In real estate investing, rental data is such a necessity that any investor will go to any length to access the latest information.
Table of Contents
- Using Rental Data to Find the Right Investment Property for You
- Using Rental Data to Your Advantage
- Wrapping It Up
Any real estate investor worth their salt knows how stats and information used to be a hit-or-miss thing in the past. Gathering accurate information and data, especially for out-of-state investments, was pretty hard to accomplish unless you possess enough time and money to make several trips to do your own research.
Today, with the use of technology, acquiring the necessary rental market data for income property investments is a lot easier and more efficient. However, getting data is one thing; knowing how to use it is another. What should an investor do with the traditional or short term rental data? How does it figure into real estate investing?
Using Rental Data to Find the Right Investment Property for You
In this blog, we will talk about rental data, its importance to real estate investors, where to find them, and most importantly, how to put them to use for investors to make wise decisions.
Defining Rental Data
Most real estate investors look for investment properties that don’t cost an arm and a leg but will also give them a decent enough profit to generate a good cash flow. It is not dependent on whether they intend to rent the property out as a traditional or vacation rental or plan to invest and fix and flip houses. The goal of each investor is to make a good return on investment.
For them to achieve their investment goals, they need to perform extensive due diligence so they can make accurate projections and computations. Making sure the math checks out is vital to any investment venture, especially in real estate, where big money is involved.
While there are several ways of investing in real estate, one of the most popular options investors take is rental properties. And one of the ways to ensure a good ROI for rental property investments is to have the correct rental data on hand.
Rental data is simply important information about rental properties that give investors an idea of a specific property’s profitability. It includes, but is not limited to, the following information:
- Number of market listings
- Monthly rental income
- Average cash on cash return
- Average cap rate
- Average occupancy/vacancy rate
When considering starting a rental property business, regardless of whether it’s a traditional rental or an Airbnb business, investors need to take all of this data into consideration.
Related: How to Calculate ROI on Rental Property: The 2022 Guide
Rental Analysis: What Is It?
Acquiring data is just one of the many steps necessary to complete a good feasibility analysis on one property. Once you have the information on hand, you need to make sure that the numbers align with your criteria and investment goals. This is what rental analysis is all about.
A rental analysis takes whatever data and statistics you have and cross-checking each of them against your ideal projections to see whether a property is worth paying for or not.
The thing about rental analysis is that it is a very taxing and exhausting process that takes too much time and effort to spend on just one property. Now imagine just how long the process will be if you’re actually considering several properties. You need to analyze each property so you can narrow down your choices to the best option that you can afford.
Fortunately, a website like Mashvisor exists. One of the main reasons for its existence is to help real estate investors perform highly efficient real estate analysis in a fraction of the time. It offers users several tools that make analyzing traditional and vacation rental data a smoother process.
For instance, if an investor is considering buying an investment property in New Braunfels, TX, all they need to do is enter the location in the search field. Search results for available rental properties will show up on the page. You can navigate through the different tabs and filters to find out the important long term and short term rental market data in New Braunfels.
Here are the most recent traditional and vacation rental market data from Mashvisor’s massive database:
New Braunfels, TX
- Number of Listings for Sale: 347
- Median Property Price: $584,878
- Average Price per Square Foot: $252
- Days on Market: 96
- Number of Traditional Listings: 720
- Monthly Traditional Rental Income: $1,692
- Traditional Cash on Cash Return: 0.73%
- Traditional Cap Rate: 0.75%
- Price to Rent Ratio: 29 (high)
- Number of Airbnb Listings: 361
- Monthly Airbnb Rental Income: $4,945
- Airbnb Cash on Cash Return: 5.37%
- Airbnb Cap Rate: 5.47%
- Airbnb Daily Rate: $261
- Airbnb Occupancy Rate: 48%
- Walk Score: 74
Based on these numbers, investors already get an idea of whether investing in New Braunfels is good for them or not. The main determining factor is the investor’s goals and how the market’s performance fits them.
We will go into further detail about each of the numbers in a bit.
To start looking for and analyzing the best investment properties in your city and neighborhood of choice, click here.
The Benefits of Rental Data to Real Estate Investors
We cannot stress enough how beneficial rental data is to real estate investors and entrepreneurs looking to start a rental property business. For those wondering how to invest in real estate, know as early as now that you should never get into the rental property business without the information and data required to perform accurate investment property analysis.
