Identifying Good Rental Markets/Towns

[Wes Shaw]

Hey guys, I am a newbie looking to invest in rental properties. I live in a rural area with several small towns (1200-3000 population) within 10 miles of me. I assume most of them are good towns to invest in as they are lower income towns due to the types of jobs available. However, as opposed to assume I would like to uncover some facts to help guide me. Are their any websites out there that could help me identify which town(s) have the most renters or is there demographic information that I should be looking to use as a guide? A real estate agent told me they were unaware of any resources, but it sounded like a lazy answer to me. However in my research I haven't found much help either. Any help is appreciated?

[David Faulkner]

Originally posted by @Wes Shaw:

@Gino Barbaro Thanks for the info. I am going to look into those now. As for the broker, I thought the same thing when he said that.

@David Faulkner I meant these towns could be heavy renter towns due to income and therefore a good investment to get into rentals as there would always be a stream of folks looking to rent. It could be the right or wrong assumption on my part which is why I was looking for more information. I hope that cleared up my comment. Now that I have reread my initial post, I can see how it could be confusing. 

Apologies in advance if this seems like it veers off of the original question, but believe it may help you. There are 2 schools of thought here on BP on rentals ... one says that you should buy in the location with the lowest price to rent ratio as that is the location that will cash flow best, and cash flow is king. Locations like the one you describe tend to be favored by that camp. The other camp is more appreciation centric and says that the best locations to buy rentals is where there is the highest demand and lowest supply, which tends to drive prices and rents up over time but tend to have higher prices and lower initial cash flow.  The first cash flow camp likes to argue that the second appreciation camp are all speculators, but I respectfully disagree based on my personal experience. Arguments between these two camps have been heated.

However, the good news is that IMO you can make money in either type of market and all shades of grey in between, but the mindset and strategies deployed in each type of market are very different. If you believe this, then the conclusion that follows is that there are no bad markets, only bad investors, and your best course of action is to learn to be a good investor and invest locally using the strategies that are effective and appropriate to that market. If you find good local investors who are willing to advise you, they can offer more detailed guidance that fits your market. This may be a challenge in a rural area, but not impossible ... I'm betting that every town, no matter how big or small, has at least on RE mogul in it, and if you can't find them then surely there is another in the next town over or nearest city with a real estate investment meetup. You could even comb the public records to find out who owns a lot of property, who is paying cash for them, who is buying with an LLC, who is advertising property for rent? That's what I'd do ...