Was trying to calculate if a house on sale for $200K with 1300 in rental income would make sense. Basic calculation showed it possibly will- The Buy to rent Ratio is 13 a little less than break even point.

The attached  excel sheet contains ratio for $200K and $500K house – http://spreadsheets.google.com/ccc?key=pXHHXgTvPZ5dqM-OuZXL1XA

Throughout the 1970s, ’80s and ’90s, the average rent ratio nationwide hovered between 10 and 14. In the last few years, though, it broke through that historical range and hit almost 19 by the time the housing market peaked, in 2006.

Courtesy : http://www.nytimes.com/2008/05/28/business/28leonhardt.html

Also the big picture gives some interesting food for thought http://bigpicture.typepad.com/comments/2008/05/housing-price-t.html

Now the interesting question is that in the current financial market does putting $200K make sense or will the housing prices continue to fall further …

Case Study : Hayward, CA

  • Rental Prices Jan 2008
  • rent.com Average Rental price $15000 (2bed/2bath)
  • craigslist.com Average Rental price $1250 to $1700  (2bed/2bath) mean ~1400

Other things to look into

  • proximity to Bart