rule right now. Are you paying cash or using leverage?I never look at poverty rates, but something to consider I guess. I'd say do you best to buy in moderate to better areas with better school systems if you can. If you are overseas investor especially. Don't buy in tough or poverty areas. This will just cause you headaches. Especially from abroad.Crime....not sure the indexes are really accurate, but stay away from high crime areas. You want to attract the right tenants especially if you are overseas. The less headaches you have the better and happier you will be. If you are local and know the area maybe you can expand your criteria, but stay out of high crime areas if you can.I never look at % of renters. I would almost look at the opposite. I think I'd the less options for renters the better. Perhaps high demand, but low availability, but I think that is hard to know and hard to judge. Big % of renters might just mean lots of apartments and lots of competition.As an overseas investors I would not suggest buying in a rural area. Everything just gets tougher. Tougher to find or have choices on trades and PM and maybe even more expensive if they charge you extra trip charges. Buy in medium to big cities I would think would be better for you.Population working....never look at this, but everyone should be working right now. Total US unemployment is under 4%. I'd say if you buy in an area higher than 8% that would not be good. 25% and either people are lazy or you're buying in a one factory town and that is not good.Days on market...probably a good number, but again that can be misleading....lower priced homes should be moving, middle is a bit stagnant now, high end still moving in my city.I'm not saying don't look at any of those numbers, but for the most part I don't think those are the most important. If you want to analyze the whole US, #1 I would look at landlord friendly states. That cuts you from about 50 states to probably 11 or less. Then #2 look at population growth and employment growth. That probably cuts 30% of those. So that can cut your analysis and make it easier.Look at Ohio, Texas, Indiana, NC,SC, FL, GA, AL, AZ, TN, not to offend anyone, I probably left a couple out that could be considered. While OH numbers normally look good, chances are you will get a much older home there and plenty of zoning and inspection issues. Some people are not happy with FL right now with insurance rates and outlook. AZ seems to have stagnant rent right now. 1-2-3 cities are probably all good or have opportunity. Never heard of FLorissant, MO...or Lexington SC and I'm from SC. Any of the bigger cities in SC, NC, GA I would look at...places with industry and jobs though. You left out Nashville and Knoxville TN.I can probably hit your target in some of the cities surrounding DFW/Dallas....like Sherman.