All Forum Posts by: Art Perkitny

Hey @Natalie Heileson, here is a map showing the cap rates for SFR properties in Salt Lake city and surround areas.

The darker colors correspond to higher cap rates. 

The chart below show the change in cap rates for Salt Lake city proper over the past decade

All data is from the American Community Survey 

Cap rates are computed by taking the annual median rent, applying the 50% rule and dividing by the median home value. 

Hope this helps! 

@Lance Francis, based on your criteria of 300k to 500k you will surly have a difficult time find a property in NYC

With that in mind, here is a map showing the median home values as reported on the most recent American Community Survey aggregated by zip codes in the NYC area. 

I have filtered the results to only show zip codes with median home values in the price range mentioned above. 

As you can see, the areas that meet your criteria are seldom located within NYC proper. NJ is a good candidate, as well as the Bronx, and eastern Queens. 

Hope this helps! 

@Isidro Martinez

Here is a resource that may help you. It's a map showing the rent to price ratios (1% rule) for Sioux City Iowa.

I would concentrate my search on the darker areas, these will yield properties that meet the 1% rule more often. 

Hope this helps! 

@Anthony Gayden

Interesting questions, I think it depends on what a person is looking for. If we take a look at the ratio between median home values and median household incomes for all incorporated places over 10k in population a clear pattern emerges. 

At the bottom we have Flint, MI where it takes 1.02 years of income to buy a house on average. At the opposite end we have Stanford, CA with a ratio of 26.36. Clearly the nicer an area is perceived, the more expensive the cost of living will be. 

That being said, the places with more moderate ratios (2 to 3) seem to strike a good balance between quality of life and cost of living. 

Here is a histogram showing the distribution of home value to income ratios:

Also, here is a link to the data I used as well as sources 

Link to Cost of Living Spreadsheet

@Brandon Drayton 

Since you are looking to generate cash flow, I suggest containing your search to neighborhoods that have higher rent to price ratios. The graphic below shows average rent to price ratios for neighborhoods in Atlanta

Once you have selected a few neighborhoods that meet your criteria, I would let your agent know and have them only send you listings that are located within those neighborhoods. This will help you filter your results and reduce time wasted looking a properties that don't meet you criteria. 

Hope this helps!  

@Erik E.

Typically riskier areas (D/F) will cash flow higher than B/C, so what you are saying makes a lot of sense. 

I too have put together a map using data from the annual Census to generate the grades (A to F) 

If we look at the same geographies but with rent to price ratios, it's clear that lower ranked areas tend to produce higher yields (on paper at least) 

Grades Map

Rent to Price Ratio Map

Linear Regression model comparing raw grades (0 to 1) and rent to price ratios. The numerical mappings are:

- 0.0 ≤ x < 0.2 = F

- 0.2 ≤ x < 0.4 = D

- 0.4 ≤ x < 0.6 = C

- 0.6 ≤ x < 0.8 = B

- 0.8 ≤ x ≤ 1.0 = A

As you can see, as the score increases, the rent to price decreases 

Link to Interactive Chart

And lastly, here are the average rent to price ratios for each grade cohort

@Troy Egar

One way of beginning to gain an understanding of your market it by looking at the relevant data.

Data sources such as the American Community Survey, also known as the annual Census, can help you judge a location by considering key market indicators, which I list below.

Some of the metrics that I find valuable to understand are:

- Population Total

- Population Age

- Home Values

- Household Incomes

- Rental Vacancy Rate

- Homeowner Vacancy Rate

- Poverty Rate

- Educational Attainment Rate (High School/GED & Bachelors)

- Number of Housing Unit

- Rent to Income Ratio

- Rent to Price Ratio

- Population on SNAPS (supplemental nutrition assistance program) percentage

- Property Tax Rate

- Median Age of Buildings

- Number of Structures by Units (SFR, Duplex, Triplex, Quadplex, etc...)

- Median Rents by Number of Bedrooms

- Unemployment Rate

- Employment Sectors Percentages

- Number of Building Permits Issued

- Foreclosure Rate

- School Ratings

- Crime Statistics

Also take into consideration the direction in which each of these market indicators are trending. This will better help you get an understanding of not just where market is today, but also where it may be heading.

Let me know if you have any other questions, hope this helps! 

@Account Closed

It just so happens that I ran an identical business, called HackShack, from late 2015 to early 2017 in the Bay Area. 

