How can I tell if this is a good investment?

[David K.]

How do investors determine if a rental property is a good investment? I have an opportunity to buy a townhouse that's in good shape. $155k, with 20k down, 4% interest on a cd. It should cash flow $2-3k a year including tax impact.

My question is really about how to determine if this is a good investment? Would I look at my cash return on the down payment? Or take a longer term view, factoring in appreciation? Then I would also have to factor the opportunity cost of my down payment.

I'm wondering how other investors look at this?

Thanks!