One of our threads, we posted up the ROE calculator that tells you cap rates, cash flow, cash on cash, tax advantages, etc. for specific properties if you enter what information you know.
The Excel spreadsheet is at the bottom of the thread. Download it, take a look, and you can see specifically what the property can do for you.
I put in the spreadsheet what numbers I look at. Nowadays, I really recommend getting properties that cash flow. Regarding appreciation, you’re buying near the bottom so it’s irrelevant, you’re probably in good enough shape there. The calculator itself assumes a 4% appreciation rate over 10 years, so any appreciation rate above that is gravy.
If you have any questions, post up the property numbers and I’m sure we can shoot it to death… 🙂
Again, try to go for cash flow properties in GOOD neighborhoods. In this economic climate, having the property cash flow eliminates most of the headaches, and allows you to ride out those periods when you have a vacancy. We are probably a couple of years away from those types of properties. The cash flow negative is probably tolerable if your household income is $200k or more. Unless you fall in that category, stay away…
On a personal note, I had a tenant in Mira Mesa leave San Diego because it was getting too expensive here. He had just gotten a new baby and while the old lifestyle made it tolerable, they could not survive long in San Diego. They moved to Texas. Fortunately, they had friends who needed a place and the friends wanted to move in right after they left. I was able to raise the rent a little and basically got no vacancy. That’s the nice thing about a good rental neighborhood like Mira Mesa.
I know that the prices look really good nowadays, especially after being tormented with $500k condos for awhile, but if you are a real estate investor, you really have to wait just a little bit longer. I’m seeing a lot of novices out there right now buying up some properties, but they are I think a little too early. And I’ll admit, I fall into that trap as well when I’m looking at how badly Oceanside prices have crashed. I have to really fight hard to remind myself that, hello, it’s Oceanside (I think the realtors here know the areas I’m referring to in Oceanside…).
Take your time. Look at 20 properties before you decide to buy one.
