The numbers I like to look at tend to vary because everyone has different situations, but here are the basics:
a) ROE > 20%
(some people will be happy with a 15% ROE if they want to play it safe, but I have a 30 year window so I look for more). ROE dramatically increases however the less downpayment you have…
b) Cash on cash > Interest Rate + 3%
If your downpayment is borrowed money, the biggest the cash on cash the better. However, if you are using actual cash, you do have a bit more leeway but it is recommended to at least consider this value into account (the theory being that if you deposit the downpayment into a bank and get 3% interest, your real estate investment should do better than that).
c) Cash flows or breaks even
d) Per Unit cost < $175k
This rule tends to disquality most properties in California.
There have been a few properties I've seen in San Diego that are close to cash flowing, but they are in historically bad areas and I've been better properties in other locations.
When investing in real estate, you have to look at your personal situation and decide what your priorities are. If you have a wife or family, you need to make sure your property cash flows a sufficient amount so as not to impact the family finances. If you are a high income individual or family, your real estate investment can break even or even be negative cash flowing so that you can save on taxes.
