Look beyond your local market – but don’t stop there

ATTOM Data Solutions just published their monthly housing report. Their lead story is about urban, city dwellers acquiring investment property out of state. In the story, they profile a lady in California who sold one rental she had locally for 27 in Alabama.

“We can sell a package of 10 to 15 homes to an individual investor whose 401(k)
didn’t do very well during the recession,” said Whitmire, providing as an example a California woman who sold the one rental property she owned in California and used the proceeds to purchase 27 rental homes in Alabama…

“She’s making a very significant cash flow,” he said.

At Audantic, out of state ownership is a feature we utilize when building our models. But we don’t stop there. There are many macro economic factors that may influence how to choose the city, the market. But once the market is selected, how do you pick the neighborhood to invest in? Realtors can be helpful, but we like data.

Let’s say you wanted to acquire properties in Charleston, SC. A metric to consider is home price divided by rent. How much do you have to pay per dollar of rent?

screen-shot-2016-12-02-at-9-04-00-am

 

While you might be tempted to buy on the coast – it’s very beautiful – but it would be a terrible rental investment.  On average, you would pay $275 per $1 of rent. But in Hanahan, where the chart is a dark green, you can acquire $1 of rent for just $100.

A single family house may cost $750,000, with a rent of $3,000.

But off the coast, the median is $114,800 with a rent of $1,100.

Much, much better numbers.

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