A question posed: "Does it matter how many properties in my chosen investment property location are rented?" I call this 'rental density'.
An interesting question this one. Rental density is relevant of course, however interpreting the results can also be tricky, or at least misleading at times.
For example, when we go to one of those large shopping centres like Westfield, notice how the food retailers are all are all grouped together in the food court. Let alone various shops that all seem to sell similar things - shoes, clothes, etc. It is done like this for a reason - it brings buyers together in one place and the fact that they could have a burger or tapas for lunch does not deter these food providers from setting up shop next to each other, as there should be enough demand for every taste. Too many, or rather too many directly competing outlets would be a problem and we rarely see two versions of the same retailer in the same shopping centre. So, this tells us that concentration can be good but over-saturation will be bad in general terms. It also tells us about differentiation and that some competition is actually a good thing, as long as there is something different about our offering.
Anyway, I digress...in relation to property we are most interested in rental demand, so that we can be confident that we will rent our property quickly and with few voids - this means buying in areas where there are lots of people, with lots of jobs, all well-connected and served by plenty of amenities. However, we are also interested in rental supply, to check how much competition there is. Some towns and cities have high rental density already - parts of London and Brighton are two that spring to mind. Some areas have low rental density like Lincolnshire (but I imagine the city of Lincoln will be higher due to the Uni). I don't have data by town / city but this tool could help at a top level. I also use PropertyWizza to look at an area and if we click through to the Neighbourhood Statistics section it will give the local borough stats including rental %, which is more granular.
However, I find that the easiest way to see other rental properties in a specific area is to use a property portal like Rightmove or Zoopla and search within a certain radius of the target property postcode. Admittedly, this will only show properties on or recently on the market but it will give a general picture of current supply and demand levels. If we switch between searching, including or excluding 'let agreed' properties, we will get a picture of the current strength of the rental market (check the sale market also as an indicator of the house sale market and to get a view on potential price negotiation strength). High % of let agreed of the total (or low % of available to rent) would suggest strong demand and vice versa.
We can also look at the average time to let figures. I use Zoopla for this and it gives me a great snapshot of the fluidity of the market. You see, it does not matter so much if the rental density is 20% or 50% (well maybe at the extremes it does...) but it matters more if there are lots of empty properties hanging around to compete with mine when I come to let.
Finally, consider the target tenant group - so if we are letting to families or professionals in a University town then the total rental figures could be misleading - that's why it is better to search based on set criteria rather than on a blanket basis.
Don't forget the point about being a bit different - this can be in the form of decor, like a feature wall or floor coverings or it could be in accepting pets for example...something that makes our property more appealing. However, the most appealing rental properties are always going to be the ones best located for what the tenant needs on a daily basis: jobs, transport, schools and amenities.
This is just a quick overview of testing whether or not a particular rental area is likely to be overcrowded with fellow landlord investors or not. It provides us with a snapshot view rather than a trending perspective over time and so is not the only way of looking at things. At least it helps us to understand how rental density can be a factor in the near-term when considering a potential rental location.