Obtaining all the necessary data will give you a better understanding and insight into the market you’re considering. Gone are the days of estimating rental rates manually. When done the old school way, landlords tend to either overestimate or underestimate their properties’ rental value. Rental data analysis gives them market-accurate figures that allow them to come up with competitive prices. Doing it results in higher chances of occupancy, which leads to more reliable income.
Rental data also gives investors an idea of whether a particular location is worth investing in or not. Let’s look at the New Braunfels, TX market again. Depending on their goals, investors might have different feelings about this particular location. The low cash on cash return and cap rate for traditional rentals will definitely not sit well with investors looking to rent a property out for more extended periods. On the other hand, the very good cash on cash return and cap rate on Airbnb properties make it a good market to start short-term rentals.
On top of the conventional data that affect rental prices, several non-conventional variables also affect rental rates in a particular market. Things such as walk score, access to public amenities (hospitals, parks, schools, restaurants, public transportation, etc.), and even Yelp business reviews have a direct impact on the rental rates of a given market.
Advanced rental data analytics can also point investors to currently undervalued properties that have very high income-generating potential.
Whether you’re a real estate investor, a property manager, or an agent, being able to access accurate rental data is something that you would want to get your hands on. The information you gather will prove to be invaluable to your decision-making later on.
Where Does One Get Rental Data?
The question now is, where does one get reliable rental data that’s highly accurate?
If people from before did things the hard (and most often, inaccurate) way, there’s no excuse for investors today. Rental data can now be acquired easily online through real estate websites like Mashvisor. While you can still go out for a drive to look at several rental properties in your area, it will cost you a little more extra money and time to do. On the other hand, online real estate marketplaces already provide lots of the information you will need to make an informed decision.
One of the best ways to go about traditional and Airbnb rental data acquisition is to go to Mashvisor and access its updated database that covers almost all real estate markets across all 50 states. Subscribers are given access not just to the site’s massive database but to its different investing tools, such as the real estate heatmap and rental property calculator, to make investing quicker and more efficient.
To learn more about how Mashvisor can help you find lucrative investment properties, schedule a demo.
Related: The 2022 Guide to Using Heatmap Analysis to Identify Areas for Rental Investment
Using Rental Data to Your Advantage
Now that we know where to look for the most up-to-date information and data, what do they all mean? How can an investor use this knowledge to their advantage?
Interpretation of data is quite critical when it comes to data analysis. The more you understand what a certain statistic represents, the more you understand the market conditions and how they will affect your future investment.
While the median property price, the average price per square foot, and days on market are all important in the grand scheme of things, specific traditional and Airbnb rental data play a role to play in determining whether a property is suitable for investing or not.
The following section breaks down the different factors investors need to look for when considering rental properties in any given market. The terms already speak for themselves, but for the following breakdowns, we will use the latest Mashvisor data on New Braunfels, TX, as our example of interpreting data.
Traditional Rental Data
Below are the things investors need to know if they’re considering going the traditional rental route:
Number of Traditional Rental Listings
The number of traditional rental listings in an area indicates how many long-term rentals are publicly listed and available. In this instance, there are 720 available listings in New Braunfels, according to Mashvisor. It means that there’s plenty of competition in this small Texas town.
Investors also need to consider how much competition they will be facing if they are to proceed. The high number of available traditional rental properties can mean either a low demand for long-term rentals or a slight overabundance in supply.
Monthly Traditional Rental Income
The monthly traditional rental income is basically what a landlord makes monthly from renting out a property long-term. New Braunfels’ monthly rental income of $1,692 is close to the average national rental rate. It makes renting a house in the town affordable to the average American.
Traditional Cash on Cash Return
Cash on cash return is one of the determiners used by investors to project their ROI. Cash on cash return is just your annual pre-tax cash flow divided by the amount of cash invested on the property. Experts and industry professionals all agree that healthy cash on cash return is between 8% and 12%. However, realistically speaking, such deals are few and far between. So cash on cash return that is 1.0% and above is already considered good.
In this case, New Braunfels traditional rentals only gain a 0.73% cash on cash return. Perhaps, it is brought about by the overabundance of rental inventory. Getting into a long-term rental business in the town now might not be as lucrative as one would expect.
