Choosing Property for Real Estate Investments

Several key metrics can help you evaluate real estate investments effectively:

Population Growth

Look for areas with increasing population.

Income Growth

Ensure median income growth outpaces inflation and rental price growth.

Rental Rate

Current and projected rent trends set your income estimate. The HUD website provides preliminary information on rent trends. For more detailed insights, consult your real estate agent.

Employment Rebound

Check for recovery in employment rates post-crises (e.g., 2008, 2020). Seek markets with diversified employment sectors. Avoid areas where a single industry employs 25% or more of the workforce. Monitor the unemployment rate to gauge economic stability. For example, check the unemployment rate in Cincinnati, OH. Economy at a Glance report by BLS,

Low Vacancy Rates

Aim for areas with rental vacancy rates below 10%. Typical vacancy rates can indicate market health. Regularly check local vacancy rates to ensure they align with your investment strategy.

Crime Rate

Lower crime rates often correlate with higher education levels. Use resources like City-Data.com to check crime rates. On City-Data’s own crime index — where the U.S. average runs in the high 200s — aim below 500, with stable or decreasing trends. Higher crime rates are typically found in Class C areas.

Ethnic Diversity

A diverse population can attract renters at various price points.

Population Age and Market Demand

Analyze population growth trends to predict future housing demand. For instance, review population growth data for Cincinnati, OH.

Young Employed Population

High demand for studios and one-bedroom apartments.

Families

Preference for single-family homes (SFH) and multi-room units.

Elderly Population

Increased demand for senior living facilities or senior care units.

Market Absorption Rate

Assess how quickly new homes are sold.

Demand for New Homes vs. Rental Rates

Compare the demand for new homes with rental rates.

Land Value

Consider the land value if the property were destroyed. Imagine your rental property burns down, but everyone is safe, and insurance covers the replacement. In an A-class neighborhood, you would rebuild bigger and better, then sell for a profit and reinvest. In a B-class area, you would rebuild exactly what was lost, as this is the best use of the land. In a C-class community, you might donate the land and reinvest the insurance money elsewhere, as rebuilding may not be financially sensible. Take into account location specific risks like floodings (see FEMA Flood maps, and FEMA Flood Map Service Center), wild fires, earthquakes. For a long-term strategy, consider capitalizing on climate change by investing in properties that may become future shoreline real estate (e.g. Coastal Risk Screening Tool).

Schools

Better neighborhoods usually offer a wider range of educational choices. Use Greatschools.org and Zillow.com to research school quality. Note that poor public schools may necessitate private school tuition.

Services like City-Data.com provides many details about neighborhoods, more specialized services like DealCheck.io helps to analyze properties.