Real Estate Investing Basics

Tough Local Market? 3 Reasons Investing Out of State Is NOT the Solution

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We’ve all heard the saying, “The grass is always greener on the other side of the fence.” What some of us don’t realize is that, often when you hop the fence and take a closer look, you discover that the grass is exactly the same—the difference was an illusion.

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The same can be said of buying properties in markets outside your local area. I hear the idea of going far afield to invest all the time nowadays.

“The market in X location is just too competitive.”

But if you think doing deals a thousand miles from home is where the gold lies, you might want to take a closer look.

Male Traveler Looking Through Binoculars In The Distance Against The Sky

In an uptrending real estate market, common wisdom suggests that in order to cashflow, you’d better start looking for deals in distant lands—anywhere housing prices are relatively low.

In my humble opinion (one developed over 30 years of investing in the greater Washington, D.C. area, which is very high priced), I believe I can disprove the common wisdom.

It might appear that snapping up a deal in a small, obscure town would make sense. Properties far cheaper than those in a current high-end market take less of an investment. And because the price is lower, you can make money with a lower rent.

On the surface, this seems true. But allow me to illustrate three reasons this train of thought isn’t necessarily your best course of action.

Related: Buyer Beware: 3 Essential Items to Vet BEFORE Investing Out-of-State

3 Reasons to Stay Local When Investing in Real Estate

#1: Risk

One of the keys to becoming a successful investor is having an intuitive understanding of the market in which you’re investing, right? Can you really expect to fully understand a market 1,000 miles away from you—in a part of the country you’ve maybe never been?

When you invest out of state, you have to develop an investing team in this far away land to help make up for your remoteness. And just to put the cards on the table… who will they truly be looking out for? You or themselves?

#2: Competition

Competition isn’t a bad thing; it’s healthy. It keeps everyone “on their toes,” keeps prices down, and keeps values high. Yet, when you try and invest in a “foreign market,” you’re competing with local investors who have one major advantage over you: intimate local knowledge and relationships.

They know the rent rates, sales prices, local economic trends. They know local agents, brokers, appraisers, lenders, and more.

All this means you’re going to have to work two or three times as hard just to stay in the running.

#3: Cheaper isn’t always better

Let me explain this with an example. Suppose that in your market, an average bread and butter home costs $300K. But you learn that in Lizard Lick, Ark., the same home costs $75K.

“Great,” you think. “I can get the same place for 25 percent less.”

Hold on, though. Consider something important: why is the home so much cheaper?

Real estate prices and rents tend to follow very closely on the heels of local economic realities and trends. One reason some areas are so expensive is that the local economy is strong. There are lots of high-paying jobs, top-end schools, and other factors that drive up desirability.

Conversely, low-cost markets may be suffering from a lack of these factors.

In Lizard Lick, let’s suppose, there aren’t many high-paying jobs. So, while you could get that house for $75K, the local market only supports a rent of $650 per month.

Meanwhile in your area, you could rent the same house for $2,600 per month. Proportionally, the rent/price ratio is similar (0.87).

Related: What Moving Out of State is Teaching Me About Remotely Managing Rentals

Which leads me to my next point…

In my experience, appreciation delivers the biggest profit. If you are honest with yourself, you’d probably agree that not all markets appreciate the same. So, which market do you think is subject to better appreciation, Lizard Lick or yours?

Let’s say all things are equal and both markets appreciate at the exact same rate (highly unlikely). If you hold each house for 10 years and both houses appreciate by 25 percent in that time, the Arkansas home will be worth something like $94K, while the more expensive home in your area will be worth $375K.

In my opinion, the effort, energy, and money you’ll have to spend, in addition to the added risk, will at best make investing far away no more profitable. Plus, it’ll cost you time and money that could be spent in your own backyard.

Remember that you know your market intimately. You can develop long-term relationships with an investing team locally. These people will help you invest, and you can have a real face-to-face, handshake relationship.

The Bottom Line

There are lots of ways to make money right where you are. I’ll go into detail about them in other pieces, so keep checking back for more in-depth discussions!

Let me leave you with one final thought: Even if you really do want to go beyond your neighborhood, you don’t have to travel far. Often you can look an hour or less away from where you are and find an entirely different market, different economic situation, different property types, different people, and more.

In doing so, you’re still not so far away that you can’t develop an intimate knowledge of the area and the quality relationships you need to succeed. So, start where you are! Remember that there are always acres of diamonds right under your feet!

