Best Market Research Sites

[Lauren Mattina]

I plan on buying my first rental property this year and my next major step is deciding on a market. I have a list of websites I will use for market information, but wanted to see what sites other investors swear by. 

What are your favorite websites for market research, especially for a new investor?

Any advice is much appreciated!

[Eric Fernwood]

Hello @Lauren Mattina,

There is no single source for what you need. I will show you the sources I used for selecting a dependable passive income location and the process I followed.

Before I do, I want to explain that location selection is more about elimination than selection. There are too many potential investment locations, and you cannot evaluate all of them. I used a process for eliminating locations that were unlikely to provide dependable passive income. Using an elimination filter, I removed locations with characteristics that made them unlikely to be viable investment locations. Locations that pass all the elimination filters are highly likely to provide the dependable passive income you seek.

Start with Wikipedia’s list of metro locations with a population >1 million (Wikipedia). Small towns may rely too much on a single business or market segment. Metros with a population over 1M will likely have the economic diversity you need. Next, apply the following filters to this list.

1. Both state and metro populations are increasing - Do not buy anywhere if the state or metro populations are static or decreasing. Wikipedia
2. Low crime High crime and long-term appreciation and rent growth are mutually exclusive. Jobs, and people with sufficient funds, leave high crime locations. Companies will not set up new operations in such locations. Do not invest in any city on Neighborhood Scouts' list of the 100 most dangerous US cities.
3. Low or no state income taxes There are many websites with comparative information. Here is an example. Just because a state has no income tax does not mean it does not have a high overhead.
4. Low operating costs - High operating costs can turn what appears to be a profitable property into a money pit. The two most apparent are property taxes and insurance. Insurance - ValuePenguin, Metro Property Taxes - LendingTree
5. Economic health - A good indicator of economic health is a rising median household income. The best source at the county level is St Louis Federal Reserve. Here is an example, Clark County, Nevada.
6. Natural disasters risk - Almost every month, I read an article where a tornado, hurricane, tsunami, earthquake, or some other natural disaster that destroyed a city. If your property was in that city, it was most likely destroyed. If you maintain proper insurance, they will rebuild your property and pay you market rent until it is rent-ready. The real problem is that jobs, stores, and everything else were also destroyed. With no jobs, stores, doctor's offices, or anything else, there is no reason for anyone to remain and rent your property. Restoring a city could take years, or it might never recover. Your property will remain vacant for a long time, but your mortgage and other costs will continue. No one can afford this situation. Homeowner insurance costs are the most reliable indicator of the likelihood of a natural disaster. If homeowners insurance costs are high, the odds that your property will be destroyed are also high. Do not take this chance.
7. Metro rent and price growth rate - To have the additional dollars you need to pay for inflated prices, rents must rise faster than inflation. Therefore, a critical location selection metric is that rents and prices are rising faster than inflation. Rents follow prices, so you can use the location appreciation rate if you do not have historical rental data. Only consider the decade before COVID; COVID distorted markets.
8. Landlord/tenant rules and regulations - Some states and metro areas have implemented rent control. Rent control may prevent you from increasing the rent fast enough to keep pace with inflation. It may limit your property manager's ability to select the best tenant. It may make evictions of non-performing tenants difficult or impossible. Never invest in any location with rent control. The only source for this information is a local investment team.

Once you have a short list, make a final selection based on whether you can find a good local investment team. Everything you learn in seminars, podcasts, books, and on websites is general information. You will not buy a general property in a general location. You will buy a specific property in a specific location, subject to local rental regulations. The only source of hyperlocal information is a local investment team with years of investment experience. Their experience, processes, and resources cannot be replicated.

If you follow the above process, your odds of selecting a dependable passive income location are excellent.