How to research strength of out of town rental market

Question

Is there anywhere to go for data on how quickly homes rent in particular rental markets?

I've been interested for some time in investing in rental properties in an area I'm very familiar with, but I no longer live there.  The numbers look okay to me, but before I take the plunge, I want to find out how quickly homes rent in the area - don't want my investment sitting empty for months.

I've watched the area's Craigslist listings, for repeats, and a local management company's listings online.  Of course the management company assures me that rentals go quickly in the spring and summer, but I like hard data.  Is there anywhere to go to research this?

Joel Owens · Answer

You can get a bunch of employment and job growth numbers from the Federal Government of Bureau of Labor and Statistics.

http://www.bls.gov/eag/eag.ga.htm

State searches are to the left. Towns that are heavily at risk are what I call ONE ECONOMY towns.

This is where one business is propping up most of the economy.If that business goes most of the other businesses will follow and the town will start dying off and people will migrate elsewhere.

Once vibrant towns 30 years ago are now all but vacant and many will eventually cycle and spring back.With one economy towns it's very important to know what that businesses plans are for staying and if they own or lease and when it's coming up for renewal.

Many investors stay only in big city cores for what they see as less risk. Suburban to rural can be great investments if you do your research and know what is going on and helps especially if the local economy has many types of trade propping it up.

This way if one leaves or fails the government can usually get something else in to cover the shortfall.There are many,many other things you can check as well that you do for planning on larger commercial projects.

For house rentals I don't think it's necessary to go real deep with it.

Joel Owens · Answer

Yes there will be more renters in the market at that time but also more properties available as well.

Same with real estate agents as many have left the game and when markets get stronger you will have more sales but an influx of more agents coming in so it will be a wash.

They should give you printouts of the MLS sheets which show the info.We are required to put accurate info into the MLS as all the other brokers/agents depend on it.The signed paperwork is also sent in to the MLS for verification of data. So what you will be seeing is accurate but nothing is ever 100 percent.

When buying a property if rents in the area go for  600 to 750 I base off of 600 or lower.Get it rented fast and have the most applicants to choose from so you increase your chances of landing a good tenant.

Also make sure your lease is air tight or you will pay later in expenses that crush your cash flow.

Joel Owens · Answer

Exactly Mitch.

If you wait on a 1,100 1 year lease tenant you will be at 2 months to rent.

If you rent at 1,050 the 50 dollars less times 12 months is 600 compared to an extra month the property sits vacant and lost potential income is 1,100. So even with lower rent you come out ahead.

The other thing you wan to ask the property manager is are rents staying flat,going down,or going up? If they are declining you don't want to try for 1,100 and then end up renting for 1,000-950  and have 2 months vacant because you wanted top market rent.

Mitch Kronowit · Answer

I agree. When I'm trying to set the rent on one of our properties, I look at what comparable rents are in the area and try to price a few percent lower than that for a rapid placement.

Your management company should be able to give you a more accurate estimate of time to find a tenant based on rent amount. For example, our PM told us the property we presently have under contract would rent in under 30 days if priced around $1,000-1050/month, but may take 45-60 days to rent at $1,100.

Mark N.A · Answer

How far are you from this area?  And why is this area better to invest in than where you are now?

I would never place a five or six or more figure 'bet' on some place where I, personally, didn't know the answers.

Which brings up the question of long-distance management . . .  but that's another topic.

Joel Owens · Answer

In my area our MLS gives the brokers and agents data on rents,average concessions given,and the time it took to rent the property.Also shows expired's and with drawns and actives to show what renters will pay.

When you have a rental you have to know if the property presents badly,has no marketing exposure,is asking over priced rents or all of the above.

If you buy right you will be able to cure all problems. If you overpay you will be in a world of hurt.

Spring and the summer might go fast when you buy you need the flexibility to rent year round at great rates and still cash flow well.

You don't buy based on getting a high market rent if you turn the lease at the peak of renting season.Instead base on conservative numbers and if you rent at the peak it's a bonus.

Mehran K. · Answer

rent=PITI is not a good investment from what I've been learning here. lookup the 50% rule.

MA Efron · Answer

@ Joel Owens -  Excellent link, thank you.

MA Efron · Answer

Yes, I'm in the same position, too expensive locally to invest, even though I would prefer having my rental(s) close by, to keep an eye on and manage as much as possible myself.

JL, sounds like you had a pretty good experience, buying out of the area.  Did you research the for a while, or was the information from the agent good enough for you?  You got references from other property owners who she manages properties for?

Jordan L. · Answer

I'm a newbie and I'm an out of state investor. My strategy is to buy and hold, preferably for decades. I live in Socal. I think RE is too expensive down here. So I contacted a realtor in the Puget sound area(WA). She referred me to a property manager who gave me rent averages for the type of property I was interested in buying. I got references from her. Crunched some numbers on new properties and the rent=PITI.

Bought in 2003. Got it rented out. Bought in 2004. Same thing. Though about doing it in 2005, but it seemed like the RE prices were getting too high and PITI was now less than rent. So I stopped and built up my cash reserves. Today I'm buying again. 3 year properties with a 35% price correction and PITI is again in line with rent.

How to research strength of out of town rental market

Most Popular Reply