Are you currently looking into different markets? How far away? Why? What do you think about my arguments against doing so?

Let’s talk in the comment section below!

 

Joe Asamoah, MBA, PhD, is a seasoned real estate investor. He owns an impressive portfolio of superior homes in the Washington DC area. With over 30 years' experience acquiring, renovating, and managing single family homes, "Dr. Joe" transformed what was once a hobby into a highly successful business. In 2003, his real estate investments enabled him to realize a personal goal of financial independence via passive and residual real estate cash flow. A major objective of Dr. Joe's business is to invest in people and properties. Many of his tenants are low-income families that participate in voucher programs. Because of his dedication to the industry, Dr. Joe is a recipient of numerous professional and real estate awards. Find out more on his website JoeAsamoah.com or on his Facebook page. or on Instagram.

    Vaughn K. from Seattle, WA
    Replied 15 days ago
    IMO you were really going off track… Until the last bit there. Look, the reality is that many markets at certain times are NOT wise to go into heavily. Anybody going in heavy into most of the trendy markets right now is insane IMO. If you already have a bunch of stuff stacked up, fine. But the truth is while nobody can know the exact top, it is painfully obvious there is not another doubling or tripling of prices left in places like SF, Seattle, NYC, etc right now. It just ain’t gonna happen. They’re ripe for a correction, even if it is less severe than some people think it might be, or the math dictates it should be. It WILL NOT double again in the next 5 years. This cycle is mostly played out, if not completely played out. Anybody denying that is fooling themselves. So if you’re in one of these areas it’s nuts to keep buying in at record highs, with horrible cap rates, when there is no way in heck there will be another 5-7 year run of 10%+ appreciation anytime soon. You’ll end up with negative cash flow, a reasonable chance of losing equity if it drops, and horrible cap rates. Why do that when there are stable and growing areas that AREN’T overpriced that DO still have room for appreciation at current prices, AND strong cash flow to boot? BUT as you correctly point out at the end, that doesn’t mean you need to go half way across the country. Maybe the market from many perspectives is better in Cleveland than it is in the mid-tier suburb an hour and a half outside of where you live, but that suburb is probably dramatically better than in the city proper at this point in the cycle… But it still within reach physically for you to get to know it well, and gain all the advantages mentioned above from knowing a market. I’m going to be buying in an area that is drivable from where I live now, although I plan to move there myself in the next year or two anyway. Even if I never moved it would be easy to learn the ropes there and make far better returns than where I actually live.
    Steve Pest
    Replied 15 days ago
    Am i missing something? 25% return is 25% return. Granted 25% on a hundred grand is less than 25% on 200 grand but still same return. Granted their is a point about extra risk in not knowing the markets and other potential problems with distence. But if the numbers work they work.
    Joseph Asamoah Rental Property Investor from Washington, DC
    Replied 14 days ago
    25% is 25% if you can get it. As mentioned in the article, not all markets appreciate the same. In my opinion, the real money in real estate investing is through appreciation. Yes,making a few hundred dollars extra in cash flow is good, but the multiplier effects of appreciation pales in comparison. As investors, our goal is to strive for BOTH cash flow and appreciation.
    Vaughn K. from Seattle, WA
    Replied 14 days ago
    But in general markets are one or the other. Some markets are in between, with some cash flow and some appreciation, but there is no such place as massive cash flow and appreciation. Not unless you bought in a perfect up and coming place anyway. You’re not noting that the couple hundred a month allows you to double down and buy more properties faster than if you run negative cash flow like one does in expensive markets. That is where compounding comes from in cash flow markets. At the end of the day you have to ask yourself how much farther can things go in some areas with appreciation. Do you REALLY think a nothing house in SF can be 5 mil in 10-15 years? There’s a point beyond which it just can’t work. What seems more likely is the growth will be in the next round of trendy cities going from 300k to 700k. That can theoretically happen if high wage jobs move to such places… But I don’t see average income in SF going to the $500k a year it would take to support another tripling.
    Sunny Nyemah from Derwood, Maryland
    Replied 14 days ago
    The author is naive about real estate investing. You are looking at real investing from a narrowed prism (Single Family Homes). As a full-time real estate investor, who invests in multifamily properties, I do invest in bankable properties wherever they are located and if the underlying fundamentals are satisfied. If I am cannot find suitable properties in my backyard, I will seek them elsewhere.
    Joseph Asamoah Rental Property Investor from Washington, DC
