How to Analyze Rental Properties
I want to show you how I find properties that aren't listed for sale.
Do this at your own risk.
Some people say you should, some people say you shouldn't…
What's up everybody, it's Lili Thompson.
I’m a real estate investor documenting my journey to financial freedom through real estate.
Today I'm going to show you how I research properties by finding different things like owner contact information, tax information, blueprints of the properties, and more.
The first thing I want to tell you about is realtor.com.
Let's just imagine we're looking for a property in Phoenix, Arizona.
Although I use Zillow for most of my MLS research, I do like one thing on realtor.com, which is that you can search by property type.
So if you're looking for a multi-family property because you're wanting to house hack, then realtor.com might be a good place for you because you can find them right there right at the top of the screen.
I'm going to go over some of the things that I do on Zillow and we're going to look here in the city where I’m investing.
If you're investing in an area where there are a lot of multi-family properties, then realtor.com's filter might be good enough for you.
I've talked to a lot of people that say their area either doesn't have a lot of multi-family properties in it, or all of the multi-family properties are never for sale.
So if that's the case that you're in, one thing you can do is start looking for creative opportunities to house hack.
On Zillow, if you go to the “More” tab, you can scroll down to keywords and I'm going to search for “garage apartment,” because if there's a property with a garage apartment, that is just as good for you to house hack as a duplex.
You can live in the main house and rent out the garage apartment.
Or, if you're like me, live in the garage apartment and rent out the house and make as much income as you can off of that property.
So this is a property with a garage apartment that I found. Recently it's for sale for $220,000 and it says that the fourth bedroom has been converted.
It can be an in-law suite with a private bathroom, office, man cave, another bedroom, or a garage apartment.
Here’s some of the things that I like to look at on Zillow to get an idea about this property.
First, I like to expand to see more facts and features.
I like to scroll all the way down to see data sources, and from there I like to click on the county website.
Luckily, my city has a great county assessor's website that gives a ton of different information.
This is public information, so for the properties that you're looking at there is a county website often linked to Zillow that can take you to more information about that exact property.
Some of the things I like to look up are the tax information so I can see how much the taxes were on that property last year.
That's going to help me run my numbers by giving me specifics on how much I'll have to pay in taxes if I purchase this property.
I can also scroll down and see the tax details so I can see what percentage I'm paying every year to different categories.
I can see the city library, emergency medical services, the community college, local schools, etc. I can see the breakdown of where the taxes are going.
Another great thing I can see is the land value versus the home value.
For this property, you can see right here that the land value is around $32,000 and they've got the house value listed at $121,000.
What I’ve found is that this fair cash or market value is often far below what the housing is actually going for on the open market.
That's just because the city isn't necessarily interested in real estate in the same way that a consumer is interested in purchasing real estate.
So I don't take this number and say “Oh my goodness, this is so much below what they're selling it for, and it's automatically a bad deal.”
This is good information to have and I may base some of my numbers off of this, but I want to make sure that I run my numbers and see if it's a good deal for me in terms of cash flow and in terms of return on investment.
Another great thing is that you can actually see the owner's name and the owner's mailing address. That can be really useful if you're trying to contact this seller or if you're having trouble getting through to their real estate agent or something like that.
Going further, you can see the improvements, property type, the condition, the year built, the square footage, and number of stories.
I can understand what the foundation is built of, the exterior, the roof composition, and more.
Another great thing you can see is the previous sales.
I know that the person who's selling this house bought this house in 1998, and I can see how much they purchased it for.
That can be really useful when you're negotiating, to know what someone purchased the house for. You can use that to kind of set the price that you're offering.
The last thing that I like to look at are the blueprints of the property.
I can see the dimensions of the property as well as that attached garage apartment, and this can be really useful to get a layout for what the property looks like.
Zillow often doesn't have blueprints, so those are kind of some of the things I can see on this first page.
I can also go a little bit deeper and look at similar properties. Based on this subject property, I can see recent sales of properties that were similar.
This is obviously helpful when you're making an offer.
Imagine if the house next door has the same bedroom, bathroom, year built, and makeup as the one you're looking at, and sold for a hundred thousand dollars. Well, if the seller's trying to sell theirs for $250,000, you can get that information all in one place.
One other thing that I like to do on Zillow is see the price history, not just for what the property has sold for, but what it's been listed for and how that has changed.
I can see that this property is at $220,000 right now, but they've been dropping it this entire month.
It started out at $229,990, then went to $224,900. So I can scroll back and see that this was actually a pending sale back in August of 2019 for $229,990.
Then something happened to put this property back on the market. That would signal me to ask the seller or ask the realtor why that initial deal fell through.
You never know. Did that other buyer do their home inspection and find termites or find some damage that they didn't want to deal with and they walked away?
You can never guarantee that that seller is going to be completely honest with you, but it doesn't hurt to have this information and to ask.
It also shows you what they wanted to sell the property for.
We can see that $234,900 was the highest they ever had this property listed for. That was back in June of 2019, and it's come down to $220,000.
Maybe the seller really needs to get this property off their hands, and that's why they keep dropping the price.
It's just great information to have.
Another thing that I like to look at is this map view. I like to go to lot lines, and this is super useful for a couple of reasons.
I can see the property we're looking at right here for $220,000 and I can see the Zillow estimate of what the homes around that property are worth.
I can see that the one next door is estimated as being worth $199,174. I can also see these red dots are properties that are for sale in the area right now.
So ours is kind of right in the middle of those two. I can also look at the yellow dots which are recent sales.
So this neighborhood has a lot of homes that are selling recently, and that may be a good thing. Depending on where you're looking, that may be a bad thing.
If there were any purple dots, that means rental properties.
If you're looking at this property as an investment property, it may not be the best neighborhood because it doesn't look like there are many rental properties here.
So the next thing I want to show you is how I find properties that aren't listed for sale.
Do this at your own risk. Some people say you should, some people say you shouldn't.
I have actually found success with this method, I'll explain that in a little bit.
Basically, what I do is I pick a city. So let's go again with Phoenix, Arizona.
Rather than looking for properties that are for sale, I look at rental properties.
Then I come down and I search for the type of property that I'm interested in. So let's say duplex.
As I look at duplexes, I can see there's a cluster of duplexes here near the actual city center of Phoenix.
I'm just gonna look and see if this would be a property that I would be interested in purchasing.
What's awesome about rental properties is that they have the owner or the property manager's contact info literally right there in the listing.
So I could call up this property owner, and I've done this before, and I've said:
“Hi my name is so-and-so, I'm looking to move. I'm looking for a place to live and I came across your rental listing for a duplex at 123 main street. I'm wondering if you would be interested in selling it rather than renting it?”
Sometimes this works, sometimes they say absolutely not and hang up on you. That's just the risk that you're taking.
But when I was looking for my duplex, I did this for a lot of the rental properties in my city because there weren't a lot of duplexes on the market for sale. But there were substantially more for rent.
What I found was that oftentimes these property owners are dealing with a vacancy because the listing is up there for rent.
So you know that they don't have income coming in for that unit, and sometimes they're tired of dealing with tenants. And they're just kind of putting it up for rent hoping that they get a good one.
And they may entertain you like “Yeah, what are you willing to buy it from me for?”
That can start a conversation for you to invest in a property that wasn't even for sale.
This is a great way to look and see if you can find some rental properties in your area.
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So, now that you've gotten an intro to analyzing rental properties, are you ready to start?
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