How to Evaluate a Neighborhood for Buy and Hold

[Leigh Ann Smith]

I have been using HAR to gather statistics on a couple of neighborhoods we're interested in. Does anyone know if there are any formulas out there that would help to determine whether a neighborhood is a good one in which to invest in rental properties?

Example - 2 adjacent subdivisions in which we are looking have a combined total of 2927 single family homes that are 35-50 years old. In the past 2 years, there have been 256 homes sold (8.7%). Currently, there are 56 homes on the market (1.9%) and exactly 1 home for lease. Median home price is $110,000. (This is in the Houston area.) Zillow ranks the high school as a 5 out of possible 10. Taxes are high (2.9%) and flood insurance MAY be needed. There are so few rentals that it isn't easy to find a good number, but they appear to rent for $1,100 - $1,300. 

Is the low number of rental homes is a good thing or a bad thing?  Does it indicate that investors aren't getting a good enough spread to make buy and holds feasible?  I would love to find some kind of "rule" to help us decide whether to focus on this area or to move on.

[Sharon Tzib]

Well I would also look on Craigslist for sure, as well as call some local property managers and find out what the rental vs. ownership percentages are for that neighborhood, how long it takes to rent something, and do they think it is a solid area.

You can look at your data either way. Either it is a bad area for returns so no investors area there; or it is such a great area, i.e. excellent schools, low crime, close to amenities/.transportation, good rent to price ratio, that rentals get snapped up quickly.

You need to talk to those with boots on the ground to get more info imho.