How to Assess a Rental Market

  • Terri Augustyn
  • 02/17/22

 
 
What characteristics should I look for in a good Rental Market? I’m sure you heard it before, the best rental properties are not in your backyard. If your goal is high ROI, where should you look for a profitable investment? 
 
First and foremost: Vacancy Rate. You want to invest in markets where properties are quickly and always rented. A vacancy can potentially be your biggest cost. Every month without a tenant is a month you aren’t collecting rent. Look at markets where properties are rented out quickly and consistently. Most investors look at a vacancy rate of 5%. 
 
When looking at markets, don’t overlook the average city.  American based infrastructure that exists in these “average cities” is what makes America great. Think chain restaurants, universities, distribution centers, long-haul trucking, hospitals and airports. All these things make these markets recession proof. 
 
Property taxes should not be ignored. Market's with with low taxes are important. Taxes come out of your bottom line.
 
You’ll also want to consider the cost to acquire homes in the market. Economically, it doesn’t make sense to acquire a rental home in a place like California. We look at these top States:
 
  • Florida
  • Arizona
  • Colorado 
  • Indiana
  • Texas
 
Finally, a great rental market has a low crime rate. You want your tenants to feel safe in their new home. Remember, do your due diligence. You can't go off data you google - you need to see it for yourself and speak to professionals in that area.
 

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