[quote=jpinpb]SDEngineer – thanks for all the info. With the way the economy stands right now, I’m thinking I may go the FHA way – if I do find something I like in my area or that add up/makes sense. [/quote]
I’d still wait if you are buying close to the coast – haven’t seen much there that would make sense.
The rule of thumb we were using was the house price should be no more than 180x the monthly rent (gross rent multiplier) it would bring in (for a 380K place, you should at least be able to rent it for 2100+ – at $1800 a month fair market rent, it’s a GRM of about 210, well above historical ratios still). Preferably lower, 180x is a bit on the high side historically, but manageable (especially with the low rates today). It would be better to get it around or below 150x. Typically, I believe investors look for a 100x-150x gross rent multiplier (lower bounds cash flow immediately, higher bounds largely pay for themselves as long term investment properties).
Ours is new construction, which is usually more expensive to buy (but cheaper for quite a few years to maintain, and will also be more energy efficient as well). Our gross rent multiplier is about 165-175 (depending on whether you count the substantial incentives the builder is throwing in). Still a bit on the high side, but no longer on the ridiculously high side, and given the low rates, we decided it was reasonable to buy at this point.
Two years ago, the GRM on what we are buying would probably have been around 260.
