Any way to compare real estate from different states?

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Rich, I wasn't saying one should not buy in TX because taxes are too high. I was saying that a significant difference in taxes seems to have a huge impact on NOI and one should take that into account instead of assuming everything will always even out. Regarding your example, I think I have a better way of doing it. I will start with the property values because that is the starting point in real life: State A = $100,000 State B = $125,000 Tax A = $2,500 Tax B = $1,000 Other expense A = $4,000 Other expense B = $4,000 Rent A = $12,000 Rent B = $12,000 We are assuming everything else is the same in both places - appreciation potential, financing terms, etc. So the easiest way to figure this out is to ask ourselves how much we are paying per dollar in income. State A Cash Yield = $5,500 (12K - 2.5K - 4K) State B Cash Yield = $7,000 (12K - 1K - 4K) Cash return %: State A = 5.5% (5500 on investment of 100K) State B = 5.6% (7000 on investment of 125K) We need not calculate anything else to figure out that per dollar of investment, state B is slightly better than state A, but not by much. Obviously, these are all based on assumed numbers. In reality, we will compare with real numbers.

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To get $1,000 rent on a piece of property that is less than 10 years old, here is what I have actually done. In Fort Worth, Texas, I paid $103,000 for a house and get $1,050 rent. My property taxes for 2008 were 3,318 and insurance was 471.00. In Southern California, I have a house that I am receiving $1,100 a month for and August Comps are $350,000 to $375,000. Taxes would be 3,500 to 3,700 and my insurance is 800 a year. Here in SW Colorado, the Durango area, to get $1,000 rent, I would need to buy a 1,000 to 1,200 square foot home for 250,000 to 300,000. I have an investor friend who is buying Riverside, California homes for 50,000 to 60,000 and renting for $1,200 a month. The catch is he has to carry a side arm to collect rents and make repairs. Plus, they are all repo's that he is putting 20,000 to 40,000 in rehab. They are usually missing all drywall, all plumbing and plumbing fixtures, all wiring, light fixtures, etc... He is basically buying a house that is in the framing area process of construction. He even had his car stolen once while making repairs on one of them. BUT, he is getting 1,200 for a house he paid 50,000 for, LOL. Oh yea, to top it off, he can't get insurance on them (cash investor). No thank you. I think Rich has the right idea, you have to consider so many things when investing. I like Texas and maybe Arizona.

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The other question is , where do you find a $1000 producing SFR with these characteristics in other states? It is just a fun comparison. Rich

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Thanks Mike. I agree with your excellent post with the comparisons. If you think I had the right idea, I ask for your vote on the thread. Others are invited to also. Thanks. Rich

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I bought it about a year ago. I have another one in Pflugerville that I bought for $117,000 about the same time and it is rented for $1,050. Prices did not move much since then if at all. It actually went slightly higher since the economy is quite good over there.

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Rich, it was your topic, not mine! :) I think you should vote for my simpler way of analyzing the deal :) I agree all this is academic. If you know of a good cash flowing property that you don't want to buy because you might be on a cruise ship, please do let me know. If the deal is good enough, I will pay for your next cruise. (I think your wife is going to like my offer.)

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Eddie, when did you buy the Round Rock property? What would its value be today?

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Vikram- My next cruise is already booked. 28 days, beginning in Hong Kong on Nov . 7 and ending in Sydney. It is 28 days to celebrate our 28th cruise. Rich. I'll vote for your method, .

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Eddie- That is why I used comps of same age, etc. We can all compare apples with watermelons and make one or the other look better. Rich

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Here is an example of two different properties that I own. The first one is in Round Rock , TX. The rent is $995 a month and I barley breaks even. In a matter of fact, if you apply all the conventions, it is a loosing property. It cost $105,000 and the annual taxes are about $2,400. The second property is located in Birmingham, AL. Total cost including rehab (New roof, New AC unit, paint, closet, tub treatment, etc) was $24,000. Monthly rent is $650 ( I have another one in Birmingham that cost about $10K more due to rehab that currently rents for $685). Taxes are around $750 anually. If you compare the two properties (the one in Texas with the one in Alabama), the cost to rent ratio is huge, At first glace you can tell that from a cash flow perspective, the Birmingham property is a sure bet, however there are many other factors that would show that in the long run, the Texas property may turn to be a better long term investment ( Age, neighbourhood, type of renters, potential appreciation, saleability, etc). Many times where you have two different properties in two different states that rent for a similar amount, you are still comparing apples to oranges for the reasons mentioned above