All Forum Posts by: Art Perkitny

@Ravi Singh

Here are a few graphics that may help in your search.

The first one shows the change in population since 2010, aggregated by each neighborhood in Cleveland

The next once shows the change in rents since 2010

This last one is the change in household incomes since 2010

Each one of these metrics is important for buy and hold investors to understand. I suggest looking at area with some growth potential and not just optimize for cash flow 

All the data used to generate the graphics comes from the American Community Survey

Hope this helps! 

@Yaniv Yarkony

The Annual Census, known as the American Community Survey, is a good resource to consider using.

Rents are broken down by value cohort and even by number of bedrooms

Here is an example for Cleveland, OH

@Tyler Santos

Glad you found my answer helpful!

Here is a great blog post on BP regarding location grades. 

https://www.biggerpockets.com/blog/2015-12-09-class-a-b-c-d-real-estate

As for my take on the matter, I tend to think of location grades as a sort of risk score, similar to how bonds and credit are measured by bond ratings and FICO scores respectively. 

The lower the grade the riskier the investment and the more enticing the returns. This will be true on average, however real estate is a less efficient market meaning it's possible to find good returns in very low risk areas. 

That being said, don't think that the first property you find with a pro-forma claiming to yield 2% rents is a slam dunk. 

The data listed above is a good starting point for determining the grade of an area and will help you avoid erroneously investing in a riskier area.

Also, all of the metrics I mentions are from the American Community Survey and are available at market granularities ranging from the state level all the way down to small groups of blocks within cities.   

Hey @Tyler Santos, welcome to the platform! 

As you stated, it's important to first define your investing goals. That is, what is your appetite for cash flow vs appreciation. How risk averse/affine are you? Also are you looking to buy and hold, fix and flip, or maybe house-hack. The choices you make will dictate where and what kinds of properties to look at. 

As for researching cities and neighborhoods, here are my suggestions.  

I suggest beginning your search by looking at the data, such as demographic data from the Census. This info will give you a decent idea of what to expect and help filter down your search to a few cities.

Some of the metrics that I find valuable to understand are:

- Population

- Home Values

- Household Incomes

- Rental Vacancy Rate

- Homeowner Vacancy Rate

- Poverty Rate

- Educational Attainment Rate (High School/GED & Bachelors)

- Number of Housing Unit

- Rent to Income Ratio

- Rent to Price Ratio

- Population on SNAPS (supplemental nutrition assistance program) percentage

- Property Tax Rate

- Median Age of Buildings

- Number of Structures by Units (SFR, Duplex, Triplex, Quadplex, etc...)

- Median Rents by Number of Bedrooms

- Unemployment Rate

- Employment Sectors Percentages 

- Owner to Renter Ratio

- Family and Household Sizes

These are just some of the indicators that will help you understand the quality of an area as well as the kinds of returns one is to except.

Also take into consideration the direction in which each of these market indicators are trending. This will better help you get an understanding of not just where market is today, but also where it may be heading.

Once you have selected a few cities that meet your criteria, it's then time to dive deeper into researching the sub-markets that comprise each of them.

The sub-market selection will have more of an impact on price as well as investment performance than the city itself.

Since this is your first investment, I don't suggest trying to find the highest cash flowing property however. The reason being that this will likely be in a D/F neighborhood, which will expose you to more risk than needed when starting out.

Hope this helps

@Tony Camorra

As @Aaron K. alluded already, this property is likely to be located in a D/F neighborhood. 

I suggest you read the following if you don't know what I mean by D/F 

https://www.biggerpockets.com/blog/2015-12-09-class-a-b-c-d-real-estate

While it is "possible" that you could see 25%+ returns on a property like this, the reality is you will actually lose money, especially since you are investing remotely 

These types of real estate investments are analogous to buying spec-grade bonds or lending to subprime borrowers. 

I'd make a concerted effort to avoid this or any other deals similar to this one

@Obi Emegano

If we take a look at the data it's easy to see why Oklahoma City is a  growing market and why this is good for investors.

Let take a look a few metrics 

- Population has increased over 100k since the beginning of the decade 

- Household incomes are up 2.55% Year over Year 

- The median age of a property has increased due to large numbers of new units coming on the market the past few years.  

Why this is good for investors:

- Rents are up over 6% since last year

- Home values are 8% up from last year 

Data is from American community survey 

Hope this helps!  

