You need to calculate and compare the before-tax annual and monthly cash flows of the condo over a range of bid prices. As you begin the bidding, have a firm idea of how much you can afford to pay out to “carry” the property. For example, you may be willing to pay up to $300 per month to own the rental property. So the maximum price you can bid will be a price that generates a negative monthly cash flow of $300. Prices lower than the maximum will generate lower negative cash flows, which improves your investment position.

Investing in rental property requires a strategy quite different form the one employed in purchasing a home. The acquisition of a rental property is a business decision, an it has to be made in a businesslike way. Once you’ve identified a property that could be a good investment, you have to estimate the property’s current value, project its future value, and make a realistic assessment of how much rental income you can expect to get from the property, versus anticipated expenses, in order to arrive at the property’s profit potential. You want to get expert advice about the benefits of depreciation and tax write-offs. Your calculations must be based on how long you plan to own the property and what it will take to manage the property over that period of time. Your calculations should also reflect whether you think you can personally manage the property or will need to hire a professional manager to do the job.