Assessing unmet demand in a rental market

[Brian Larson]

What are some good ways to assess the unmet demand of a rental market?  Maybe it's a small town and there are very few homes available to rent and there are several families that would rent there if there were available homes in their price range.  Is there a way to find out how long a rental sat onoccupied?  Is there a way to create an interest list where you could get people to sign up if they are interested in renting in a particular area?  I'm just investigating rental property ownership and this is one of the questions that came up for me. 

[Stuart Udis]

@Brian Larson Kudos to you for thinking outside of the box and problem solving a housing need. Most investors take a look at the available rental units in a particular market,  determine if its a good or bad market based on DOM and either dismiss the market all together or replicate the housing units that are absorbed. There is usually a missed opportunity in most markets delivering housing products that are needed but not readily available and the Zillow data most rely upon does not tell this story.

Get to know the members of a community, their needs, what steers them away from the housing that's currently available. If you are the lone supplier of a specific housing product and there's pent up demand you will absorb your units quicker and have tenant stay longer given the lack of alternatives. If there are barriers that limit similar supply and you figure out how to get the housing units online, even better. 

A few years ago I got caught with a number of housing units I built in Philadelphia I planned to sell to owner occupants if not for the  2022 unexpected rate increases. At the time there were limited 3 BR rentals in the neighborhood, but achieved such high rental rates the properties ended up performing better as rentals than as a for sale project. There was no market data indicating there was a market for $3K 3 BR rentals but that was merely because nobody ever supplied the market with the inventory. As a result there were tenants who settled for 2 BR units and were dissatisfied or alternatively sought rentals in different neighborhoods.   It was those 2022 delivered  projects where I became an accidental landlord that led me to focus more attention on building to researched housing needs rather than simply replicating the inventory other's bring to the market and it's been a game changer for me and my business.