esmith,
I dont mean to seem like I am disagreing with you all the time. You just seem to have a more bullish sentement on rents than I do. I agree that rents will create a floor underhousing. I just think that using the highest rent in the area to justify pricing isnt gonna pan out. Using your same numbers, but tying to the lower range of the rent scale I get a purchase price of $245000. Requiring a reduction of 25% on current 330000 listings.
This is right in the middle of the range of rents right now and doesnt include upkeep costs, homeowners insurance, any managment or advertising fees, or rent loss due to turnover. The cost of capital on 12000 isnt much, so forget that.
Plus the argument that rents rise, so long term it is a good investment is a hard sell on me. Sure over 30 years it will turn cash positive, but that still doesnt make it a good investment. Most any non retarded or high risk investment over 30 years will make a return. Plus in the time frame we are talking about, 1-5 years, who says rents go up?
