Because taxes are low here and I only look at places with tenant paid utilities, I drop the ratio down to 1.5 - 1.8% personally.

My operating expenses are mainly water sewer garbage.

I just pay for water, sewer and trash which will average $75/month.

Not only that, my ready to move in tenant will buy the property from me in 5 years and make payments to it in meantime in edition to rent.Issue is it is in a flood zone - mind you last hurricane irene here in NJ not a drop of water in basement.

If your insurance company knows, they may drop coverage, if there is a loss they pay not pay.

It's probably REO, so the electricity is usually off (unless there is very good reason - I went through one that had a sump pump running continuously even though the weather was and had been dry; I suspected a spring of some sort was pumping water into the basement).

Namely, look for any leaks (we once found a bad water heater that was peeing all over the garage floor) and any electrical problems that may shock you (pun intended).

If not too far, Drop by tenant's house and politely inquired whether he is happy with the repairs.

I only buy in 3 zip codes so I am pretty up to speed on what listings have dropped in price, which houses need work, which houses are under-valued.

My profile says Upland but that's an old office address that I need to update.I was making a generalization about OC/LA prices - there are pockets that have dropped more than the surrounding areas but everytime I am offered a house out there, I always find the same thing - too much room to drop.