    Replied 14 days ago
    With all due respect Sunny, I am not naive. I am more than happy to go toe to toe with you on my portfolio any day. I have 30 years experience in one of the most expensive real estate markets in the country so I know what I’m talking about. I’ve developed systems, processes, navigated minefields and nurtured relationships that work. Yes, I invest in single family houses by choice and you invest in multifamily by choice also. What works in the multifamily arena doesn’t always work in the SFR arena and vice-versa. I like you, invest in bankable properties. The main difference is I choose to invest in my local area. I’m not convinced I must go hundreds and thousands of miles away in order to make money in real estate. Because I choose not to invest in multifamily properties doesn’t give me the right to call you naive. Just my 2 cents.
    Joseph Asamoah Rental Property Investor from Washington, DC
    Replied 13 days ago
    I addressed this post earlier. Sunny, there’s no need to repeat yourself.
    Joseph Asamoah Rental Property Investor from Washington, DC
    Replied 14 days ago
    Thanks Vaughn for your comments. The main point I wanted to convey in the article is that I am absolutely unconvinced that if you live in a high priced market then the only solution is to seek nirvana in some strange place. Places you have no relationships, networks and understanding of the local market. IMO unless you are a seasoned investor, you should be extremely careful undertaking such ventures. To your point about appreciation. All real estate markets are local and based on local economic forces including supply and demand. As long as places like DC, Seattle, SF, NYC etc. maintain healthy economies, strong job growth and are viewed as attractive places to live and work,then they will draw people like a magnet. Many of the cities I mentioned above have very restrictive land/use regulations that limit new construction and impose limits on housing. Therefore, there is often a disconnect between supply and demand. In Washington DC, for example, it is bordered by Maryland and Virginia. It cannot grow in size since its landlocked. Therefore, increasing demand has resulted in price appreciation. I don’t know or can’t predict the future,but based on 30 years experience, experience tells me that prices will increase. The other point I wanted to convey is even though you may live in a high priced market, many times you can travel one hour away and be in different market altogether and be able to mitigate some of the risks associated with long distance investing.
    Vaughn K. from Seattle, WA
    Replied 13 days ago
    Hi Joseph. As I said, I think the best bit of advice in your piece was that you don’t have to go half way across the country, an hour or two down the freeway usually gets you most of the way there! I think this is rock solid basically anywhere in the country. I think you and I fundamentally disagree about how the trendy cities will do going forward. I have reasons for my opinion as well, it’s not just the also useful anecdotal experience of hearing people endlessly talk about leaving my city because it’s too ridiculous. Did you know the city of San Francisco had a net population drop the other year? I don’t know about 2019, but not a good sign. According to polls there the majority of the population is considering leaving, mainly due to excessively high prices. Population growth has slowed or gone negative in other major super expensive cities as well, I believe NYC experienced it’s first overall drop in decades in 2018. The big tech companies are (10-20 years too late!) finally opening more offices in other cities as well, instead of swamping a half dozen cities with an entire global industry as has been the case until now. In short, the signs IMO point to people having had enough of this nonsense. Did I forget to mention Seattle prices have actually been going down already? Cuz that’s a thing. How far will they drop? It’s been ~10% already, and fundamentals say 30-40% lower would be reasonable by the numbers. Maybe it’ll go flat and not drop at all anymore… But I don’t see 10%+ appreciation coming back anytime soon here, or in other cities that are slowing down. As I said above, if I had to take a guess I’d say other 2nd tier trendy cities will see their prices push up from their $300 something thousand price points up into the $600-700K+ prices we see in hot areas that seem to have peaked. An interesting thing was noticed in Seattle, and probably other cities if you looked… As a given neighborhood approached the 1 million dollar average sale price, they stopped going up. Every. Single. Time. And then other neighborhoods rapidly shot up. Why? Because even Amazon employees can’t afford to pay over a million bucks for a place in most cases. In short, we hit the maximum limit that even irrational exuberance could support! Now it’s petered out all together, and the only places that have been level or up are suburbs out nearly an hour or more from the city. IMO there just isn’t room for another doubling or tripling of prices again. People might be able to pay 60% of their salary to cover rent in an expensive city… But they can’t pay 120% or 180%. It just doesn’t work. And a lot of the top markets would need to hit such figures in order to have another run of the kind of appreciation we have seen recently. Will Seattle be more expensive in 30 years than now? Probably. But in 5 years? I wouldn’t want to bet on it! On the flip side, places like Nashville, Atlanta, Dallas, Boise etc etc etc that are cheaper now, but seeing a ton of growth… Those are places where there MAY be upside even now. I don’t know about any of those markets in particular, but there are a number of cities that are still hot, but not completely played out. You’re way further along in the game than I am, so you do you! I’m just sayin’ that I don’t see as rosy of a picture for these top tier cities as you do, mostly due to data that seems to all be pointing in a bad direction.
