Thinking of buying in this crazy market...

[Zack Francis]

My wife and I are currently looking for a property in Mesa, Gilbert, Chandler AZ. When running the numbers, accounting for vacancy and capex, the cost on cost return (yield) is 0% or slightly negative on almost all of the properties we look at.

I'm tempted to pull the trigger anyways. Here's why:

1. Low interest rates.

2. I expect inflation to continue, causing rent prices to increase, and housing to become even more unaffordable. 

Do you agree or disagree with this approach? Any thoughts or feedback are welcome.

[Matthew Irish-Jones]

@Zack Francis the market is the market. Obviously there are still homes selling in your market to buyers with a 0% return. Highly appreciating markets usually have little to no cash flow.

When we analyze a property we use the following criteria in this order:

1. Location

2. Asset condition

3. Returns

If you are getting a 0 on returns in an appreciating market and get a great Location and an asset on great condition you may be fine or even better off.

Considering labor costs and material cost if you buy a turn key property you may even be ahead of the game.