How to identify potential rental properties

Question

Hi all,

I'm just starting out in learning the basics of rental properties. I'm based in the North Bay Area California.

While I am not quite ready to purchase a property yet, I wanted to ask how more expierenced landlords analyze properties when looking on zillow. What numbers do you run when determining if a propety is worth taking a closer look at? I know that there are great oppurtunities in the area, but they won't be easy to find around here. Any advice is appreciated!

Alecia Loveless · Answer

@Dany Jarjouraim not sure why no one else said this but Biggerpockets has a really great calculator for analyzing deals. You get 5 uses for free then need a Pro Membership. The calculator alone is worth the cost of the membership to me.

You can find other more sophisticated calculators but the biggerpockets one has been more than sufficient for me. I’ve done hundreds of analyses on it and can quickly weed out bad deals this way.

Also the best way to get detailed information is through the MLS as opposed to Redfin and Zillow. My MLS usually has all the documents online like the property disclosure, rent rolls, deeds and more if the listing agent has done their job right.

Once you start looking offline for deals it gets a little trickier to get the information if the seller isn’t prepared.

Bradley Buxton · Answer

@Dany Jarjoura

Start with the rents in the area where you are thinking of investing.  Zillow, RentCast, BP all have rental calculators. If you're thinking in the Reno Tahoe, NV area you can check out this rent map: https://www.addressincome.com/data-center/reno-rent-map

Look at other factors in the neighborhoods, like close to trails, restaurants, college, or a cement plant. Think about the ideal renter for your strategy. Once you have a good estimation of rents that is your income and you can calculate the other expenses an ultimately your returns.  Calculate several scenarios such as first year expenses, second, third, 5th, and your exit plan. Then you can look at acquisition in the areas with good rents and purchase price. Do those properties fit with your strategy.

There will never be enough numbers and data to make a 100% perfect decision and buying your first property will be hard on the nerves. Use the numbers to build confidence. Even though there is fear in making a wrong decision sometimes you have to do things scared.

John Morgan · Answer

@Dany Jarjoura

I do 2 minute “back of the napkin” math on potential properties. I look on Zillow to see what they’re renting for. Taxes and insurance are easy ballpark numbers. I google free mortgage calculator to see what my payments will be. It’s quick and easy math. If the numbers work, I call or text the listing agent to go look. I buy my properties off the MLS (Zillow) and create a buy box area. I educate myself on the price points in areas I see potential. I hit the like button on the properties in my price range (C+ class/working class hoods) and get emails of when they go pending. After awhile, I can tell instantly if a deal is good or not and will jump on a deal if the numbers work. If I don’t, then another investor or home buyer will snap it up. Find areas you want to invest in and study it every day or every other day. Learn what good deals are. Walk homes. Get your eyes on them. Call up the listing agents and go look. Have your finances ready to deploy once you’re serious. But take 3-6 months to really know what you’re looking for.

Jacopo Iasiello · Answer

Hi Dany, Check the estimated rental rates on Zillow. Compare these rates with active rental listings in the neighborhood to ensure they are accurate.

Diane Chapman · Answer

Thank you Alecia.

Michael Smythe · Answer

We typically try to get numbers from 3 sources. Analyze the numbers if wide range to figure out why.

Nathan Gesner · Answer

Computer algorithms are decent for analyzing an entire market, but they are not accurate for a specific home. They can't consider the size of bedrooms, the kitchen layout, the view from the front window, or the five dogs barking all day long next door. If you want to know your market, you need to study the market yourself.

Here's how to analyze properties: https://www.biggerpockets.com/blog/easily-analyzing-rental-p...

Diane Chapman · Answer

I think I just answered my own question! I googled "Open Houses for Investor Properties" and up popped "Redfin". So far, It's showing a$175,000 3-bed, 1-bath, 1,659 sq ft and 3,920 sq ft (lot) on a street that's only 4 blocks west of my block. Redfin is also showing a $199,000 4 beds, 2.5 baths, 1,542 sq ft (lot) also not too far from my house. Additionally, I see a third house only 18 minutes and 11.8 miles outside of my city; this particular "Open House" is Sunday 1:00p-3:00p, and it's advertised for $195,000. Plus I do like this city. Hmmmm I guess I'm off to the races! Gotta start somewhere, right! Wish me luck!

Diane Chapman · Answer

I have a question for you Jonathan Greene. I would like to start attending Open Houses in my Michigan location in order to get my feet wet. How do i look up "Open Houses" on investor properties?

Jonathan Greene · Answer

Stop using Zillow to start. It won't give you enough data to know whether it's worth looking at. The basics of rental properties really depend on your why and your market. North Bay is tough so the numbers that are good there are not the numbers that are good in the midwest.

If you are so new, how are you going to even know what is good to look at it until you start looking at properties in your price range to get an idea. Even if you don't have an agent, you can go to Open Houses when they have them on more investor properties and get your feet wet off the computer and in the real world.

How to identify potential rental properties

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