Where to find various REI related data?
Portland , OR · Member since 2008 · 29 posts · 2 votes
Hello,
I'm curious to know if anyone can help with some info here. . .obviously REI, like any other form of investing, is all about the numbers. Although I've never done a deal and I've only been reading about and listening to information for a few years, I am skeptical when reading the numbers some people put together and I wonder if they might be missing something that is going to sink their deal.
So, what I am wondering is, especially as a person that has always loved playing with numbers and reaching a conclusion that I can feel confident in, where can I find all of the numbers that I want. It would be impossible to name all of the numbers that I'm interested in, but stuff like job and industry growth, vacancy rates and if possible average rents, population change, and on and on. There are obviously many many numbers out there, but any help is sincerely appreciated.
Jeff
The numbers you list are somewhat helpful in finding a neighborhood (and the short answer I'd give is zillow.com for some neighborhood comparisons), but I wouldn't rely on them for finding a specific deal. For each deal you need to know several numbers in particular to determine the maximum amount you can offer for a house:
ARV (after repair value) which is basically what you're going to sell it for. For that you need comparable houses, and zillow.com works okay for this as long as you're only having a look at what was recently sold. Make sure you use the filter on the side to narrow it down to recently sold houses with the same number of bedrooms and bathrooms as what you're looking at and you can get some idea of what things have been going for. A realtor can provide a better list in my experience, though.
Profit: Simply put, how much you want to make on a house. This number is subjective of course.
Rehab cost: You'll need to be able to estimate the cost to bring a house into move-in condition. Some of this is intuitive, some is learned. Most people could guess that an average water heater will ballpark something like $500, and there are some formulas for determining other items (for flooring we budget $2 x square footage of house). Sometimes a local REIA can be very helpful in this, as commercial members looking for business may be able to give you some guidance in regards to costs.
Holding costs: How much it costs to keep a house while you're working on it and before it sells. The mortgage has to be paid along with taxes and insurance until you sell it. This is dependent on how much you paid and how long houses sit on the market in your area. The first you can figure out easily with an amortization calculator. The second is information a realtor would have easy access to. You can also do some driving/walking through your neighborhood and the sheets offered in the information packets for houses have quite often had the CMOD (current days on market) number on the sheet as well as the date the report was run. From that you can just work out yourself when the house was listed. For my area, just using a much simpler formula like 1% of ARV per month is pretty close for mental calculations.
Hard money costs: Will you be getting money from a hard money lender? They're more expensive than a conventional loan but if you need money fast for an investment property they can be useful. They often charge a few points along with a higher interest rate so that causes you to come up with a different number for your holding costs.
Realtor costs: Will you sell your house by owner or use a realtor? Assume 6% of the ARV will go towards that.
So from all these numbers you can work backwards from the ARV to the maximum purchase price.
Maximum offer = ARV - profit - selling costs - holding costs - rehab costs
As you can see this formula has nothing to do with the asking price of the house in question. In my limited experience, it's just not possible to determine if a place is a deal or not by looking at the asking price and location, plus you don't know what they may or may not take. But once you can more or less figure it out in your own mind as you're touring a house, you can make an offer on every house you walk into and know that you're working a reasonable profit into any place that you potentially purchase.
Thanks for the info, but I have to disagree with your point that numbers like industry and population growth are only helpful in picking neighborhoods. I think you're spot on with your method IF your goal is to buy, rehab, and sell.
What if your goal is to buy and hold and rent though? Wouldn't I want to know vacancy rates and employment figures then, regardless of neighborhood?
Brian,
Good post. I like the point that the asking price has nothing to do with what the place is worth to you as a buyer.
O/T: I sent you an email following up on the Dayton deal.
John Corey
Thanks John. I got your e-mail and replied but I didn't hear anything back after that. I'm starting to think your e-mail system is wacky. :)
About the numbers themselves, knowing the general numbers for a neighborhood can be good if you're trying to project whether you'll need to raise or lower rents in the future, but if you're buying a house as a rental the first thing you'll need to know is whether it will make you money right now. The quick and dirty method as I learned it from MikeOH is to expect 50% of your gross rent as expenses (taxes, insurance, maintenance, vacancies, et cetera) and with the other half you can pay the mortgage on the house. Anything left over is your cash flow for the property. If it doesn't make money like that, it is likely not a good candidate. Appreciation is nice but shouldn't be considered the main goal of your property.
Anyway, you might try rentometer.com for some rents around the area you're looking it. I'm on the fence about how much I like it though. It seems like they just post whatever people put in on the start page (and I wasn't able to find a way to look at the data without submitting); I guessed at what rent on our property would be, and a few weeks later when I came back it was one of the data points. It's something, but I wouldn't rely solely on it.