Property values depreciate??

[Michelle Caines]

Hi BP,

I've been looking at potential rental properties with no particular location in mind and came across homes in Danbury CT. According to Zillow, a great amount of homes here that are in the $200-300k price range have gone down in value.

If this is accurate, I wonder, how often does this happen?

Thanks for reading!

MC

[Dave Toelkes]

If you are buying to hold for rental income, then do you care if the property value goes up or down while it is producing income?  If you never sell, it does not matter what the market value is at any time after purchase.  If the property will produce a positive cash flow when the market prices are currently down, then when market values increase many potential buyers will be priced out of the market.  Those potential buyers become renters and potentially increase the demand for your rental.  Increased rental demand = higher rent.

Question to answer is whether the market rent for a potential purchase will produce a sufficiently large positive cash flow to comfortably support the overhead and debt service.