Rent to Retirement has very specific criteria that needs to be met before we start to operate in a new market. So many investors come to us in confidence looking to be successful with their financial goals and in order for that to happen, we need to make sure we do extensive research and speak to local experts in each market that we want to open up to turnkey. As described in our video: How to Invest with Rent to Retirement, we explain how we pride ourselves on being different than any other turnkey provider for several reasons but one very important one being the amount of time and education we put into learning about our operable, successful markets.
A & B Markets
All of the markets that we operate in are classified as A and B markets and sometimes, C. It is important to note that while Rent to Retirement has strict criteria that we stick to when it comes to defining our A, B and C class areas, there is no national rating system. We base our classification of B markets off of several things. One being the tenant-to-homeowner ratio. Typically, we like to see a 50/50 split here. This tells us that the neighborhood is great for owning a home and for long-term renters. Within the 50% renters, we also like to see a minority of section 8 or government subsidized housing numbers. Although we are in several different class markets, we mostly operate in B. Within the B markets, you will see a median household income with median home prices. We like to stay near the middle-class markets because the higher the class, the more expensive the homes are, the more income the homeowners make, essentially meaning less renters and higher down payments with a lower ROI. This is not always the case but will usually put us in those middle-class areas.
Cash Flow & ROI
In a recent video I discussed what cash flow and return on investment are, how to get these numbers and why they are important for a real estate investor. If you’re not confident about what those are please go back and check that out! We want our investors to get the best bang for their buck when they invest with us. In order to do this, we need to research the market and make sure that the investor will get good cash flow and good returns on their investments. It’s pretty common knowledge to understand that buying in a market like California or New York will not yield an investor the greatest returns. What isn’t always well-known is what ARE the best markets for the best returns and cash flow. That’s when we come in and do all of that research so that the investor doesn’t have to.
Landlord Friendly Legislation
What exactly is landlord friendly legislation and why is it good for investors to invest in those states? These are states that favor the landlord’s rights over the tenants. Currently with the COVID restrictions changing everything, the laws are a little grey. Normally in a landlord friendly state, the law will favor the landlord when it comes to evictions, tenant rights, rent control and registrations and licenses. The states that we operate in won’t make investors jump through extra hoops.
Taxes are one of the biggest burdens people face when it comes to, well pretty much anything and everything! When investing your money in the real estate market you want to pay attention to the location of the property because a lot of states have extremely high taxes. Rent to Retirement has this on their list of important criteria to meet when opening up in a new market because taxes can make you or break you in the investment business. Finding a state with low taxes is important if you want to reap the sweet, sweet rewards of good cash flow and
Population & Economic Growth
Invest where the people and the jobs are! We want to invest in areas that have a diversity of industries and economy. Find places where the fortune 500 companies are coming into the economy. We have our teams attend city planning meetings to see the long-term goals of the city. Markets where population and the economy are continually rising are going to create a consistent and predictable demand for housing, allowing you appreciation and equity in your investment properties. We want to be in the path of progress.
Why Zillow is Not Always an Accurate Tool
Searching for market information on Zillow can be very misleading. If you’ve never been to a certain city/town you’re sure to believe what information these types of websites tell you. The problem with this is that these websites will take large geographical areas and bunch all of the information into one group and classify it all together when in reality, there are several overlooked areas that are unlike the big picture. There could be a great spot on the outside of town with a fantastic private school that no one would know to invest in because they looked at a website that gives a broad description on a broad location. This is why it is so important to have experts in place that can give you the most accurate information.
Our goal is not to focus on one piece of criteria more than the other. We want all of these
pieces of the puzzle to come together to create a great area for our investors to see good
returns and make them feel confident enough to continue to come back to grow their portfolio.
As always, we appreciate you taking the time to read up on our blogs!