How to Analyze Rental Market Saturation

15 Replies

Hi BP friends.

I am analyzing my first rental property investment deal in Baltimore, MD.  How do others go about determining rental market saturation other than trolling through Craigslist ads?  I am narrowed between two specific neighborhoods and all my other numbers look great on these two properties.  So, this is my last consideration that I can't use a specific number to stack against one another.  Thanks for the advice!

I'd check the Renter density in a specific neighborhood. That coupled with the Vacancy rate should give you a good starting point.

Thanks for the suggestions @Bogdan Cirlig.  Great site!

Follow up question...if you had to choose between a 60% renter density/3% vacancy rate and 31% renter density/11% vacancy rate, where would you lean?  I am leaning toward the lower vacancy rate even though I would have more competition.  I am thinking as long as I am confident my property will stand out among the rest, I will be okay.  Thoughts?

I would focus on the vacancy rate.  I believe that one of the most important things to consider in purchasing residential rental property is what jobs will supply the tenants.  You want to choose property that has local job sources sufficient to feed a rental market.  I like things like universities (that haven't overbuilt housing).

When you say "Renter density" I assume you mean renter vs homeowner?  This is not a metric  I have ever considered. it is tough to know the vacancy rate of a specific neighborhood. 

To get these answers or answers to better questions and to learn what those better questions might be I would be networking with successful local landlords.

There are a lot of baltimore investors here that can help you if you give more specifics about the properties and area.

@Glen Wiley  Thanks for the feedback.  Great input.

@Ned Carey Yes, that is what I meant by renter density. I found the vacancy rates on I am not sure how those are calculated, from MLS? @Bogdan Cirlig  

Maybe you can comment on how those are calculated?

One of the properties I am considering is dead center of Canton/Fells Point and the other is in Fed Hill.  Any thoughts on those two neighborhoods would be much appreciated?

@Jamie Mathieu  

Best way would be to talk to a few local Property Managers and see what their takes are. You can probably find some right here on BP or at least can get recommendations from someone here.

You can also go online and check out some statistics. Redfin might be a good free source - they service Baltimore. When you're on a property's page, there is a section called Neighborhood Info (near the middle of the page) with a little box to the right with Demographics link. Click on it and another page will show you the housing inventory (owned v rented v vacant, turnover, crime, etc.). Granted, this is for the zip code ONLY, so gives a general overview. But a good start before you dig in by community and blocks. 

Another place can be city data. You can get a lot of info for the zip, then drill down to the community, including population growth, etc.. Some data can be a bit outdated, but again, a good place to start.

Best of luck!

Hi @Jamie Mathieu  

Congratulations in taking action and analyzing your first rental property. Here are some tips that you may find helpful in analyzing your rental market:

Any time I am looking at buying a property as part of my due diligence process I try to gauge the interest from potential renters and price points that I can charge. Here are certain things that I would do:

1. Get a Google Voice #: You don't want people calling your cell phone so it's better to have a Google voice. Also create a secondary email for ad's. [email protected]

2. Create an account on Postlets

3. Location - Enter the entire address for the property. Postlet's give you the option to hide the street number. 

4.Contact - I typically put contact information as management company. So if the property is on XYZ street I put contact XYZ Management LLC

5. Pictures - I post a lot of pictures. Whenever I go to the property I take good quality pictures of the property - the more the better (i.e. parking, entrance, rooms, bedrooms etc). I don't photoshop the pictures or anything like that..simply put the pictures as-is..most of the time agents don't put good pictures

6. Description- Provide detailed description of the property features etc. In the end I Include  Equal Housing Opportunity and standard disclaimers.

Once I am done with the above I also place the ad on craigslist..Postlets provides an easy way to do that.

All that being said the next step is to post and wait for phone call. Typically, I start receiving phone calls in the first 2 hours. If it's a good property the # of calls are a good indication on how easy or difficult it would be to rent tenants. Note: I also post different price points $1,500, $1250, $1375 etc. Typically, I try too keep up with the market rents and don't overcharge..It's easier for me to find people quickly at market price than wait for someone a month to make $150 more. I focus on higher occupancy and less vacancy. So to answer your question I focus on the properties with higher occupancy. If the property is sitting empty its not making money. Typically, I deactivate the ad in 2 days or a day depending on the response rates.

You can also do the following:

1. Go to rentometer see the rates people are charging

2. Check out Zillow/Realtor Rentals within 1 mile of your property

3. Use the above method (I do this for all properties that I feel there is potential)

Since this is your first rental don't get too caught up in analysis paralysis. See the high level trends where the path to progression is heading, buy it right, know your numbers and have an exit strategy. Unfortunately, I don't have insight in to your neighborhoods. 

Good Luck!

Hey @Jamie Mathieu . Wondering if you ever pulled the trigger and if so how it's been going? Me and a couple partners are in the initial fact finding stage for choosing a great rental neighborhood in Baltimore City. Hope all worked out and look forward to hearing!

Canton and Fed Hill are relatively similar. Both are very popular and expensive. Know the street you're on vs the price you're paying. 

@Travis Lauchman undefined

Yes, I pulled the trigger!  I closed on my first rental property at the end of April.  I ultimately chose a property in Federal Hill.  It fit my goals and has been going really well so far.  I did a few minor updates and had a lease signed and tenants moved in by end of May. 

Even though I have only been in the game a few short months, I feel like I have learned a ton about rental property and Baltimore specifically.  So far so good.  I am happy to bore you with all of the specifics and share my experience so far if you like.  Feel free to connect with me!  I wish you luck!  I feel that Baltimore has a lot to offer, especially if you know the neighborhoods or streets/blocks especially and have your numbers and goals dialed.  Stay in touch!

@Jamie Mathieu congratulations!  Yes on your first deal you learn more than you can from reading a dozen books.

Congrats Jamie! 

@Jamie Mathieu Congrats on the property and glad that it is going well. Do you have any details on the property? Also, not sure if you are looking for a tenant but I have an excellent tenant in my property that is looking for a place in Fed closer to her work.

@Ned Carey Thanks!  I couldn't agree more.  I am happy that I did a ton of research (networking, books, podcasts, forums, etc.) to establish a foundation of knowledge and then trusted that foundation to just jump in!

@Gabriel G. My property in on the south end of Fed Hill on Patapsco St.  I do have tenants in there currently with a two year lease.  So, hopefully no vacancy anytime soon. :)  wish you luck on your search for your client.

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