What research and/or ratio’s do you recommend to determine the area (town/city) to invest in with rental properties. Do you look at occupancy rates ? How do you classify a good area for investing in rentals
I look for stability, demographics including growth, employment, average earnings, demand, etc.
I make my projections based on a vacancy rate as there may be huge demand today and a slump tomorrow, I usually factor in between 8 and 10 percent depending on area of the country.
Just wanted to chime in on my experience with vacancy rates.
I produced a research paper a few months ago on trends of vacancy rates in counties in Indiana. The leading data source for vacancy rates is from the American FactFinder from the Census Bureau. The search options they have provide a variety of information for counties, MSA’s, and states. However, if you notice, their margin of error is often very high during years between the decadal census. So I would be careful to look out for that when doing your research. For instance, one county may have a vacancy rate in 2017 of 8% plus/minus 6%.
Hope this helps,
Here are few tips to choose the area for rental property investment-
- Choose the neighborhood carefully. It will determine the vacancy rate and the types of tenant.
- Consider the area with affordable property taxes.
- If you are looking for family-sized homes, invest in the location having a good local school.
- Check the crime rates in the area you are planning to invest in. Higher crime rate promotes a higher vacancy rate.
- Choose the location having more employment opportunities. It attracts long term tenants. Also, fewer you have to be prepared for tenant turnover.