I would say that for rental properties, as this case, it would depend on a few things. In most areas, the quick appreciation ship has sailed. If it is a buy and hold, like as in a retirement home, that would make more sense.

But buy a home in an area that you will hopefully see at least some appreciation. I would suggest retirement cities with modest housing prices. And ensure you dont buy a rental house you happen to ‘like’. Treat it like a business transaction…buy low and (hopefully) sell high. Look for bargins, distressed sales and easily rehabbed homes that will give a littl leverage to sell when the time comes.

If you pay retail and assume 5% appreciation (which is agressive), you will need at least 2-3 years just to break even after commissions, repairs and closing costs. That being said, there are some great bargins to had out there, but you have to look.

Work with an expert realtor and make them run numbers for you on rental history, cost of ownership and projected appreciation.

Bottom line is that if your cash flow is crunched with a rental property, do what you can to have the lender help you. They do not want the home back and will do things like defer payments, take interest only payments, allow you to make up past due payments over time. But remember, if you take a Home Equity Loan to buy a rental, you should have some equity in that home. So you may sell at a loss, but the lender may take a short sale cash settlement. Or you may be able to get a loan on the rental property. But make sure you get it before any loans get behind.

Just make sure you do your homework to determine the investment home is priced right, has a good chance of renting and is poised to appreciate.