Analyzing propoerties to live in, then rent out for cashflow.

[Ben Kirchner]

I wanted to get some advice/opinions from with some experienced minds here.

I plan on purchasing a new home as a primary residence this year.  The idea would be to then move into a new primary residence, and rent out old residence.  The plan would be to do this for the next 3-6 years.  Reason for doing this would be to purchase new property for low money down (5% each) and get a lower interest rate.  

So when looking at my new residence, I'm looking for something that would cashflow right now, so it will when I end up renting it out. I'm working with a realtor to feed me properties from MLS that fit the criteria of: 20 minutes from my work, 2+ bed/2+ ba. I've been looking at the properties fed to me and basically lookign on Zillow's Zestimate to see what they have it as truly worth, and rentometer to give me an idea of what it would rent at. Would there be anything additoinal or different that may serve me better as analyzing potential cashflow on a purchase?

Also, I'm unsure if I should be leaning more toward on fixer uppers or turn key properties with my goal.  I would have some extra money to fund some fixing.  I've thought of narrowing my search as well to filter through properties, and perhaps become more marketable for tenants?  3+bed/2+bath? single family homes? Newer developments (newer hvac, roof, etc...)?  I'm also unsure of what price range to shoot for, to best suit future tenants.  I live in Durham, NC.  The income per capita is $27,748, which includes all adults and children. The median household income is $48,241

When it comes down to it, the cashflow is what I'm looking out for.  The house will only be my residence for a year.  If anyone has experience with this strategy, and could share their first hand experience, I would appreciate your input.  Also, any advice on analyzing properties to cashflow would be appreciated as well.

Thank you

Ben

[Jamie S.]

I have been renting out houses in Durham, NC for awhile now.   Something to consider is the large number of universities in the area.   Choosing something close to Duke, for example will greatly increase the demand for your property and the pool of available tenants.   Buying something outside of this area will drastically decrease demand.  Durham is also 'spotty'.... there are some great deals but they might be one block too far from a higher renting area.  You have to drive around to check out the neighborhood carefully.  

I would ignore the median income listings... Durham has a huge number of medical residents, business school people, law school, etc that are staying here for short terms.  These are often the best tenants because they are here for 2-3 years and would normally not be renting.  These folks want nice, clean, low maintenance houses with some perks like stainless in the kitchen.   They tend to be concerned about safety of the neighborhood and access to recreation.  Decks are popular since these folks are more likely to have parties than kids.  I look for bright, sunny, homes with simple exteriors to appeal to a younger audience. 

  Typically when trying to determine potential future rent what I do is look on craigslist at similar properties that are listed for rent (bedrooms, sq. footage) to the one you are thinking of buying.  This is what you will be competing with when you try to rent it.  I also look on Airbnb at properties that are fully booked and see what sort of rates they are getting (long term would be lower but you can weed out overpriced rental listings this way).

You can also look at what an apartment is going for in the area and take an average... you can typically get a bit more for a single family home.

In durham I would look at houses in American Village, Forest Hills, Woodcroft in that order if you want a sure bet. 

good luck!