I had a client ask about how the Weyers Cave real estate market had performed over the past year in comparison to Harrisonburg and Rockingham County (HBG/RCK).  Weyers Cave is located in Augusta County, just outside Rockingham County --- but many Rockingham County buyers also consider buying in Weyers Cave.  Let's take a look....

1. Weyers Cave and HBG/RCK saw similar (large) declines in overall residential market activity when comparing 2007 and 2008.  The decline in Weyers Cave was 29%, and in HBG/RCK was 25%.
2. While HBG/RCK saw home values holding steady (both average and median sale prices), Weyers Cave saw a decline in both of these metrics (6% in average sale price, 9% in median sale price).
3. HBG/RCK saw little change in the average time to sell a home, but Weyers Cave experienced a 45% increase in average days on market.  Of note, the 2008 Average DOM for Weyers Cave is still (after the 45% increase) below the Average DOM for HBG/RCK.

A few significant disclosures:

1. We shouldn't draw too many grand sweeping conclusions about the Weyers Cave market based on this data, because the small sample size (32 sales in 2008, 45 sales in 2007) allows for irregularities that we would not find in the larger data set in HBG/RCK.
2. The Weyers Cave sales data was extracted from the Harrisonburg/Rockingham MLS.  I had hypothesized that the Staunton/Augusta MLS would have more home sales data for Weyers Cave (you know, since Weyers Cave is in Augusta County), but in 2008 only 18 sales were recorded in the Staunton/Augusta MLS and 32 sales were recorded in the Harrisonburg/Rockingham MLS.
   

National research shows that the top means by which buyers found the house that they eventually bought were:

• hearing about the property via their Realtor
• viewing the property online 
• seeing the yard sign (driving through neighborhoods)

How should this dictate marketing strategies as a seller or seller's Realtor?

Realtor

• Enter all pertinent details about the property into the MLS.
• Make it easy to show your property, and communicate that flexibility via the MLS.
• Enter descriptive, compelling remaks into the MLS.
• Take top-notch photos and enter them into the MLS.
• Remind other Realtors about listings when you see them.
  

Online

• Focus on the few short sentences permitted in the "Remarks" field in the MLS.  Make this attractive and compelling, and update it periodically.
• Take compelling photos that bring to light the best features of the home.

Sign

• Keep the sign looking professional --- pound it into the ground if it starts to sag.
• Install a flyer box with a detailed flyer inside including price and other amenities.
• Include photos (and floor plans if possible) on the flyer.

Remember --- this is just the start of property marketing --- but it is likely to be very effective, as it has been developed based on current buyer behavior.

I was asked that two times yesterday.....and the hypothesis of the two people asking was that the Harrisonburg real estate market has indeed hit bottom.

But what do we mean "hit bottom"? 

When people use this language in most other real estate markets, they are referring to the end of a period of declining home values.  But in Harrisonburg (and Rockingham County), we saw a 1% increase in home values between 2006, 2007 and less than 1% change between 2007, 2008.  So, without an overall decline in home values, we probably wouldn't be referring to home values when we say "hitting bottom" --- if we were, we should be asking if home values are starting to increase again (after 2 years of treading water).

Perhaps when people ask if the Harrisonburg housing market has "hit bottom" they are referring to the dramatic decline in sales activity.  The number of home sales in our local market peaked in 2005 (1,669) and have declined ever since (-14% in '06, -13% in '07, -25% in '08).  I do hope that we see that we have "hit bottom" in terms of this steady decline in market activity.  More specifically, I hope that we see at least the same amount of home sales in 2009 as we saw in 2008. 

A broader view...

In a sense, we may see market activity pick up in Harrisonburg and home values increase again when other real estate markets across the country are deemed to have hit bottom.  Some analysts are predicting that we are seeing the beginning of that in March.  Factors that may be contributing to an increase in sales activity and home values (in Harrisonburg and otherwise):

• Lots and lots of new spending via the stimulus package
• An $8,000 tax credit for first time buyers
• Very, very, very low interest rates (4.5% yesterday, with 1 point)

I'll certainly keep you posted here on what we're seeing in Harrisonburg and Rockingham County in terms of home sales and home values.  My March 2009 market report will be out in a few days, but until then you can pore over my February report.

