[quote=EconProf]Some observations about your guestimates:
The price to rent ratio looks awfully optimistic. Are you sure you can get that high a rent on a $150,000 property?
Landlord insurance looks way high. If it is a condo, why do you need insurance at all?
Property tax will be at least 1.2% of value, or $150/mo.
If your mortgage payment is $600/mo, at least $100 of that will be principal payoff, which is a form of forced savings, or, actually, income, just not cash income.
Glad to see you factored in vacancy cost, repairs, and misc, and put them on a monthly basis, even though they happen infrequently. Many beginners overlook these expenses.
As flu suggests, the long run is what counts, and it depends mainly on the rate of appreciation of the property. The big money in rental real estate is historically made, or lost, due to property values changing over time, not cash flow.[/quote]
I was really pointing out what rent would be needed to cash flow, rather than is achievable. All the other numbers are guestimates as well, but give some idea of what to look for. You definitely need insurance which covers you for liability. The other question is risk and return. The lower the end of the market, the higher the return, but risks increase. Homes are also often older and can swallow a years net income with just one capital expense. I personally have not invested in CA, because I’ve never been able to find my benchmark cap rate. You might have been able to on the court house steps a few years back.