    Joseph Asamoah Rental Property Investor from Washington, DC
    Replied 13 days ago
    Thanks Vaughn for your comments. The main point I wanted to convey in the article is that I am absolutely unconvinced that if you live in a high priced market then the only solution is to seek nirvana in some strange place. Places you have no relationships, networks and understanding of the local market. IMO unless you are a seasoned investor, you should be extremely careful undertaking such ventures. To your point about appreciation. All real estate markets are local and based on local economic forces including supply and demand. As long as places like DC, Seattle, SF, NYC etc. maintain healthy economies, strong job growth and are viewed as attractive places to live and work,then they will draw people like a magnet. Many of the cities I mentioned above have very restrictive land/use regulations that limit new construction and impose limits on housing. Therefore, there is often a disconnect between supply and demand. In Washington DC, for example, it is bordered by Maryland and Virginia. It cannot grow in size since its landlocked. Therefore, increasing demand has resulted in price appreciation. I don’t know or can’t predict the future,but based on 30 years experience, experience tells me that prices will increase. The other point I wanted to convey is even though you may live in a high priced market, many times you can travel one hour away and be in different market altogether and be able to mitigate some of the risks associated with long distance investing.
    Joseph Asamoah Rental Property Investor from Washington, DC
    Replied 13 days ago
    Sorry for the last post. It was inadvertently sent. I’m glad you and I agree if you live in a pricey market, then a 1-2 hour drive can usually take you to a different real estate environment that may work better for you. It shouldn’t be necessary to catch a plane to some strange place seeking riches in a market where you don’t know anyone. For better or worse, I happen to live in an expensive market. So what should I do? Cry about it, throw in the towel and wish I lived elsewhere? No. I decided I didn’t want to invest in a different part of the country where I didn’t know anyone and put my faith (and hard earned money) with some turnkey outfit based on some fancy marketing and downloaded spreadsheets. The net result was I had to try and figure out how to make things work in my local area first. I can’t comment on SF, SD, Seattle etc. since I don’t live there and don’t know the local dynamics. However, in the DC area we are struggling with the same real estate and housing issues as the cities I just mentioned. I truly believe its possible to get cash flow and appreciation through real estate. Despite the late night infomercials, TV shows and guru radio ads, the reality is it takes time and hard work. It just doesn’t happen overnight. My point is you start where you are but don’t fall into the trap of easy riches in some far away place. The grass is not always greener on the other side of the fence. I wish it was greener, but unfortunately most of the time its not.
    Vaughn K. from Seattle, WA
    Replied 13 days ago
    “For better or worse, I happen to live in an expensive market. So what should I do?” “I truly believe its possible to get cash flow and appreciation through real estate.” To these points I would say this: I don’t doubt that you’ll make money eventually. Honestly, I’m of the belief that if you’re in it for the long haul, it’s almost impossible to not make money over 20-30 years. As I said, I’m sure Seattle (or DC) will be more expensive in 30 years than it is now. That’s not the question though… What people are really talking about is how to make returns that are better than other possible returns. You can buy the inflation adjusted + nominal return government bonds and make a guaranteed profit… But it’s so small nobody cares! I would say, buying in Seattle/DC/SF/etc right now is a lot like buying into them in 2006 or 2007. Sure, if you hold it for 20 years you’ll have made some amount of profit. Sure. But it’s a heck of a lot less profitable than if one bought in in 2010, 2011, or 2012. Since we’re not REALLY having an across the board national run up/run down like then, that means we can PICK whether we want to invest in 2007 or 2012 in a way! Because some markets are still sane and not inflated by the numbers, whereas others are. At the end of the day, if somebody is fine with lower returns for being able to invest right in their own neighborhood, that’s fine. It’s really a personal choice, or almost a lifestyle choice in a way. You’ll make money in the end. I’m just saying that I don’t see where it’s mathematically possible that these trendy markets that are at/near their peaks are going to outperform other places right now, whether that be strictly cash flow markets with ultra low appreciation, or some of the mid tier cities that seem to be the next wave of trendy cities that are up and coming that offer a nice balance of cash flow and appreciation potential. If I was some big fancy fat cat playing with tens of millions right now, I’d be investing in those seemingly up and coming places, or cash flow places… Then I’d by into the 1st tier places when they’ve dipped some, or wage growth makes the fundamentals a little more reasonable.
