Using data to find vacancy rates by zip code.

[James Stirgus]

Hi all,

I am a military veteran from Chicago and I am looking to purchase my first 3 to 4 unit property using the house hacking method. My plan is to utilize my VA loan which has the benefit of putting no money down. I have found that the Chicago market is very competitive to not only find deals but to find reasonably priced deals in good areas. I have bought a few lists that I will utilize to cold call owners in the zip codes I wouldn't mind living in for the minimum year that is required by the VA.

Until I find my deal, I have been analyzing deals daily from the mls to get a feel for what numbers work and don't work and one variable to my analysis is vacancy rate. Is there a data source you all use to find vacancy rates? I am looking to find this data by the zip code to see how much additional cash I should have reserved. Any additional feedback is greatly appreciated.

Thanks,

James

[Eric M.]

I assume you are referring to, The percentage of units available that are unrented?

I understand how you might think this is a relevant statistic. They use it in commercial RE, etc. And I guess it could theoretically give you an idea of the desirability or demand for an area.

But for any single 3 unit building, it is entirely irrelevant. Just like the stat about population decline in Illinois is entirely irrelevant to your few units. People give far too much credence to these types of macro statistics when they are working on the micro level. At any point in time, a certain percentage of units will be vacant. So what? It is much more relevant how long it takes for those vacant units to be filled. If there are 10,000 vacant units in an area for a 5% vacancy rate. And next month there are 10,000 vacant units for a 5% vacancy rate, are they the same 10,000 units or different ones in the normal process of turnover? 5% rate is the same but it doesn't tell you much.

It might be useful for a 50+ unit because of the larger number and because those big buildings are where the data comes from. The data does not come from the small SFH and 2 or 3 flats. There is no way for that data to be compiled for the small buildings. Those landlords don't report data or vacancies to anyone. So no matter what vacancy rate you read, you have no clue what the real rate is for small buildings or SFH.

There is plenty of demand for rentals in all areas of Chicago. If the units are nice and market priced and in a decent area, they will rent. Period. Make your 3 units worthy of renting and they will rent. Regardless of whether the vacancy rate is 1% or 10% or 20%.