Narrowing my market to find leads for my next rental.

[Karl Dela Cruz]

Hello Everyone,

I am looking to find ways to narrow an area. Please let me know if I need to do any modifications or if my assumptions are incorrect.

This information if received from the MLS.

1. I take the five year history of average price sold and days on market (DOM) of houses with 1-2 bathrooms and 3-4 bedrooms.

2. I then calculate the compound annual growth rate to determine which areas have seen the most growth with the average houses prices sold and DOM.

3. I take the top 5 growth rate and DOM and narrow it down to houses that are 300k and below as im focused on affordability housing.

4. I look at the average rental rate for each of those areas and annualized it then divide it by the average price sold. 

5. Anything above 8% indicates an area where im most likely going to see positive cash flow. Anything greater than 10% is a hot area where houses are cheap but getting the most rent.

6. I would then market and find a property around the 8-10% zones.

I hope this helps others. I thought of this while walking my dog haha. Please let me know if there's a flaw or any assumptions I should add to make it more accurate.