Comparable Rental Properties: High vs Low Supply

[Chris Kenney]

Hi all,

I've been a member for almost a month, and I've been reading up on everything, trying to do as much research as possible before investing in my first property. I'm looking to buy a SFR, but am a little weary on the rent situation. When you are doing your deal analysis, which of the following situations do you prefer? 1) high supply of rental properties in the area (higher competition but possibly hinting at more opportunity) or 2) lower supply of rental properties in the area (lower competition but possibly less opportunity).

After running the numbers on a lot of deals, this seems to be my biggest worry. What do you typically look for in an area to get comfortable at the opportunity to rent the property at the right price? I'm open to any and all comments, thanks!

[Tim Gillette]

We were looking for sfr's, but stumbled upon a duplex, a pocket listing from my realtor. I inherited a current tenant, and remodeled the other (vacated) side. The current rent for 2/1 rental is $600 (per side) and all those type properties are not taken care of. There are a minimal supply of rentals in our area, therefore, the demand is high. We remodeled the empty side and placed the unit up for $750/month and got plenty of applications, and placing a tenant this next weekend. In the afterthought, we should of/could have started higher. So I'd rather supply the demand, set my own price, rather than competing with lower rent rates.

BTW, it also ups my value of my duplex with higher rental income...Ka-ching!