@Edward Callaway

One way of beginning to gain an understanding of your market it by looking at the relevant data. 

Data sources such as the American Community Survey, also known as the annual Census, can help you judge a location by considering key market indicators, which I list below. 

Whether you are interested in long distance investing or looking to buy in your backyard, this information is invaluable. 

Some of the metrics that the survey provides and that I find valuable to understand are:

- Population

- Home Values

- Household Incomes

- Rental Vacancy Rate

- Homeowner Vacancy Rate

- Poverty Rate

- Educational Attainment Rate (High School/GED & Bachelors)

- Number of Housing Unit

- Rent to Income Ratio

- Rent to Price Ratio

- Population on SNAPS (supplemental nutrition assistance program) percentage

- Property Tax Rate

- Median Age of Buildings

- Number of Structures by Units (SFR, Duplex, Triplex, Quadplex, etc...)

- Median Rents by Number of Bedrooms

- Unemployment Rate

- Employment Sectors Percentages

Also take into consideration the direction in which each of these market indicators are trending. This will better help you get an understanding of not just where market is today, but also where it may be heading.

Note that the sub-market selection will have more of an impact on price as well as investment performance than the city itself, this being smaller locals that compose a larger macro market. 

Since this is your first investment, I don't suggest trying to find the highest cash flowing property however. The reason being that this will likely be in a D/F neighborhood, which will expose you to more risk than needed when starting out.

Hey @Erica Dixon, what you heard seems to be correct based on the relevant data. 

Here are some economic indicators for Danville, VA:

Population has been decreasing significantly since the beginning of the decade from about 45k to 42k, roughly a 6.7% decrease.

Home values, while having increased in the past few years, have only seen an increase of around 3k

Vacancy rates remain high at 15.9%, with a significant portion of those vacancies being reported as for rent properties. Rental vacancy rates are at 6.9%.

Below are graphics showing the metrics discussed above. 

All data is from the American Community Survey 

Hope this helps! 

@Helen M Leyzerovich

While I am not actively engaged in the area, I do have access to data, which corroborates @Joshua Braskett 's firsthand information.

Home values have fallen in the Stuyvesant-Prospect neighborhood and so has the population. 

The population is rather rent burdened, with a rent to income ratio of 37%

Both rent to price (1% rule) and cap rates have increased, which at first glance is good, but the reality is increased returns are reflective of the increasing perceived risk of investing here. 

Both SNAPS (Food Stamps) and poverty rates are very high.

Lastly, the percentage of college educated adults has increase. This one is obviously good but overshadowed by the other negative aspects of the area

Below are graphics showing the trends for the metrics discussed above 

Data is from the American Community Survey  

Hope this helps! 

@Kelly Ovard

I would recommend taking a look at the American Community Survey, also known as the annual Census. 

This info will give you a decent idea of what to expect and help filter down your search to a few cities.

Some of the metrics that the survey provides and that I find valuable to understand are:

- Population

- Home Values

- Household Incomes

- Rental Vacancy Rate

- Homeowner Vacancy Rate

- Poverty Rate

- Educational Attainment Rate (High School/GED & Bachelors)

- Number of Housing Unit

- Rent to Income Ratio

- Rent to Price Ratio

- Population on SNAPS (supplemental nutrition assistance program) percentage

- Property Tax Rate

- Median Age of Buildings

- Number of Structures by Units (SFR, Duplex, Triplex, Quadplex, etc...)

- Median Rents by Number of Bedrooms

- Unemployment Rate

- Employment Sectors Percentages

These are just some of the indicators that will help you understand the quality of an area as well as the kinds of returns one is to except.

Also take into consideration the direction in which each of these market indicators are trending. This will better help you get an understanding of not just where market is today, but also where it may be heading.

Once you have selected a few cities that meet your criteria, it's then time to dive deeper into researching the sub-markets that comprise each of them.

The sub-market selection will have more of an impact on price as well as investment performance than the city itself.

If this is your first investment, I don't suggest trying to find the highest cash flowing property however. The reason being that this will likely be in a D/F neighborhood, which will expose you to more risk than needed when starting out.

I will also leave you with a link to a spreadsheet listing all the markets in the country with over 100k population.

It lists median home values, median rents, and the 5 year CAGR for population.

Link to Cities Comparison Spreadsheet

Hope this helps!