Introduction
This post on The Hybrid Real Estate Professional, I’ll give you 6 key factors to consider when selecting a market to invest in real estate.
You can also download my Market Analysis Cheat Sheet and use it to follow along with your own market.
Choosing the right market for your rental property is one of the most important decisions you’ll make as a real estate investor.
But with so many factors to consider, where do you even start?
In a past issue, I shared one of my favorite ways to pick a market. But what if you want to start from scratch?
If you’re like me, starting with a blank map is overwhelming…so let’s boil it down and give you a good framework for your search.
For this issue, let’s set aside macro factors such as interest rates (which we can’t control) and look solely at the characteristics of the location itself.
From economic and environmental factors to buyer and local trends, I’ll provide you with the key resources to help you make a smart investment.
Here are 6 essential factors to look for, along with 2 resources to dig deeper:
Download my Market Analysis Tracker here & fill it out as you go.
1. Market Trends
This includes local trends like:
- Population growth
- Job growth
- Overall economic growth
Markets with a growing population and a strong economy typically have a higher demand for rental properties, making it easier to find tenants and generate steady rental income.
Resources:
Zillow Research: https://www.zillow.com/research/
Zillow provides a variety of research reports on real estate markets across the United States, including trends in home values, rental rates, and housing inventory. You can find these reports at
U.S. Census Bureau: https://www.census.gov/
The U.S. Census Bureau provides data on population growth and other national, state, and local demographic trends.
2. Economic Conditions
This includes factors such as:
- Unemployment rates
- Median income
- Cost of living.
A market with a low unemployment rate and a high median income is likely to have a stable rental market, as tenants will have the financial means to pay rent consistently.
Resources:
Bureau of Labor Statistics: https://www.bls.gov/
The BLS provides data on unemployment rates, median income, and other national, state, and local economic indicators.
U.S. News & World Report: https://realestate.usnews.com/places
Provides rankings and analysis of the best places to live in the United States based on factors such as job market, affordability, and quality of life.
3. Rental Demand
Look for markets with a high demand for rental properties, as this can help ensure a steady stream of rental income.
This includes areas with a high number of renters and areas with a low vacancy rate.
Rentometer: https://www.rentometer.com/
Provides rental market data and analysis for thousands of cities and neighborhoods across the United States, including information on average rent prices and vacancy rates.
Zillow Rental Manager: https://www.zillow.com/rental-manager/market-trends/
Put in your city or zip code to see high-level trends such as median rent price, market temperature, and change in rent over time.
4. Property Availability
Supply/Demand dynamics for real estate can significantly impact affordability.
Look for markets with ample properties available for purchase, as this can help you find the right investment property that meets your needs and budget.
Resources:
Local Real Estate Agents:
Local real estate agents can provide valuable insights into the number of properties currently for sale or rent and the demand for rental properties in the area. You can find a local real estate agent through websites such as Zillow or Realtor.com.
Zillow: https://www.zillow.com/
Filter by location, price, and other criteria. Save your search so you can quickly look based on your own criteria. A bonus with Zillow is the ability to see both sales & rental listings.
5. Government Regulations
Look for markets with landlord-friendly regulations, such as laws that make it easier to evict tenants who fail to pay rent or cause damage to the property.
Conversely, markets with tenant-friendly regulations can make it more difficult to manage rental properties and generate consistent rental income.
Resources:
National Association of Realtors: https://www.nar.realtor/law-and-ethics
NAR provides information and resources on real estate laws and regulations at the national and state level.
Apartments.com: https://www.apartments.com/rental-manager/resources
Provides resources and tools for landlords, including information on local landlord-tenant laws and regulations.
6. Location
Look for markets located in desirable areas, such as those with good schools, shopping centers, and public transportation.
Properties in high-crime areas or areas with limited amenities may be more difficult to rent out and generate less rental income.
Walk Score: https://www.walkscore.com/
Walk Score is a website that rates the walkability of neighborhoods and cities based on access to public transportation, grocery stores, and other amenities.
Trulia Neighborhoods: https://www.trulia.com/neighborhoods/
Trulia Neighborhoods provides maps and data on specific neighborhoods and cities, allowing you to assess the day-to-day life in an area.
TL;DR:
Look for markets with strong economic conditions, high rental demand, ample property availability, landlord-friendly regulations, stable rental demand, and desirable locations.
By carefully considering these factors, you can find the right market for your rental real estate investment and maximise your chances of success.
