HLS, you stated earlier that you multiply the monthly rent a place would rent for by 125 and that is the real value of the property. What is the rational behind that?
If you multiply the current rents in this area, you get a number that is WAY lower than anything in this area. Like 50% reduction from todays prices.
DWC, it's just a common sense generalization. I'm not saying that values will drop 50% further, but they could.
If looking for a reasonable investment that will pencil out, without needing appreciation to have it make sense, it's just a rough number.
There are plenty of places in the country where you can buy for closer to 100X monthly rent, esp multi units.
If I buy as an investment, I would like to see a return on my investment, not something that I need to support every month with additional cash.
It's also a generalization that if monthly rent is less than the price of the property divided by 150, you are better off renting, financially speaking.
To me, the reasonable rent in an area determines the true value of the property; the price of the property doesn't determine the reasonable rent.
There is a big difference between price and value.
