Re: Rental vs PITI -new investor question. - Posted by Brad (CA)
Posted by Brad (CA) on August 31, 2003 at 02:39:43:
If the cost of owning a home (PITI) is about the same as renting a home (rent payment), then it would stand to reason that more renters would buy houses (especially in areas where people want to live), thus pushing prices higher widening the gap between prices and rent.
In a desireable area (where people want to live), home prices are going to be relatively high as compared to rents. In those areas, appreciation will happen faster while rents will not rise at the same pace.
In lesser desireable areas, home prices tend to stay at the lower range where rental properties may cashflow better, although appreciation may lag. SO, there are pros and cons to both areas and it depends on what your goals are. Best-case scenario would be to get a good deal on a property within a deireable area, then you could get good rents and appreciation.
If what you want is cashflow, then you look at the less expensive areas. If you want appreciation, you may want to focus on more desireable areas.
If you want both appreciation and cashflow than you either get good at finding/creating deals in desireable areas or you use more of a downpayment (traditional way).
This is only meant to be very general. I know there are marginal areas that are still relatively low priced where people want to live.
Either way you may also want to keep intune with market timingas Robert Campbell writes about. That might help to maximize your appreciation in either area.