What makes a good "renter's market"

Question

Can someone please tell me why certain areas, aka St Louis, is a good city for renters? Is this based on income, unemployment rates, amount of properties available, etc.....

I am a current landlord in St Louis, but thinking about expanding my search outward of the City.....If anyone has insight, I'd love to hear it. Thank you!

Peter MacKercher · Answer

@Jamie Carter There are two ways to answer that that seem apparent to me.

1) Rents are generally lower when comparing the local market to other cities that offer similar job opportunities and lifestyle; ie, general cost of living is less in this city for equivalent opportunity and amenities. That brings an influx of residents, which almost always starts with a boom in the rental market as people move in to temporary housing to learn about a city and figure out the area. "Temporary" is of course, again, relative, as some people are renters all their life.

2) Rents are "cheaper" relative to the advantage of buying a property and paying a mortgage. This means that the housing prices are higher such that there's no financial advantage to owning instead of renting. This can be broken as a straight "what would you pay in rent for X bedrooms and Y bathrooms and Z square feet vs what a monthly mortgage cost would be for an equivalent", or by mixing in other costs that come with homeownership, like repairs, lawncare, etc.

St. Louis is more of the first case rather than the second, though those are also related cycles in that 1 can lead to 2 over time as people settle in and start buying homes.

To use that info to judge where to buy a property you'll need to consider what demographics are moving to the city, what the housing trends are for those segments of the population, see if that's something that will continue over the next 5-10 years, consider what happens to those folks once they shift gears a bit (do they stay in the city? buy a house in the city? move to the burbs?). That's the trickier part, and also the more interesting part, and seems to be where you're at.

Hope that helps!

Adam Christopher Zaleski · Answer

A good market for renters has lots of vacancy. They get to pick and choose from multiple options.

As a landlord, I like buying in college towns that also have a solid young professional base. Many young professionals have plenty of income for higher rents and don't want to buy until they are ready to settle down. In my experience, I like it when the college kids and young professionals compete against one another for the same rentals, which drives up the price. They want to be close to the action (bars & restaurants).