What's Your Method for Analyzing Potential Rental Markets?

6 Replies

What are your methods for analyzing a potential rental market to invest in?

I have a specific market in mind(Berwyn, suburb of Chicago IL) to start my investing career in, only because I grew up here and am familiar with the area. However I don't want to miss out on other neighborhoods that have more potential just because I'm used to Berwyn.

My overall plan right now is to find and focus on one target area in Chicagoland that I wouldn't mind living in for a few years, find and buy a distressed 2-4 flat for cash in that area, rehab it and live in one unit while renting out the others. Cash flow and ARV are both equally important to me, so it's like a hybrid buy&hold / fix&flip analysis.

So what I'm asking is: What are the best ways to get data on rental markets? How should I be analyzing the data? What should I be looking for when analyzing the data?

I'm pretty much brainstorming right now, so all thoughts are welcome!

Originally posted by @Account Closed :

What are your methods for analyzing a potential rental market to invest in?

I have a specific market in mind(Berwyn, suburb of Chicago IL) to start my investing career in, only because I grew up here and am familiar with the area. However I don't want to miss out on other neighborhoods that have more potential just because I'm used to Berwyn.

My overall plan right now is to find and focus on one target area in Chicagoland that I wouldn't mind living in for a few years, find and buy a distressed 2-4 flat for cash in that area, rehab it and live in one unit while renting out the others. Cash flow and ARV are both equally important to me, so it's like a hybrid buy&hold / fix&flip analysis.

So what I'm asking is: What are the best ways to get data on rental markets? How should I be analyzing the data? What should I be looking for when analyzing the data?

I'm pretty much brainstorming right now, so all thoughts are welcome!

Try the blue bar atop the screen, click 'Analyze' then click 'rental properties'.

Kudos,

Mary

@Account Closed  Reverse engineer the numbers, and when you arrive at your final number...don't argue with it.  I'll explain in reverse engineering...or at least reverse to my original statement above.

I see too many investors focus on an area to invest in, because it's where they live, they know that area, they would want to live in that area, etc...none of those reason are good reasons to invest in an area.  You invest where the numbers tell you to invest, then you become an expert in that area.

When you reverse engineer the numbers, you always start out buy paying yourself...the desired cash flow.  Never use a % of something to analyze if a market/property is good or not.  You don't spend %...you spend real dollars.  If my numbers tell me I need to make at least $300/month on a hold, I don't care if that represents a return/ratio of 50%, 20%, or 10% (well, maybe?)...I'll pull the trigger on it.  If 50% got me $100/month, shy would I do it?

After that, you subtract all your actual costs.  Again, don't use %...they will either put you into a bad deal, or take you out of a good one.  Use real numbers.

For a market, look for markets that will have to most available properties that match your criteria for buying...and cash flow,  This is an easy verification by looking at sales comes...then how they relate to cash flow when holding.

Lastly, don't force yourself into an area...letthe area find you.

I like using craigslist and rentometer to see what certain areas average rent ranges are.  I then look at the same area with citydata.  This will give you a breakdown of average income, rents, demographics, home prices, etc.

If an area looks viable, based on whatever your go criteria is I then visit the area.  Driving the neighborhood and walking around usually gives me a good feel for potential.  I want to make sure I feel safe in the area I am investing in.  The one thing I will note is if you are investing around a city be sure to scout the area well.  In most cities if you go down a few streets you could be in a whole different world.

If all these things check out see if you can find deals to meet your desired ROI and start making offers! Obviously more is involved but this is a good place to start.

follow the hipsters! I'm a buy and hold investor in Chicago. I'm about to close on my first 4 unit to owner occupy. Hipsters pave the path in tough neighborhoods and are a leading indicator of improvement, a bullish rental market, and imminent appreciation. You have to look at an owner occupant property differently than a strict income property. Very hard to find one that works for all your needs. @Brie Schmidt  and I looked for one for almost 6 months!

@Willa Pugh, 

There are great ideas posted here: craigslist & rentometer and I will add to that postlets.com,  and driving by and calling the For Rent signs close by a property you are analyzing. 

As this is your first property, I will also advise to call a Real Estate Broker that is familiar with the area and you'll get a wealth of information about the rental market, demand and prices.

For example, I just looked in the MLS and there are 21 total rentals units posted active today, with your average 2 bed, 1 bath remodeled units located in two flats going for about $1100.

If you look in Berwyn, keep an eye on Forest Park, Cicero and Oak Park also. I was able to buy a four flat at the beginning of the year in the area with my fourth unit covered entirely by the rents from the other three units.

Good luck to you!

@Joe Villeneuve

@Eddie Werner

@Danny Duran 

@Lumi Ispas 

Thank you everyone for the thoughtful replies! This is all extremely useful advice for me and I appreciate it very much.

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