Is it bad to own the only rental home on the block?

[Carlo Michelotti]

Has anyone owned property like this? In some areas there are few renters - almost all properties are owned. Does this mean that there is...

- no demand for rental property. When you try to enter the market you are forced to sell or convert to condos because you can't find tenants

- a low-competition area with untapped demand for rental property; tenants will knock down your door and you'll cash flow even if you overpay for the property

Which is more likely, and how do you tell? Either way, HOW DO YOU ANALYZE A RENTAL MARKET THAT DOESN'T EXIST?

I'm stuck in analysis paralysis: Do I look at similar towns? Survey real estate agents? homeowners? landlords/property managers in nearby towns? Consider percentage of vacant houses in area? number of laundromats? number and size of local institutions with skilled transient workforces? number and quality of local schools? class of the neighborhood? amount of new construction?

bleh.

WHAT WORKS FOR YOU?...

1. How do you estimate key indicators that you would typically use comps for, specifically fair market RENT and VACANCY rate?

2. What local factors best indicate no demand for rentals, what are the WARNING SIGNS?

3. What local factors best indicate an UNTAPPED DEMAND for rentals in a low-competition market?

[Ali Boone]

I think there's a much easier solution to this than asking the questions that you are asking. Before I tell you what it is, here are two possibilities for owning the only rental home on a block (one good, one bad):

1. Being surrounded by owner-occupied homes is fantastic because values will typically stay higher, exit strategy options are better, etc. Who cares if you're the only rental...it's much better to be on an owner-occupied street than one full of only rental houses! (good possibility)

2. You'll have a hard time finding tenants. I have one of these houses. The city/area is mostly higher-end people who can afford to buy a house and don't want or need to rent. That's why the street is all owner-occupied. (bad possibility)

Now, instead of asking those questions...make life way easier. Just call a couple or few local property management companies to that area and tell them you are interested in purchasing the house at that address but are concerned about rentability and get their opinions. They will have first-hand knowledge of every street in the area and how easy or well you'll be able to rent out the property.

Easy.