I was 20 years old when I started it and have to say that it taught me a lot about not just business, but also human nature.

Before I give you my thoughts on whether or not you should pursue this idea, here is a quick write-up that describes how and why I started the business 

I didn't start the business on purpose but out of necessity at first. I was working in San Francisco as a developer and renting a house in San Mateo with a few people I had met earlier that summer. 

Through a series of events, by the month of October, all of my roommates decided to leave and I was stuck paying the entire 4k rent alone. 

Instead of trying to break the lease and finding a cheaper place to rent, I decided to try and make some extra income by renting bunk beds out on Airbnb to travelers and new arrivals to the Bay Area. It happened that I stayed at a place like this before renting the house I was living in now and rather enjoyed my time there. 

Over the next few months I improved on the concept, got more bunk beds, and developed a brand. By summer of 2016 the one house was generating over 8k in gross rents and I decided to focus on scaling the operation full time. I rented another house, this time with 5 bedrooms at 6k/month in rent. 

Another few months went by and the whole business made 17.5k in the month of November. (This figure would have been >20k but I was granting a few guys free stays in exchange for help managing the growing business) 

This however is where the story turns around. In December we hit our first big issue. One of our tenants turned out to be a professional squatter. He refused to pay or leave and this snowballed into a major problem. Evictions in CA are tough as it is, but add into the mix the fact that we were operating a hostel business out of a residential house without official leases made it even worse. 

It took me until January to get rid of him and about 1.4k in legal fees. This could have actually been a lot worse but during that time we lost most of our clientele at the house he was squatting at. This caused our revenue to drop significantly in December and January. 

Whilst this eviction was going on, we also ran into issues with both cities we were operating out of. The East Palo Alto city inspector came out personally to tell us to shut down the operation, and the San Mateo inspector notified us that they would send an inspector to investigate the situation in Feb. 

The tenant profile had also dramatically declined from summer to winter. In the summer we would get a lot of high paying ($50/night) interns. In winter tourism and internships are not as common and we had to drop prices to $35/night and content with a lower quality tenant profile, whom I was living with mind you. 

All this to say, I shut down the business in February 2017 because I couldn’t put up with all the headaches. At one point I hoped to scale the concept further, maybe bring on VC partners, but learned rather quickly that Co-Living is just not a viable means of habitation outside of very brief stays. 

Given my experiences, I do not suggest you attempt this, rather go with more traditional “house hack” method. You wouldn’t see nearly the same returns, but also won’t run the risk of experiencing the same kinds of things I went through. 

Below I have included a few pictures from one of our houses as well as a P&L that I maintained during operations and one of our Airbnb listings.

Link to P&L Spreadsheet

If you have any other questions feel free to ask

Hope this helps! 

Hey @Morris Sutton I may be able to help. 

What specific data are you looking for? 

@Nathan Shankles

One way of beginning to gain an understanding of your market it by looking at the relevant data.

Data sources such as the American Community Survey, also known as the annual Census, can help you judge a location by considering key market indicators, which I list below.

Whether you are interested in long distance investing or looking to buy in your backyard, this information is invaluable.

Some of the metrics that the survey provides and that I find valuable to understand are:

- Population Total

- Population Age 

- Home Values

- Household Incomes

- Rental Vacancy Rate

- Homeowner Vacancy Rate

- Poverty Rate

- Educational Attainment Rate (High School/GED & Bachelors)

- Number of Housing Unit

- Rent to Income Ratio

- Rent to Price Ratio

- Population on SNAPS (supplemental nutrition assistance program) percentage

- Property Tax Rate

- Median Age of Buildings

- Number of Structures by Units (SFR, Duplex, Triplex, Quadplex, etc...)

- Median Rents by Number of Bedrooms

- Unemployment Rate

- Employment Sectors Percentages

- Number of Building Permits Issued

- Foreclosure Rate

- School Ratings

- Crime Statistics 

Also take into consideration the direction in which each of these market indicators are trending. This will better help you get an understanding of not just where market is today, but also where it may be heading.

That being said, it's very difficult to predict market cycles.

I recommend reading a book titled Emerging Markets by David Lindahl if you are interested in learning more on this subject

Here is a link: Emerging Real Estate Markets: How to Find and Profit from Up-and-Coming Areas

Hope this helps!