Is my market overpriced?

Question

I'm trying to find a way to gauge if an area is over or under priced. I first thought I might be able to use median new home prices for the area then adjust it for property taxes and inflation so that when I compare year over year it might be apples to apples. I should also state that I want to landlord for cash flow.  Any ideas?

Rick Pozos · Answer

What you need to do is find properties that are below market price. Market to distressed sellers. If you look for deals on craigslist, MLS, trulia, or whatever online, they will be pretty close to market price. Why would you sell your property at a discount in a great market like we have right now?? You wouldn't. BUT if you have some reason like, a divorce, behind on payments, behind on taxes, etc. you will be more willing to let go of that house below market price.

John Barr · Answer

@Jason Yahner I feel that we are a little over priced but I think real estate, in general, is pretty over priced just because of the market cycle the over all economy is in. One thing that I look at though is the price range we are in.

For good cash flowing rental, I find the best properties to be under the 200K. at those prices, you should be able to cash flow several hundred dollars a month. Say our market is 10% over priced. So you would need to put 40K down on a 200K house to have a mortgage of 180K. Now the market corrects that 10%. Your house is now worth 180K but you are buying for the long term and as long as you bought right and are cash flowing several hundred dollars a month you are going to be fine. In a down market, rental prices tend to increase because people don't want to buy homes when real estate prices are falling.

Now say you buy the same house in the down market for 180K. Your down payment is 36K. It's only a 4K difference which isn't a whole lot when we are talking about prices in the hundred of thousands to get a cash flowing asset.

That 10% over valued is a heck of a lot better in our market than say an Austin where rental properties are in the 250K+

Antoine Martel · Answer

San Antonio is a very tight market right now. But there are still people out there killing it so there is room to make money. But of course the profits will be slimmer.

Is my market overpriced?

Most Popular Reply