Robert Loftus

Ann, when your looking at real estate investment and considering rental rates you need to consider several factors:

1. Your annual cost of ownership, including mortgage, taxes, utilities and upkeep

2. The going rental rate for properties in the area where you will be purchasing a home. This is calculated in $/sf/Month, and if you aren't going to see at least three times your principle investment over the life of a 360 installment mortgage then you aren't likely to garner enough income to adequately maintain the property and still realize a profit.

3. In most real estate markets (Excepting NYC, Silicon Valley and other extremely over-valued markets) it gets rather difficult to find tenants when you're charging more than 1.30/sf/mo for long-term middle-class residential property. That 1.30/sf/mo figure is obviously different for luxury properties and vacation rentals. The equation I like states that in a realistic real estate market your purchasing options are typically limited to [1.30/sf/mo x 12mos/yr x 30 yrs] / 3.

The figures I've given you are based on my own estimation of the Bradenton/Sarasota market and any real estate agent you speak to in the area is likely to tell you the market there is still hot and your being ridiculous for sticking to such low numbers. Just remember to stick to your guns, play hardball and don't make your move until you smell blood in the water. - Sun May 4 2008, 19:07