Rental Property Investor · Pittsburgh, PA · Member since 2018 · 150 posts · 50 votes
I have some level 1 market research done on my local city and some others... Are there any indicators of a market that would be strong for a renting market, because of it's ratio to house prices? That is, I do not want to compete with house prices...
My niche is 800-1100 Class B and C value add properties.
Are there house price to rent ratios to consider when evaluating a submarket, especially in the rent range above?
@Clayton Hepler I'm not aware of any specific ratios, but I'd just eyeball it and see how much a mortgage payment would cost somebody buying an average-priced home in the area that you're looking to invest in with a 20% down payment and 4% interest rate. If that number is close to the number that you're looking to charge for rent (ex. $1,200 or $1,300 per month), then you might have a tough time attracting quality tenants. If it's significantly higher (ex. $2,000 per month), then there's a good chance that your rental properties will attract a wider range of potential tenants.
People tend to want to own if possible. So I would posit there is at least an extra couple hundred dollars per month they are willing to fork over to own a house/condo. There will always be renters, it is the exact supply that is in question.
If a city/neighborhood is up and coming, then your supply of renters will increase rather nicely. The rents will also go up, most likely SLOWER than the cost of ownership. If you can find a place where home ownership is going to cost you $300 or more than the rents for an area, then I think you've got a solid place to find rentals.
If you can find a C -> B neighborhood you have a gold mine :)