I would think the only time

[Jazzman]

I would think the only time to become a landlord in the Bay area was 20 years ago. The rent to price ratio is 20% above it’s historical average, and I’d suspect that is a very conservative number.

Here’s a hypothetical investment analysis. You can argue the variability of some the individual items, but for a home valued at $500k, with a rent of $2,000 a month, the picture may look some thing like this.

Market or Appraised Value”$500,000″
Purchase Price “$500,000”
Initial Equity

Down Payment 10%
Amount Financed “$450,000”
Down Payment Amount “$50,000”
Closing Costs & Fees “$3,500”
Total Cash Investment “$53,500”

Interest Rate (30 yr Fixed) 4%
Debt Service (P&I) Monthly “$2,021”
Debt Service (P&I) Yearly “$24,248”

Monthly Rent (GSI) “$2,000”
Annual Property Tax “$5,000”
Annual Utilities “$200”
Annual Landscaping “$500”
Annual Insurance Premium “$600”

Vacancy Rate (% of GSI) 8%
Maintenance Rate (% of GSI) 5%
Property Mgmt Rate (% of GSI) 8%

Gross Scheduled Income (GSI) “$24,000”
Less Vacancy Amount “$(1,999)”
Gross Operating Income (GOI) “$22,001”

Annual Operating Expenses
Property Management “$(1,760)”
Annual Property Taxes “$(5,000)”
Annual Utilities “$200)”
Annual Landscaping “$(500)”
Annual Insurance Premium “$(600)”
Repairs & Maintenance “$(1,100)”
Total Operating Expenses “$(9,160)”

Net Operating Income “$12,841”
Less Debt Service “$(24,248)”
Before-Tax Cash Flow (BTCF) “$(11,408)”

Cash-On-Cash ROI -21.32%

Last two years price increases make investing a challenge now even in places like Las Vegas, where prices corrected by 60%, which is twice the drop of metropolitan CA.