    Paul Merriwether Investor from Oakland, California
    Replied 13 days ago
    Joseph >>I don’t know or can’t predict the future,but based on 30 years experience, experience tells me that prices will increase.<< Yes you can … Google future value calculator. Determine the average application over those last 30, 40, 60 yr's. Then just predict 30 yr's into the future!!! It's just that simple. You and I have been in the market for a very long time. I remember when I thought a $50,000 home was expensive, then $100k came and went. It's normal for these new YOUNG investors not to understand the long term value of property as they generally never mention supply & demand as you did. SF & the Bay Area are pretty much landlocked by other cities. Thus you have miles and miles of areas where every home is over $1,000,000!!! Long term residents not selling looking to pass on those homes to their children as I will. We pull cash out as needed to upgrade or by other real estate even out of state. Trying to find a buildable lot in my city of Oakland, is almost impossible. Turning a $500,000 home into a million dollar home is just a matter of upgrades & floor expansion. I read the other day average pay for Google workers is $150k. Some even marry each other!!! I love those tech workers & gentrifier's!!!
    Vaughn K. from Seattle, WA
    Replied 13 days ago
    But it’s not that simple… Price to income ratios have got WAY out of whack in recent years. That was something that didn’t happen in the run up from 50K to 100K, or 100K to 200K, etc. Not to the degree it has happened now. To see another run up in SF like has happened recently (doubling or tripling of price), your dual earner $150K a year each couple would have to nearly DOUBLE those wages again. You would literally have to have an AVERAGE salary in the bay area of maybe 250-300K PER PERSON to support such prices. And frankly, that just ain’t gonna happen. People can pay 60% of their wages for rent in a pinch… But they can’t pay 120% or 180%! There are limitations to how far things can go, and looking through the math gives one some idea of where the 100% all in upper bounds might be. Rent going from $50K a year to $150K a year, when the average salary in SF is just under $90K a year IIRC… NOT POSSIBLE. Even if 100% of people in the city were Google employees making $150K a year it’s basically not possible. Therefore, it ain’t gonna happen. 30 years from now, sure. Because inflation alone will put wages nearly at that point with no true gain at all… But there will not be another 5-7 year run up right now that lands at such pricing levels.
    Paul Merriwether Investor from Oakland, California
    Replied 13 days ago
    >>it is painfully obvious there is not another doubling or tripling of prices left in places like SF, Seattle, NYC, etc right now. It just ain’t gonna happen. They’re ripe for a correction,<<< REALLY??? Purchased first home in Bay Area 1973 for $$32,500. Sold for $65,000 in 1978 and purchased the new home for $64,500 in 78. Today's value over $800,000. Appreciation is the key to real wealth!!! But how do I get it ??? A 2 x 4 in my area cost about the same in your area. In an Ohio area adding 100 sq\ft to a home might net me $80/sqft or $8000 minus cost in terms of appreciation. VS in Bay Area or high priced areas $400 – $700/sqft or $40k – $70,000 appreciation in property value. According to a future calculator a $800k Bay Area will be over $4 million in 30 yr's. At 6% appreciation/yr double in 12 yr's doing nothing to the home. Over the last 70 yr's 4- 7% yearly appreciation has been the norm for the Bay Area IMO.
    Vaughn K. from Seattle, WA
    Replied 13 days ago
    See my post above. In 30 years prices will be higher than now. Half+ of that would just be normal inflation. But there is no short term crazy run up to be had. And you still have to contend with things becoming too out of whack with wage to price ratios. People can’t pay more than they make in rent/mortgage! This issue hasn’t really hit until numbers like we have now, but they preclude future spikes from being too massive, and are in fact why things have started cooling off now. Even high earners have simply hit a wall beyond which they can’t really go, because MATH. Either way, appreciation gains aren’t as impressive as they seem. Google a study that compared appreciation markets to cash flow ones… Over decades returns ended up basically identical, but with fewer ups and downs in cash flow areas, AKA less risk and more stable for the same overall return. Cash flow markets allow one to reinvest and increase the size of their portfolio faster than buying in negative cash flow areas, so total returns ended up THE SAME. This was a major, serious study, not some thing cooked up by somebody in a basement. You’re stuck in a head game you’ve convinced yourself is correct, when the math tells a different story. You might not like hearing that some guy who invested in Cleveland has made as much money in RE as you have with your impressive appreciation figures… But that’s the story the math tells. And he had less volatility to deal with, and cash in his pocket the whole time.
