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home prices relative to market rents?

By
Real Estate Agent with The Indy Realty Shop

This topic was brought up on another forum I read on real estate.  I have a property management arm of my company, who also manages my personal rentals for me.  Here in Indianapolis, we have had stagnant growth for the past 5 years, while we watch everywhere else explode with price appreciations.

 

Here in Indianapolis, my property manager can rent out a 3 bedroom 2 bath 1,600 sq.ft. BRAND NEW home for about $1,050-$1,295/month.  Purchase price for a home like this is about $135k.  So we have about a 10% cap rate here in Indianapolis.

 

What is rent's vs. value in other areas of the country?  California, Florida, New York?  Anyone there have any cash flow at all?

 

I have read that when rents get seriously out of line with property values, the area is overvalued.  For example, on average, over the years, you should expect to receive 1/10 of what the property is worth per year in rents.   In Indianapolis, the 135k home example above would be $1,295*12 = $15,540 gross rents, which is 11.5% of what the home is worth.  How does this compare to other areas of the country?