I’m looking to purchase a residential property that will provide me with the greatest return on my investment through a combination of rental income and price appreciation. I do not have any geographical preferences and am willing to hold on to my property for at least 10 years. I looked at the rent vs buy index on trulia (link below) and at first glance it might seem like the best plan is to invest in properties with the lowest price to rent ratios or conversely the highest rent to price ratios in places like San Antonio, Texas for example. Although price to rent ratios may be a good indicator of how much return I will earn from the rental income, it doesn’t not take into account the potential return I can earn from price appreciation in those areas. What areas do you think offer the highest absolute return?
Also, what type of properties generate the highest returns? Studio, 1bdr, 2bdr, apts, houses, etc? I’m 28 and have no experience in the real estate sector. Your feedback is greatly appreciated. Thank you
I frequent another forum and there’s a dedicated real estate thread there. The guy spex_x probably answered over 100 different questions in detailed length.
You will learn a lot reading through it.
To answer your question. Focus on your own local area. Learn the economy there. The properties that give the most ROI (besides high margin flipping) would be multi units.
Go do a search around here for PropertyManager. He advertises his book in his posts, go buy it.
If you are expecting a return from appreciation, you will be disappointed more often than not. Just look at where housing prices are today – they are at 2000 levels. If you bought a property in 2000 and are selling it today, you may be lucky to sell it for what you paid for it.
Investors who buy rental property, aren’t buying the property. They are buying the cash flow the property can generate. Base your buying criteria on the return on investment the cash flow will give you rather than an expectation of future appreciation.