The problem with "rent to own" is that everybody means something a little different by it.  Here are some examples of what someone might mean when they are talking about a "rent to own" scenario:

1. Owner won't sell the home to anyone without checking with the tenant first to see if they want to buy it (first right of refusal)
   
2. Owner and tenant decide on a sale price for the home at the start of the lease, and the tenant has the right to buy the the home for that given price at some future date.
3. A portion (or all??) of each rental payment will be credited back to the purchaser if and when they buy the property.
4. Tenant pays a large nonrefundable deposit at the start of the lease, which is credited back to them in its entirety if they purchase the home.
   
5. Any combination of the scenarios above, for example no fixed price is set, but a portion of each rental payment will go towards the eventual purchase price.

If a landlord and tenant are both generally interested in pursuing a rent to own scenario, the first thing to talk about is what each party means by "rent to own."  It can be a win-win situation for property owner and tenant/buyer, but you'll need to first make sure everyone is on the same page.

From a loyal blog reader...

"I used your lovely search tool to look at all of the Belmont Estate listings. One thing that surprised me is the vast difference in the price per sq ft. Some were as low as $88 and others were as high as $139+. I'm curious to know why there's such a difference."

An excellent question!  Here's what she was noticing....



One reason for these differences is based on whether the homes have basements.  You'll note (below) that the three homes without basements have a much higher price per square foot than all other homes in the neighborhood.  What is really going on here is that when you start to add basement finished square footage into the "total livable square footage" (which is then used to calculate price per square foot) you are able to achieve a much lower price per square foot in a home with a basement.  So....while the homes without basements seem to be really expensive on a price per square foot basis, it's really that the homes WITH basements are able to look less expensive using that metric.



Another item to notice is that the largest homes (on a total livable square foot basis) are able to achieve the lowest price per square foot (see below).  Three of the largest homes in this group have the lowest price per square foot.



Given all of this, remember that it is best to compare relatively similar homes using the price per square foot metric.  If some of the homes you are comparing have basements, and others do not, or if they are vastly different in total livable square feet, then you are likely to find significant a variation in the cost per square foot.

Many parents of JMU students consider buying a property in Harrisonburg for their son or daughter to live in while attending college.  This can be a great financial alternative to paying several years of rent, especially if there is, or may be more than one student in a family attending JMU.

But you can't just come to Harrisonburg, buy any property, and put your students and all of their friends into it.  Here's what you need to know about buying houisng for your JMU student to live in with friends:

• SINGLE FAMILY HOMES  ::  Almost all single family homes in Harrisonburg won't work --- if you're looking to house more than 2 people (including your son or daughter).  Most single family home neighborhoods are zoned R-1 or R-2, both of which prohibit having more than two unrelated people living in any property.  If your son or daughter has two (or more) roommates, then most single family homes will likely not work for you.
• GRANDFATHERED-IN SINGLE FAMILY HOMES  ::  There are some single family homes that have been used as rental properties (for more than 2 unrelated people) since before the zoning code prohibited such a use.  These properties are "grandfathered in" such that continuing to lease it to more than two unrelated people is acceptable.  A transfer of the property (upon sale) does not limit the ability of the new owner to use the property in the same way.  Of note, these properties don't become available very often, as most owners of such properties have held them for decades and will continue to hold them indefinitely.
  
• ANY TOWNHOME  ::  You might think that just about any townhome would work to hold 3 or 4 students, but many neighborhoods actually have restrictions in their "Restrictive Covenants" that prohibit an owner from leasing the property to more than two unrelated people.  Adding this verbiage into the Restrictive Covenants in many cases was a requirement for obtaining a re-zoning to allow for the townhouses to be built.
• SOME TOWNHOMES  ::  There are some townhome communities where the restrictive covenants do not prohibit having 3 or 4 (unrelated) tenants living together.  Some examples include one of the sections of Avalon Woods, Beacon Hill, Blakely Park and Wishing Well Estates.
  
• COLLEGE COMPLEXES  ::  Most off campus housing complexes are "corporately owned" --- that is that they are owned by one corporation or individual, and thus individual units, condos and townhouses cannot be purchased in those developments.  There are, however, a few college student housing options where an owner can come in and buy one or two units and not have to worry about zoning, non-student neighbors, etc.  These areas include Hunters Ridge and Madison Manor.

If you are considering buying a house, townhouse or condo for your student(s) to live in while at school, please be in touch (540-578-0102, scott@cbfunkhouser.com).  I have worked with numerous people in this situation, and would be delighted to meet you.

Are you ever looking for a house that is for sale with only one or two clues?  If you only know the street name, subdivision, or Realtor's name, you'll have a difficult time finding the home on most web sites.  Funny thing --- because if you're driving by a house you'll often only know one of these (rather essential) bits of information.

