I heard in a Podcast recently that one of the first things to check when underwriting a potential deal is that the average median income is twice that of the national average. At face value, this seems like a good metric to check. However, there was no mention of the cost of living in that area. For example, if someone from San Fransisco who made 100k per year were to move to my market in the midwest, They would only need to make around 45k per year to maintain the same standard of living. So theoretically (and based on what we've seen in real life) my tenants are just as financially capable of paying rent.
Also, because property out here is so much cheaper, we see strong cash flow in every deal we make, both in multi-family and single-family.
Am I missing something? Or is it better to look at your market's average income compared to the cost of living, rather than compared to the national average? What do you guys look at to determine a property's potential for cash flow?
