My Secret Weapons for Unearthing Great Rental Properties
Rent Range tool provides make-or-break rental and vacancy information.
(Usual disclaimer: I'm just an investor and not a financial advisor or attorney. Consult your own financial professional before making any financial decisions).
As I talked about in my recent article (A Sneak Peek Inside My 2017-2018 Real Estate Portfolio), my highest portfolio allocation (45%) is in residential rentals. In addition to producing stable, attractive income (7% last year), they also appreciated in value quite a bit (over 20%). But building up a portfolio of these wasn't easy. Getting a good return requires going through thousands of candidates to find the diamonds in the rough. And once you find one you have to make a competitive offer that's higher than all the other investors trying to do the exact same thing. And it has to be low enough that you don't lose money. Striking that balance isn't always easy, but if you don't, you either miss out on the property, or end up investing in a money loser. So it's crucial to figure it out. Finding the Needle in the Haystack One of my secret weapons, is a program that I wrote. It finds the thousands of properties that are for sale in the areas I'm interested in, and then filters them out based on my strict criteria (unit features, crime, neighborhood appreciation, construction type, etc). It then spits out a report of the handful of properties that are worth a closer look. (If you're interested in more about this, please let me know, and I'll do a future detailed article on it). Making Short of the Short List Once I have my short list, it's important, to look at each property and make sure it really is a moneymaker and not a money loser. And there are certain key numbers (rental income and vacancy rate) that make or break the profitability. But the problem is they're really hard to figure out accurately. A few lucky investors may happen to have years of experience in whatever submarket they're buying in. But most of us don't have that luxury. Some first-time investors, make the mistake of relying on the real estate broker or the seller's information packet for this. Unfortunately, both have a strong economic incentive to be "overly optimistic", and wrong information often hides the fact that a property is really a money loser. "Data, Data Everywhere, but Not a Drop to Drink" There are public websites like Zillow, that attempt to estimate things like rent. However, even Zillow themselves says that the accuracy varies widely, depending on ho