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When I first got started in real estate, I realized that if I was going to make a strong enough return on investment, I needed to invest outside the state of California. I started looking into other markets, like Memphis, TN and Birmingham, AL, due to their history of price stability and high rent-to-price ratio.
Once I realized the great potential these markets offer, I spent countless hours flying back and forth between Los Angeles and these southern cities in order to build relationships with real property management teams on the ground and gain a solid understanding of each neighborhood.
You see, in each market, the degree of risk can vary greatly from street to street. One street can have nice houses where the owners have a strong pride of ownership, and the next block over can have vandalism everywhere and broken down cars in the yards.
To get an idea of what your property might rent for and the risks associated with the address, you could use Rent-O-Meter.com as a rent estimator, but this index is not very reliable. The other option is to call a property manager in the area and hope you find one that knows what he is talking about.
The truth is, if you really wanted to get a clear idea of the risks of a particular address, there hasn’t been an accurate rent estimation tool out there.
That is…until now.
Cash Flow Connections is proud to announce its partnership with Rent Fax Pro, the makers of the leading real estate analytics and rent estimation software. Over the last ten years, Rent Fax Pro has compiled data from asset teams, real estate investors, rehabbers, property managers, and even insurance companies to create the most inclusive real estate investment profitability index in the world.
The application analyzes more than 400 data points including…
- Population Density
- Unit Structure Type
- Ownership Percentage
- Housing Stability
- Per Capita Income
- Unemployment Rate
- Property Crime
- Violent Crime
- Commute Distance
Once this data is compiled, the information is then processed by Rent Fax Pro’s unique algorithm, which has been verified by historical performance data gathered from 1- to 4-unit and single-family non-owner-occupied investments.
The algorithm then assigns the specified geographic location a number based on the expected income generation of a residential real estate property (the higher the number, the less risky the investment). The index gives you the ability to compare states, counties, cities, zip codes, and even blocks. This information can be extremely helpful when selecting properties in faraway markets.
The primary attributes of an area that Rent Fax Pro predicts are:
- Risk of the Location
- Rent Estimator–Rent Comparable Development Schedule
- Vacancy and Credit Loss
- Maintenance and Repairs
- Analytical Probability Simulation
With this data, you’ll have an objective idea of how well your prospective property will perform, prior to making any decisions.
So, does it work?
The answer is a resounding YES. Many seasoned real estate investors agree with the projections of Rent Fax Pro and find the index to be extremely accurate, even capable of accounting for differences on a street-by-street basis.
I have driven through multiple markets with the Rent Fax Pro “heat map” by my side and have found it to be incredibly accurate. The subtle variations between streets, which the index picks up on, will give you a very in-depth look at the risks associated with the property you are considering.
This index will quickly become a necessary tool for the real estate industry, especially for those who look for investments far from home.