Jmail, thanks for returning to the thread, It is nice to know that the consumer who posed the question returned to Trulia to look at the opinions that the pro' are giving. As you can see, 4 realtors answered with four different opinions.
My opinion of question #3: I think the bottom of the market has been reached. However, since the reporting of reported closed sales is published in the mainstream media weeks and sometimes months after the offers are written and negotiated, you will see reports that the market is continuing to slide because values continued to drop as we ended the year and began this one. Volume of sales has already started to pick up, and I do expect it will pick up in volume a little bit more in the sprig time. Prices however will be not be shooting up this year. I venture this opinion because I believe there is a lot of inventory that will come on to the market as prices stabilize, keeping supply adequate for the increased demand. The long term hold is the best strategy. I vote "stabilizing:
Question #2: You answered "easiest to rent out" yourself. Good schools, nicely kept nieghborhoods. These are going to be the towns and zip codes where the median prices exceed $200,000. These are the towns and neighborhoods where the investor competes with owner occupant buyers for the clean desirable houses. Funny thing....if you pay $300,000 for a 1500 square foot 3 bedroom 2 bath house with a two car garage. you cannot possibly collect as much rent as you can collect if you buy two $150,000 houses of the same size and attributes in a less desirable neighborhood.
The easiest house to rent out would be a $300K house as I described in a better neighborhood of a town like Roseville, Rocklin, Elk Grove, Mather or Sacto 95864, 95825, or 95821 - Maybe get about $1800 a month for it.
But if you do that, don't be jealous of local guys like me who braves the termites, the dry rot, the weeds, and peeling paint in the low income neighborhood, buys 4 houses for the $300K in 95838, fixes them, and collects twice as much rent in the poorer neighborhood.
It is OK for you to make the conscious decision to make the trade off of a lower return on your investment in exchange for peace of mind about the location and condition of the property, and lower repair and maintenance costs.
Answering question #1 would require some sort of survey to get you more than anecdotal information from individual agents, teams, and firms. The MLS does not have a field to search the owner occupancy status of recent sales. Realist county property tax site does have an owner occupant field so the answer could be obtained with a few hours of research. - If someone has the time to do that I think the answer would be interesting.
I suspect that it would be the low income zip codes where an investor can purchase with cash and earn 7 to 9% cash on cash. Or leverage with 25% or more down and have approximately the same percentage return on the cash invested.
The type of investment that I would reccomend for you (emphasizing clean, safe, desirable neighborhood as more important than profit) would have only about a 4 to 5% return for a cash on cash investor and by leveraging with 20 to 25% you would earn you only about 1 to 2 % return** on your down payment. You would however enjoy other benefits such as future appreciation, reduction of principal balance on your mortgage balance, income tax benefits. etcetera.
In my opinion, the appreciation alone on a five year + hold strategy justifies the nice neighborhood purchase tactic , even if cash flow is only break even.
**The reason for this is that if you pay the bank 6% for your mortgaqge loan, and you are earning only 5% on the money you borrow, then that extra percent of interest expense comes out of your profit. Leveraging only increases your profit when your return on the borrowed money exceeds the cost of the borrowed money.
If you are willing to settle for a break even or small negative cash flow projection, the nice neighborhood strategy works well. Do not be taken in by any dreamer who claims you can buy into one of these middle to high end neighborhoods with only 20% down and still have a reliable positve cash flow. Someone who tells you it can be done, would be sweet talking you, telling you what you want to hear, instead of the truth, in order to be chosen as your agent. They would have to switch the story to explain the income tax benefits, principal accumulation and future appreciation to justify the negative cash flow after you became a client.
Like I said, these benefits can justify the investment, but you need to know this coming through the front door.