[quote=Critter]What about the OP’s math? He states he can buy properties where the rent “easily” covers 5% of the purchase price. So, a $500K home would rent for $25K.
What am I missing? Is he talking yearly or monthly… I always thought rent calcs should be figured monthly. [/quote]
I am sure he means annually. Nothing wrong with using annual numbers (I prefer that actually, since you can compare to alternative investments and interest rates more easily).
And in actuality it is more like 6% + for single family homes in central San Diego (e.g. Clairemont or Mira Mesa). That’s today with fixed mortgage rates in the 6-6.5% range. Coastal areas are more like 4-5%
For perspective, in 1996 SFRs in central San Diego (e.g. Clairemont) rented at an equivalent of about 7-7.5% of their value (about $900-$1000 per month on a 150-160K house) At that time fixed mortgage rates were around 8%.
I would expect long-term rates to reach the 7-7.5% range in the current down cycle, so I would expect some more downside in prices resulting in gross rents in the 7% range in central SD. That’s another 10-15% price correction.