As you can see above, I have accommodated for these frequent searches on my web site.  You'll quickly be able to search for a property by its street name, subdivision, Realtor, or MLS number.  A few notes....

Subdivision:  This can be quite helpful as you explore a variety of neighborhoods where you are considering a purchase.

Realtor:  This search will allow you to search by any Realtor in our local MLS, not just those at Coldwell Banker Funkhouser Realtors.  Try it out --- type in the name of a local Realtor and you'll see all of the properties they have listed for sale.

Quick Search Tab:  Don't forget you can also quickly search for a property by Address, MLS# or Realtor from anywhere on my web site using the Quick Search Tab in blue to the right of "My Services".

If you have any suggestions for making your home search process even easier or faster, feel free to leave them in the comments below, call me at 540-578-0102, or e-mail me at scott@cbfunkhouser.com.

Let's assume for a moment that a first-time buyer decides to buy a $150,000 townhouse in Harrisonburg.  With the appropriate income and credit scores, they may be able to obtain a rate as low as 4.625% on a 30 year fixed rate mortgage, with no downpayment. 

In the first year, this first-time buyer would likely have the following income and expenses:

• - $3,500 on closing costs
• - $952/m on mortgage payments (principal, interest, taxes, insurance, pmi)
• + $8,000 tax credit
• + $1,400 tax savings from interest payments
  

That is a total net cost of $5,524 in the first year of homeownership.

Contrast this to a buyer who closes on December 1 of this year.  At that point, the tax benefit will have ceased, and I predict that rates will be at least as high as 5.75% on a 30 year mortgage.

• - $3500 on closing costs
• - $1,056/m on mortgage payments (principal, interest, taxes, insurance, pmi)
• + $1,725 tax savings from interest payments

This is a total net cost of $14,447 in the first year of homeownership.

The combination of the tax credit, and the extremely low interest rates we are currently experiencing are likely to save you almost $9,000 in the first year of homeownership. 

As you can see, much of the above $9,000 of savings is in the $8,000 tax credit for first time buyers --- but the additional savings because of a low interest rate becomes quite dramatic over the course of the loan.  Buying now at very low rates (4.625%) may save you as much as $37,000 over the next 30 years as compared to buying at 5.75%. 

• A $150,000 purchase financed over 30 years at 5.75% will result in $165,129 paid in interest. 
  
• If had been financed over 30 years at 4.625%, you would only paid $127,635 in interest.
  

Just a few days ago, the third (blue) bridge was installed at Urban Exchange!  Click here to view updated construction photos of the blue bridge and other exciting developments at Urban Exchange.

If you look through all of the photos you'll also notice:

• the first kitchens at Urban Exchange, by Classic Kitchens, nearing completion
• the developer of Urban Exchange riding in his new ZAPCAR (zero air polution)
• the interior of the Urban Exchange Sales & Leasing office on Market Street

To see these exciting developments for yourself, feel free to swing by our Sales & Leasing Center --- we're open nearly every day of the week.  View our hours by clicking here.

We are pleased to announce that Heritage Estates, a 55+ community in Harrisonburg, Virginia has launched a re-vamped web site . . .



Don't be bashful, tell me what you think of this new web site, in the comments below, by e-mail (scott@cbfunkhouser.com) or by phone (540-578-0102).

Some exciting additions to the web site include:

• A thorough look at the community at Heritage Estates, both inside and outside the beautiful French Country homes.  View Heritage Estates Photo Gallery
• Candid video interviews with residents at Heritage Estates, who tell us a bit about why they live at Heritage Estates and what they like about the community.  View Heritage Estates Video Gallery
• Full details on each floor plan style (Augusta/Avenel, Pinehurst, Paired Home) including floor plans, standard features and options/allowances.  View: All Heritage Estates Designs, Augusta/Avenel, Pinehurst, Paired

For those of you unfamiliar with Heritage Estates, here's an overview...

Heritage Estates is an active adult community located in Harrisonburg, Virginia. Heritage Estates boasts superb French Country architecture with flowing interior floor plans that are wonderful for entertaining.You'll also enjoy spectacular views of the Blue Ridge Mountains, the golf course immediately beside Heritage Estates, the community swimming pool, and a maintenance-free lifestyle.

Homes in the City of Harrisonburg are currently selling at approximately 95% of their assessed value.



