Neal Bawa shares 5 data points for picking U.S. rental markets

Grocapitus CEO Neal Bawa has posted the full version of his free “Location Magic” course, which shows investors how to screen U.S. metros using public data on population, income, home values, crime and jobs. Bawa says the last 12 months of job growth matter most and argues the affordability gap is pushing more investors toward rentals.

Why it matters: - Grocapitus CEO Neal Bawa is trying to make market selection for rental real estate more data-driven and repeatable. - The method relies on free public websites, which lowers the barrier for individual investors to check metros on their own. - Bawa says job growth is the strongest signal because new jobs quickly translate into rent demand and homebuying demand.

What happened: - Bawa, founder and CEO of Grocapitus Investments, posted the full version of his free course, “Location Magic,” along with a written transcript. - The course lays out five tests investors can run on any U.S. metro using the St. Louis Federal Reserve’s FRED site, City-Data.com and the Bureau of Labor Statistics. - The video and transcript are available at the full course.

The details: - The first test is population growth from 2015 to 2024. - Bawa’s 2026 targets are 10.1% for metros of 250,000 to 1 million people, 6% for larger metros and 13% for smaller ones. - Bawa says smaller cities need higher growth because a single employer shutdown can hit them harder. - The second test is median household income growth from 2000 to 2023. - The 2026 target is at least 52.7%. - Bawa says weak income growth can limit rent growth across an entire metro. - The third test is median house or condo value growth from 2000 to 2023. - The 2026 target is at least 92%, and Bawa expects to raise that target above 100% next year. - The fourth test is crime trend, with the latest City-Data crime index below 450. - Bawa says the key is improvement over time, not whether a city starts out high-crime or low-crime. - The fifth test is job growth over the last 12 months. - The normal target is above 1%, but Bawa suggests 0.5% this year because national hiring has been weak. - Bawa says the five-year and 10-year job figures were less useful than the most recent 12 months in tracking rents and home prices. - He says his team found that job gains show up quickly in rent and homebuying demand. - Bawa also says the income needed to buy a typical U.S. home is about $121,000, while median household income is about $84,000. - That leaves a gap of roughly $37,000 that opened in about five years, according to Bawa. - Bawa calls that affordability gap “astonishing.” - The course and spreadsheet are free, and there is no subscription fee.

Between the lines: - Bawa is positioning public data as a way to cut through anecdotal market advice and avoid relying on local hype. - The framework also reflects a broader bet that affordability pressure will keep pushing renters into the multifamily market. - The focus on job growth over longer-term averages suggests Bawa sees housing demand as a near-term labor-market story as much as a long-term demographic one.

What's next: - Bawa expects to raise the median home value growth threshold above 100% next year. - Investors who use the framework can apply it to any metro with publicly available data. - Grocapitus will keep teaching the method through its educational content, including the Multifamily University YouTube channel.

The bottom line: - Bawa’s rule of thumb is simple: if a city is adding jobs, improving economically and getting safer, it is more likely to support rental demand over time.