Traditional Cap Rate
Cap rate is another metric investors look at to determine profitability. The main difference between a cap rate and cash on cash return is that with a cap rate, the NOI is divided by the property’s market value and not the total amount of cash invested.
The cap rate for traditional rentals in this Texan town is a low 0.75%, which makes plenty of sense given that cap rates and cash on cash return rates aren’t that far off from each other. If the cash on cash rate for New Braunfels implies that investing in traditional rentals is a bit risky at this time, the cap rate pretty much confirms it.
Price to Rent Ratio
A price to rent ratio is a metric used by real estate professionals and investors to see if it’s better to buy a property in a neighborhood or just rent out one. It is divided into three categories:
- Low score of 15 and below – It means that property prices are lower compared to rental rates, which means it is better to just buy than rent.
- Medium score of 16 to 20 – It indicates that there is a healthy balance of property and rental prices in the market. Rental demand and profitability are both moderate, which means that whether people decide to rent or buy doesn’t make that huge a difference to an investor.
- High score of 21 and above – It implies that housing affordability is a huge challenge, and it makes more sense to rent out in markets like this than to buy a house.
In New Braunfels’ case, its price to rent ratio is a high 29, which means people are most likely in the market looking for property to rent.
Airbnb Rental Data
Investors who are thinking of getting properties and getting them listed on Airbnb and other similar platforms should know the following market data:
Number of Airbnb Rental Listings
Similar to traditional listings, it shows the number of available rental properties listed on Airbnb. And while 361 New Braunfels Airbnb listings may seem a lot, it is a healthy number based on the size of the town and what it can offer tourists and visitors.
New Braunfels is conveniently located between San Antonio and Austin, which makes it a desirable location for tourists and visitors who have a business to take care of in both large cities. Thousands of people flock to New Braunfels yearly and there is no shortage of visitors, especially with the lifting of COVID-19 travel restrictions. Adding one more New Braunfels vacation rental property on Airbnb might actually be a good thing for the town’s economy.
Monthly Airbnb Rental Income
In most cases, the average monthly Airbnb rental income is quite larger than the average traditional rental income. It is quite evident in New Braunfels as the latest data shows that Airbnb owners get about $4,945 monthly. While it may be more than twice what traditional rental landlords are getting, one of the downsides is that Airbnb income still depends on the occupancy/vacancy rate.
Airbnb Cash on Cash Return
Airbnb cash on cash return rate is quite similar to its counterpart, only that it is computed for vacation rental properties. The same set of standards is used for Airbnb cash on cash return. Given that New Braunfels offers a 5.37% cash on cash return rate tells investors that it is a very healthy market for short-term rental investments.
Airbnb Cap Rate
Similarly, the New Braunfels Airbnb cap rate of 5.47% confirms that the place is, indeed, a good location to set up a short-term rental business.
Airbnb Daily Rate
Unlike traditional rentals, Airbnb can be rented out on a per-day basis, depending on the guest’s needs. The daily rate, coupled with the occupancy rate, will ultimately determine the average monthly rental rate for an Airbnb host. According to Mashvisor, the latest average Airbnb daily rate in New Braunfels is a very reasonable $261.
Airbnb Occupancy Rate
Occupancy rate will make or break a vacation rental business. A low occupancy/high vacancy rate means that the Airbnb host will most likely lose more money maintaining the property. On the other hand, a high occupancy/low vacancy rate means that the rental property is generating enough positive revenue to take care of itself and give the owner a decent profit. The higher the occupancy rate, the better the monthly rental income will be.
New Braunfels Airbnb properties show an average occupancy rate of 48%, just a couple of points shy of 50%, which still makes for a decent number. Airbnb occupancy rates tend to vary depending on the season.
Related: Top 10 Tips to Buy a Rental Property for Sale
Wrapping It Up
Now that we’ve talked about the importance of rental data and how to apply it to your investment decision, it is also important for investors to obtain the right investment tools. A website like Mashvisor not only provides a massive database filled with highly accurate data but also a wide array of investing tools that make the process simpler and easier.
To get access to our real estate investment tools, click here to sign up for a 7-day free trial of Mashvisor today, followed by 15% off for life.