Taking a look at the data above, you'll note that approximately 30% of homes in Harrisonburg sold above their assessed value in 2009 thus far.  An additional 40% (roughly) of homes sold between 90% and 100% of their assessed value, and the final 30% sold for less than 90% of their assessed value.

The average (and median) ratio between sale price and assessed value is 95% thus far this year. 

Is this actionable?  Not necessarily --- assessed values are not a reliable measure of what you could sell your home for in any given real estate market.  But, do note that we can no longer assume that most if not all properties sell at or above their assessed value.  In fact, 3 out of 4 properties selling these days are selling below their assessed values!

Additional yet-to-be-opened can of worms:  are home prices lower now than they were a year ago, or are assessments to high?

This is another great question from a client --- if you have a question about our local real estate market that could be best answered with some data analysis, send it my way!  Call me at 540-578-0102 or e-mail me at scott@cbfunkhouser.com.

Over the past year in Harrisonburg and Rockingham County, 93% of all homes sold have sold within 10% of the seller's asking price.



Given this market data, keep the following things in mind as you are considering making an offer on a home, or as you are considering pricing your home to sell:

1. If you're thinking you'll be able to knock 20% or more off the asking price, you might have a hard time finding a property where a seller is willing to do so.  There are some (14 in the last year), but the odds are rather low.
    
   
2. The average sale price to list price ratio during this time frame was 97% --- the median ratio was 98%.  Thus, if you're negotiating more than 3% off the asking price, you're doing better than most!
    
   
3. This doesn't mean that most homes on the market will sell within 10% of their current list price.  It may take a price reduction on the part of the seller in order to generate an offer (and then contract) that falls within 10% of the asking price.
    
   
4. Sellers -- don't get carried away overpricing your property thinking buyers will make offers.  The data above is also indicative of the fact that buyers aren't making offer after offer trying to negotiate significant amounts off the asking price.

This was a fantastic question asked by one of my current clients.  If you have a question, call me at 540-578-0102 or e-mail me at scott@cbfunkhouser.com.  Chances are, others have the same question, and it would be worth analyzing to benefit us all.

Happy negotiating!

In an exciting (and very ambitious) move, the Green Building Committee of the Shenandoah Valley Builders Association will be building a home with Habitat for Humanity ON SITE at the 2009 Home and Garden Show!



The foundation for this home is being poured this week in Grottoes, and after the home show, the home will be moved to Grottoes to be set in place.  Volunteers from MANY different companies and organizations will be working together to build the home during the three day (April 3, 4, 5) home and garden show at JMU's Convocation Center.

If you, your company, or your organization would like to donate materials or labor to this tremendous effort, please contact Aaron Yoder by e-mail at homestead.frame@gmail.com.

Click here to view/print a PDF of my real estate market report.  Enjoy!



This month's home sales report (above) has several surprises, the first ofwhich is the increase in sales in February 2009 compared to February2008.  Though only a modest increase, we have only seen this type ofincrease in sales (compared to the same month the prior year) 3 timesin the past 14 months.

Median sales prices have fallen considerably when comparing Jan/Feb2009 with Jan/Feb 2008.  This is, however, solely based on two monthsof data (a small sample size), and thus these figures may be affectedby the sales price distribution of the properties that have closed inthese two months.  Somewhat contradictory to the median sales pricetrends, we see that average sales prices have increased when comparingJan/Feb 2008 to Jan/Feb 2009.

Average Days on Market has increased somewhere between 14% and 20%during the past year, which is likely no surprise to sellers, many ofwhom have experienced a longer than typical length of time on themarket.




Home sales in February 2009 (53) were stronger than in February 2008 (52), perhaps suggesting that we may see 2009 turn into just as strong of a year as 2008.  After several years of consecutive declines in real estate activity, February's sales figures should be an encouragement for homeowners  --- perhaps the pace is finally increasing again in our local residential real estate market.



This graph shows a normalized trend of home sales by charting the ongoing sum of the preceding 12 months' sales.  This normalized trend line is now showing a leveling off of home sales, perhaps indicative that the market is becoming more stable.



Likely as a result of the coming spring real estate market, inventory levels are now headed back up.  If we continue to see an increase in the number of homes on the market, buyers will have even more negotiating power as we move forward.



Supply levels in the $400,000+ price range dropped significantly (from 25 months to 22 months) --- due in large part to a significant increase in sales in this price range.  We continue to see the healthiest supply levels in the lowest price ranges.



