Which areas to invest in for single family rental properties?

Question

Hello BP Community!

I am wanting to begin investing in single family rental properties, but have been feeling overwhelmed with where I should begin my search. I've been trying to analyze one property per day in order to get some practice and to feel more comfortable with the process.  But, it feels like I'm just randomly analyzing these properties with no true goal in mind.

My question to everyone is, how do you find a good part of the country to invest in?  What factors should I consider?  I would appreciate any help or advice anyone has!

Thank you all!

Joshua Noth · Answer

Hey @Lieren Schuette - it's a very popular question. You could start with areas with good "criteria", such as low unemployment rates, population growth, company relocations, high occupancy rates, etc.  Many times these figures can be found online.

Start narrowing your goals: appreciation heavy market, or one that favors cash flow? Keep in mind, markets can have both, but likely at a price - for example, even Austin can cash flow from day 1, barring that you put more than 20% down.

Sometimes your strategy will also direct you with this.  I'll use Austin as an example again (sorry, just my expertise!) - if you are an out of state investor, and you want to do a STR, you won't be able to get that license if within the Austin city limits.  Same scenario for small MFH: some cities are full of these, while others don't quite have that inventory.

In short: find what things are important to you, both in the area and strategy, and continue to build upon that.  Use BP as much as you need - a lot of times questions around these subjects have been answered before as well!  Best of luck to you

Joshua Noth · Answer

@Lieren Schuette There are plenty of resources out there, especially depending on the criteria you land on - the Bureau of Labor Statistics is a good example for employment rates, as are many government websites for those types of factors.  However, one thing to avoid is blindly trusting a single resource.  As with literally any information gathering, compare data across different sources. The more data points you have to reference, the stronger your predictions can be

Lieren Schuette · Answer

Hi Joshua!  I appreciate the advice.  It looks like I have some research to do.  Do you recommend any specific resources when researching the criteria you mentioned (low unemployment rates, population growth, etc.)?

Joe Funari · Answer

@Lieren Schuette I would add to the great advice is consider states that have laws that favor the landlords since your looking for long term rentals. Many states do not. But I work in the Dallas/Ft. Worth area and this has all the factors your looking for in a Long Term rental. Average days on market are 17 days for most areas. That is quick for rental compared to most part of the country. But regardless of the market you pick be sure to look up in the Network section of Bigger Pockets for investor friendly Realtors to work with. I would go a step further and pick a Realtor that is a fellow investor. They will give you recommendations to help you build your team too. No sense reinventing the wheel. Hope this helps in your REI journey.

Cameron Braig · Answer

As mentioned above some good metrics to help filter target markets are population growth, job growth, rent growth, income growth and job diversification. These can hopefully help identify target markets. Another item to look at is if a submarket has received any public funding particularly infrastructure developments. These can be signs of growing momentum as well as sustainability should infrastructure be reworked for new developments. Best of luck getting started.

Wale Lawal · Answer

Welcome to BP! For me, real estate investing for beginners doesn’t have to be overwhelming. Start small, do your research, and consider your short-term and long-term goals. Talk to experts and learn more about investing and the market where you wish to buy, and most importantly, don’t rush!

Nicole Heasley Beitenman · Answer

What kind of comments? Is IL very tenant-friendly?

Collin Wilson · Answer

Lieren, first congrats on taking the first steps.  You have received a lot of good answers and I certainly agree with a lot of the metrics.  However, when you look at the obvious metrics you are competing with 3/4 of BiggerPockets and even tougher you are competing with people with a lot more experience and a lot bigger wallets/purses.  If you can find good deals in these areas with the classic metrics then jump on it.

However, I personally would recommend you look at areas that you have connections: your hometown, your current town, where your brother/sister live, where you went to college, etc....It automatically gives you an advantage because it is familiar and even better you may have connections or people who can provide references for Real Estate Agents, Lenders, Handymen, etc...

Regardless, congrats on taking the first steps and I wish you all the best!

Lieren Schuette · Answer

I don't actually have a reason, other than negative comments from various sources regarding investing in Illinois.  However, I have not done my due diligence on this!

Lieren Schuette · Answer

Thank you for the advice!

Which areas to invest in for single family rental properties?

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