8 Data Gems to Find the Best Location for Real Estate Investment

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Where would you put your money?

Whether you are trying to find a new home or looking to make your next real estate investment, it is important to know your location. Today I want to show you how you can assess a location from the comfort of your home, so you don’t buy property on a sinkhole.

It just needs some touch-up paint — Photo by AJ Wallace on Unsplash

Agenda:

We will look at 8 important features of a city, zip code, or address that determine whether it is a good place to invest or live:

  • Median Home Price
  • Fair Market Rent
  • Vacancy Rates
  • Schools
  • Crime Rate
  • Walk and Drive Distance to Nearby Venues
  • Population Growth, Income, and Unemployment Rate
  • Building Permits

Median Home Price

Money doesn’t grow on trees! Of course, when investing in an area we would like to know the cost of homes in that area. Even better, if we can see the trends in one area compared to others, we may be able to forecast future appreciation.

So, how can I find accurate median home value data?

Zillow’s research data is the best tool I have found for this. They provide monthly updates on the median price of single-family homes for every zip code.

Screenshot of Zillow Home Value Index (ZHVI) download

Below is a plot of said data in excel for Charlotte, NC.

Excel Plot of the CSV Data for Charlotte, NC Single Family Home Value From 2000-Present

Median home values are important when investing, but good investors know there are other important data points to pay attention to.

Let’s see what’s next . . .

Fair Market Rent

The projected rent for an investment property helps depict the cash flow for that asset. However, you should take a second to think. Many people assume they have the nicest house on the block and ask too much for rent. Let’s face it, no one likes those people. You should always plan for the worst.

So, where can I find a realistic rent estimate?

The more popular tool for this would likely be Zillow Rent Estimate Calculator.

Screenshot of Zillow’s Rent Estimate Calculator

The more realistic tool to use for a zip code would be RentData’s Fair Market Rent by ZIP Code.

Screenshot of rent estimates for Charlotte, NC 28203 zip code on RentData.org

Vacancy Rates

What if you bought your house and expected to rent it at a fair market price, but no one rents it? This means you are losing money and it is a reality for many investment rentals. Therefore, it is important to keep track of vacancy rates for your location to help avoid the problem.

So, how can I get vacancy rates?

The best resource I have found is USA.com/rank which will give you various types of data based on Census Blocks.

Screenshot of Vacant Housing Units for Rent in Charlotte, NC from USA.com/rank under “Housing”

While this is great data for specific locations, there may be better sources for more updated data.

Schools

Even if you don’t have children, it’s important to respect the impact schools have on the housing market. Parents want to send their balls-of-joy (aka most-expensive-assets) to the best schools. And while the best schools may not always be the most affluent, data suggests affluent schools provide a higher learning rate (Stanford School Study). It is safe to assume finding a high-quality school in a low-cost-of-living area is a good sign of appreciation.

So, how do I tell if my location has a good school?

The best tool I have found is GreatSchools which gives a rank for each school based on various equity and academic scores. To use the tool simply type in a zip code, address, or school to see the public school associated with the location. Below is an example of Dilworth Elementary, which is located in an affluent neighborhood in Charlotte.

Screenshot of greatschools.org for Dilworth Elementary

Crime Rate

This one is a no-brainer. None of us want our stuff to get jacked. And even if we are not living in the house, the property itself is a highly valuable asset and renters do not like crime either.

So, where can I find info on my location’s crime?

There are a lot of sources for this. I would suggest either Interactive Crime Maps | ADT Security or CrimeGrade.org | The Safest Places and Best Home Security.

For ADT Security you simply search your location, and they will give you specifics on your area. This includes a heat map not pictured.

Screenshot of ADT Crime Index for Charlotte, NC

Alternatively, you can go with CrimeGrade. Note, this one gives a more holistic view of a larger area.

Screenshot of Crime Grades for Charlotte, NC

Walk and Drive Distance to Nearby Venues

Where is the nearest grocery store? Where do you want to eat tonight? What do you want to do this weekend? Most people want a list of options and they want it close by. Unless you really like to drive which is cool too.

So, how do I know if my location has necessary stores and fun nearby things to do?

The best tool I have found for this is WalkScore.com where you can search your location and get a walk, public transit, and bike score for the area. In some cases, they will list the drive score as well.

Here is an example of submitting the address to my beloved Shake Shack in Charlotte, NC. As you can see this is a bustling area and “Walker’s Paradise.”

Screenshot of https://www.walkscore.com for Shake Shack — South End

Population Growth, Income, and Unemployment

Population growth, income, and unemployment are important factors to consider when investing in a location. Population growth can impact appreciation, income can affect rent, home price, and other market attributes, and unemployment is indicative of vacancy rates and evictions. Noticing these trends early can keep you ahead of the market.

So, where can you find this information?

For population growth see census.gov here (cities and towns) and here (counties).

For income, www.USA.com/rank is the best resource I found to get information on Income under “Income and Careers”. Please note that they divide statistics by census blocks.

For the unemployment rate see Tables and Maps Created by BLS : U.S. Bureau of Labor Statistics

Building Permits

Sometimes an area looks dead, but you notice some new buildings in the area. Many times, this is an early sign of a new community and future appreciation. An area with many new building permits is a future hot spot.

So, how do I tell how many new buildings are being built in my chosen location?

An easy way to do this is to use the Census. Excel spreadsheets are available showing building permit counts on a metropolitan level.

Metropolitan Area building permit data from Census.gov

If you want this data on a more granular level (county or zip code) you may be able to find it using the Census API: Key Signup (census.gov).

Wrapping it all up . . .

There are your 8 Data Gems to assess a real estate investment location. As with most things, there are a lot of factors at play in the real estate investment market. We only looked at how to assess a location today and even more goes into assessing individual homes.

What do you think is the most important location attribute? What is the most underrated? What did I miss? Please let me know.

If you enjoyed this, stay tuned for more gems as I build residential real estate investment software and share with you how I’m doing it!