This graph captures all residential real estate activity as reflected in the Harrisonburg/Rockingham Multiple Listing Services.  The pace of home has decreased significantly over the past four years, but home values have continued to stay level or increase slightly.



When we examine solely the single family home market we find a somewhat more significant decrease in median sales price (4% between 2007 and 2008), but we don't see as much of a drop off in the number of sales taking place.  Of note, the record growth in median sales prices was 2004 when we saw a 24% increase.



Sales in the townhouse market have drastically decreased, with a 37% decrease just between 2007 and 2008.  Sales of townhouses are now down below even 2003 levels.  The good news, however, is that the median sales price of townhouses continues to increase, with a 2% increase between 2007 and 2008.



Examining the median price per square foot of sold single family homes in Harrisonburg and Rockingham County reveals an overall decline in home values (as defined by this metric). We are now at 2005 First Quarter prices per square foot, which is a decline of 14% since the peak in 2006.

Yellow, Red Bridge to be installed on Tuesday!

All day tomorrow (Monday) we'll be setting up a HUGE crane next to the Urban Exchange construction site.  Then, on Tuesday between 8:00 a.m. and 10:00 a.m. we'll be using the crane to (carefully, slowly) lift the red bridge and the yellow bridge over top of the East Wing, and down between the wings to span the courtyard area.

Feel free to drive by to see the action, or watch it live from across the street!  Call me (540-578-0102) or e-mail me (scott@cbfunkhouser.com) with any questions.

Become a fan of Urban Exchange on Facebook!

Are you on Facebook?  If so, become a fan of Urban Exchange --- click here to visit the Urban Exchange page on Facebook.

Yesterday, I mentioned that there are good deals available on investment properties in Harrisonburg, with the key to finding them being:

Seek properties listed at prices under market value in neighborhoods (subdivisions) where it is easy to understand market value.

To continue that theme, here are a few examples of what I'm referring to:

1296 Victorian Village Drive (Beacon Hill)
Asking price:  $139,900
Average recent sale price:  $155,633
Average current list price:  $152,720
view details

1043 Meadowlark Drive (Reherd Acres)
Asking price:  $136,100
Average recent sale price:  ~ $150,000
Average current list price:  ~$150,000
view details

There are other possibilities on the market right now, and these opportunities will continue to present themselves over time.  If you have funds available (10% - 20% of the purchase price) to buy an investment property in Harrisonburg, I'd be more than happy to help you sort through the available properties to find some of your best options.

I met with a client earlier this week who has funds available to purchase an investment property, and we were contemplating what might make the most sense in the Harrisonburg.  Here's what we came up with...

Seek properties listed at prices under market value in neighborhoods (subdivisions) where it is easy to understand market value.

If we consider, for a moment, townhouses and duplexes in the City of Harrisonburg --- we find that most of these properties are barely viable investment properties given their current market value and the rental income that they can generate.  Most new-ish two-story townhomes in the City are selling between $155k and $165k, and might generate $850-$950 per month in rental income.  When you consider 80% financing, insurance, taxes, association fees, you'll likely have (on average) $900 of rental income to offset (roughly) $900 of monthly expense.

This "barely break even" scenario can make sense to some investors --- they are not only in it for the monthly cash flow, but also for the tax savings, principal reduction and appreciation.  But consider this --- if you can purchase a townhome in one of these communities between $135k and $145k, the scenario can be quite different.  Dropping the purchase price by $20k reduces your monthly obligations by approximately $110, which creates a nice buffer between income and expenses.  Furthermore, you will likely be picking up some "instant equity" because you are buying below market value.

A few important notes:

1. You likely won't be able to purchase any property $20k below asking price or $20k below market value.  There are, however, some properties for which this would be possible.  Sometimes we can determine that by the asking price of the property compared to recent sale prices in the neighborhood.  Sometimes we can determine that by when the owner bought the property, which might suggest how much they need to make the deal work.  Sometimes we can only determine that by making offers on properties.
2. One important caution --- don't get too excited about the "instant equity" right off the bat.  If you buy a townhouse $20k below market value in that neighborhood, and then several other owners sell at that same price point, your perceived equity will have vanished for the time being.

If you have funds available (10% - 20% of the purchase price) to buy an investment property in Harrisonburg, I'd be more than happy to help you sort through the available properties to find some of your best options. 

Feel free to call me (540-578-0102) or e-mail me (scott@cbfunkhouser.com) to get started.

An Urban Exchange Marriage Proposal!

