Posted by Rich-CA on May 20, 2007 at 13:00:13:
First, the disclaimers. I was looking at OkC about 9 months ago, and we know how fast some areas went south once the sub prime lenders retrenched or disappeared. So your info may be better than mine.
I have a general rule of thumb regarding deciding where to spend my time. The closer the monthly rent gets to 1% of the purchase price per month at 20% down, the more likely I am to spend time looking at the market. As of 9 months ago, I was seeing rents in that target range for OkC.
I am working a strategy that assumes a certain equilibrium level for housing prices as they relate to household income (the exact formula I am using I developed and is proprietary). It represents the supply/demand balance in housing prices. Target markets are ones where the housing prices are below the equilibrium point (under valued) and the rents net out the holding costs (positive cash flow).
As a rule, once appreciation starts. the rents start to drop because the source of new buyers is from the “top end” of the rental market. The new equilibrium level SFH are not cash flow positive for new purchases and some borderline purchases may slip from positive to negative.
When I evaluated OkC, it was one of those markets with undervalued housing. I would suggest current research as these things are in flux at all time.
The problem I have with “getting in” on the latest fasted growing markets is that this is a game of musical chairs and you don’t want to be the one left standing when the music stops. The idea is to locate a place likely (as much as anyone can predict the future) to be a place where the music is about to start.