Every investor (or potential investor) comes to the table with different expectations for an investment property that they may choose to purchase.  A few examples of this broad spectrum include:

Having One's Cake And Eating It Too!

• Minimum Investment: 5% to 10% maximum
  
• Generous Positive Cash Flow: $200+ / month
• Professional Property Management included as an expense
  
• Maintenance Contracted Out included as an expense

Investing At Any Cost

• Flexible Investment: 20% to 30% acceptable
• Negative Cash Flow: a loss is ok, given tax savings and principal reduction
• Self Managed: no professional property management
• Self Maintained: no outside maintenance costs

A Reasonable Middle Ground

• Realistic Investment: 20% on most deals
• Neutral Cash Flow: possible slight loss in Year 1 - 3
• Self Managed: no professional property management
• Some outside maintenance costs for significant repairs
  

But let's take this outside the realm of reasonable:

• The Cake Investor won't buy anything in Harrisonburg
• The At-Any-Cost Investor will have many choices in Harrisonburg
• The Reasonable Investor will have a few choices, over time

Before 2005 (or 2006), the ratio between sales prices and rental rates allowed for investors to have their cake and eat it too.  This brought a rush of investors into the Harrisonburg market, many of who bought new construction and existing townhouses.  But sales prices have increased 49% over the past six years, and rental rates have not.  Thus, the profit margin for investors has been declining steadily for the past few years, leaving most purchasable investment properties not as palatable for most investors.

Put more specifically in today's context, most rental properties that an investor could purchase in Harrisonburg today will offer (how exciting!) negative cash flow --- even given a 20% down payment, self-management and self-maintenance.  This leads me to two questions every potential investor should be asking....

1.  Should I be investing in real estate in Harrisonburg?
If you are seriously considering investing in real estate, Harrisonburg is a great place to buy.  While there are still some who believe our home values will eventually, somehow, start falling rapidly, we have seen relatively stable home values over the past several years despite the majority of the country seeing sharp declines.  This is likely attributable to our low unemployment, a diverse economy, multiple local colleges/universities, and our proximity to D.C. --- all of which are great economic stabilizers that benefit real estate investors in this area.

2.  What should I be buying as an investment property in Harrisonburg?  And how should I be buying it?
First, you'll need to be patient.  As stated above, most properties currently for sale won't be very exciting, even given reasonable investment goals.  However, there are, and there will continue to be some properties that can work well --- providing positive cash flow, likely appreciation, a stable tenant base, etc.  To properly evaluate such opportunities, however, you'll want to (in my opinion) become comfortable with analyzing the properties and their potential financial benefits through several different lenses (cash flow, tax benefits, principal reduction, appreciation).  Read up here for more details.

If you are considering purchasing an investment property in Harrisonburg, I'd be delighted to assist you in that process.  Get in touch (540-578-0102 or scott@HarrisonburgHousingToday.com) and we can start to discuss your situation and goals.