BiggerPockets

I'm new here, but I did read the long 2008 thread on appreciation, aside from some of the more flaming parts.

I'm very pleased to learn the rules-of-thumb for cash-flow, like the 2% rule and that expenses are 50% of rent, and that you should buy low enough that you have instant equity. All good, I'm learning a lot.

However, I'm quite surprised there isn't more discussion about the location of properties. Does location not matter? $1,000 of cash flow is great but if rents decline by $400 each year I'm soon negative. Conversely, in a growing area you might expect rents to increase, perhaps even exceeding inflation. You might even be confident enough of the growth to be willing to purchase with break-even cash-flow.

Are there any location rules-of-thumb? For instance, is it worthwhile to include "metro area unemployment must be under 25%" as a rule? What other location rules are there?

I've noticed that there are bubble-prone areas and non-bubble-prone areas. The cash-flow-positive areas mentioned in this forum seem to fall into both categories. Which do people prefer? Or do people completely ignore this?

I find bubble-prone appealing, in that there's also the possibility of experiencing appreciation (which I hope isn't a dirty word here). Plus, the local economies seem more stable and thus able to support steady rents.

To summarize, cash flow seems great, but are there any rules-of-thumb that will give me confidence that the location is solid and perhaps growing?

I'm not one who believes in living where you own rentals. While there is nothing wrong with doing so, imo there is nothing wrong with owning out of state or area either. I will stipulate that no one can manage your rentals better than you can.

As to location, it is very important. The old adage is that the better the cash flow, the worse the city, or part of town the property is located in. This is by no means a hard and fast rule though. You generally want to locate properties that are closer to the better public schools or close to amenities such as shopping, etc. This will cost you more, but in the long run you will most likely have better tenants.

I would also look for cities that are showing a growth trend from job creation rather than immigration (ie: CA). Where jobs are being created, property appreciation is not far behind.