Evaluating location

[Robert Mayo]

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?