Congratulations to Bobby and Jenna on their engagement!  Bobby proposed this weekend in the apartment at Urban Exchange where the couple will eventually be living --- after her surprise (Jenna thought she was just getting a tour of their apartment's progress) --- she said yes!  Bobby is a chef at Eastern Mennonite University and Jenna is a graduate student.  We wish Bobby and Jenna well, and are excited about the life they will share together at Urban Exchange!

Many thanks to Rebekah Girvan Budnikas, a top-notch local wedding and family photographer, who not only captured this special moment, but is also soon to be opening a high-end photography studio in downtown Harrisonburg! 

Six Days to Bridge Installation

BREAKING NEWS --- the three bridges that will connect the two wings of Urban Exchange will be installed on Tuesday, March 10th, beginning at 8:00 a.m.  We will be using an enormous crane to lift each section of the bridge up, and lower it into place between the two wings.  We will certainly post photos of this exciting event online, but feel free to stop by to watch the action!

Work was completed this past weekend on the metal columns that will support the bridges.  Click here to view these updated photos --- which also include a glimpse of some small bridge sections.

Classic Kitchens Prepares for Kitchen Installation

Class Kitchens now has all of the granite and cabinetry components in Harrisonburg for installation at Urban Exchange.  Click here to view photos from the Classic Kitchens warehouse, where the kitchen components will be staged and partially fabricated before being brought to the Urban Exchange site.

Condo Specifications

Are you curious about the detailed specifications of the apartments and condos being built at Urban Exchange?  We have now posted a list of specifications for the condos and apartments at Urban Exchange.  Please let me know if you have any questions about these specifications.

Stay tuned for more exciting announcements about Urban Exchange in the coming weeks. For more information about the condos and apartments, feel free to reply to this e-mail, or call me at 540-578-0102.  For all leasing matters, please call 540-421-9341 or e-mail info@LiveUE.com..

In days gone by (2002, 2003, 2004, 2005) you could buy a home in Harrisonburg or Rockingham County and sell it two years later for a tidy profit.  Home values were escalating so rapidly that you no longer had to consider how long you would be in the home before needing to sell it.  Today's recent home buyers, however, find themselves in a significantly different scenario.

The graph below shows the progress made over time in paying down the principal balance of a 30-year mortgage of $225,000 at 5.5%.



As you can see, the majority of the principal is paid off in the tail end of the mortgage life cycle --- 53% of it is paid off in the last 10 years.  But if we take an even closer look at the first five years, we can see what some recent home buyers would be facing if they needed to sell just two years later.


Consider these three factors:

1. As you can see in the chart above, after two years of making regular payments on the mortgage, only 2.8% of the mortgage has been paid off. 
   
2. The cost of selling a house, however, is often between 5% and 7% of the sales price. 
3. There was a less than 1% increase in average sales prices in our market over the past two years.
   

Given the above factors, a buyer who obtained a 100% LTV mortgage two years ago, who needed to sell now, would be in a bit of a tight spot.  Their house would have likely only increased in value by 1%, they would have paid off only 3% of their mortgage, and they would have (perhaps, roughly) a 6% total cost of selling the property.

What do you need to take away from this illustration?

1. It will likely continue to be difficult for the next 12-18 months to sell a home within the first two years of owning it while not losing money.  That is, of course, only taking into account principal reduction and appreciation, and does not include other financial benefits of buying such as the tax savings each year.
2. Be thankful that the Harrisonburg and Rockingham County real estate market has not seen drastic downward shifts in home values.  Other parts of the state and country have seen 20-40% declines in home values!
3. Do bear in mind that there is one extra equalizing variable for those considering a first time home purchase right now.  The $8,000 tax credit can change the game considerably for first time home buyers.
   

When considering the purchase of an investment property, you ought to account for the following investment benefits:

• Cash Flow Before Taxes - if your rental income is $900 per month, and your expenses (mortgage, etc) are $800, you have positive cash flow.
• Principal Reduction - unless you have an interest-only loan, each monthly rent payment helps to reduce the principal balance of your mortgage.
• Tax Savings - this can vary significantly depending on your individual financial situation, but the "loss" (including depreciation) on your investment property can be used to reduce your tax liability.
• Appreciation - though our current appreciation rate is somewhere between -1% and 2%, this is (in a longer timeframe0 an important investment benefit.

To help my clients understand these benefits, and to better understand the investment property that they are considering purchasing, I use the investment analysis worksheet below. 

Click on the image for more detail.