    Jay Hinrichs Developer, Real Estate Broker, from Lake Oswego OR Summerlin, NV
    Replied 15 days ago
    age old argument there is an irrational exuberance right now to buy rental real estate in non appreciating markets those that buy them wont know how they do for another 5 to 10 years.. markets price for risk / reward.
    Joseph Asamoah Rental Property Investor from Washington, DC
    Replied 14 days ago
    Good points Jay. I
    Michael Gratteri
    Replied 15 days ago
    Do you realize that for investors in CA that it is extremely difficult whether you are a seasoned investor or newbie considering the prices are astronomically high??? Furthermore, the rent to price ratio is much better in other states. You failed to mention that if you live in a high cost state it’s not necessarily better to invest in the state you live.
    Deanne Bourne Investor from Concord, California
    Replied 15 days ago
    I am with Michael. I live in the San Francisco Bay Area and the only home I have here is a SF I purchased in Walnut Creek in 1984. Yes it is worth a good deal and yes, the rent is great BUT the little four families I purchased in upstate NY a few years ago are a real good investment too. For $30k down I can pay the bills and have $1000 a month for me baring any major issue. I have properties in three states now with good property managers and each one pays me a fair amount after the bills. There are enough buildings to cushion the blow if there is a downturn in an area. Diversification works for me. It takes a team and good property managers/realtors have been the key.
    Joseph Asamoah Rental Property Investor from Washington, DC
    Replied 14 days ago
    Good points Michael and Deanne. I get it. I too live in a high priced market, but as the saying goes – “it is what it is.” This is where I live and the challenge for me was to figure out how to make real estate work for me, given the realities of where I am. Although I am not intimately knowledgeable about where you live – it is what it is. Therefore, the challenge for you (and other investors in high priced markets) is to develop a game plan that works for where you are. I believe this is possible without having to throw in the towel or seek riches thousands of miles away.
    Paul Merriwether Investor from Oakland, California
    Replied 13 days ago
    Convert that Walnut Creek homes garage to an ADU for extra income!!! YOU’RE IN THE MONEY!!!!
    Bernie Neyer Investor from Chanute, Kansas
    Replied 15 days ago
    You are right on in so many facets, but staying local can be a bigger risk than expanding out. I live in a small town, 10K. The next closest town is only 2,500. You have to drive an hour to get to a larger town than mine. When I started investing in real estate, this was the only game I had. You have to cut your teeth in a local market. In these small towns if a business segment declines country wide, it can hit the smaller towns especially hard. If a business closes that has only 100 workers, it can affect the rental market of that small town significantly. I’ve weathered a couple of these down turns in part because of diversification into other markets. No one would suggest just owning one stock or having all your investments in one stock market market sector, and yet investing in one city could be just that. Another significant risk was recently revealed when I was contacted by a real estate agent selling a large portfolio of properties, 50 houses. For your market, D. C., that’s a spec on a gnat’s ass, but here in Chanute, KS, that’s a market call, a fire sell, a collapse reminiscent of 2008, which didn’t really affect us here much. There can’t be any appreciation with a sell off like that. Everything has its risks. The mark of an intelligent investor is seeing, realizing and navigating those risks. For Washington, DC, I can’t find too many risks, as it IS the seat of the federal government, and when was the last time you saw the feds ever get smaller?
    Joseph Asamoah Rental Property Investor from Washington, DC
    Replied 14 days ago
    Great points Bernie. Not sure about the “specs on a gnat’s ass though”!! – I may have to think about that one. Your points are very valid. I’ve been through four real estate cycles and know from experience the importance and benefits of a strong local economy during a downturn. Unfortunately, most investors don’t know the catastrophic collateral damage a market cycle can cause to your real estate financial well-being. Its ugly. Believe me, there’s no joy being the guy that is standing when the music stops. I’ve seen it play out so many times.
    Radsford Felix
    Replied 15 days ago
    I’m no mathematician but 75k is 25% less than 300k? Or is it 75% less considering you’d be spending a quarter of what you would have? I think that’s makes a difference when trying to figure out what your rent/return would be on the 300k house versus the 75k house. Idk… it’s early and I haven’t finished my coffee yet so excuse me if I’m off base here. ??
    Joseph Asamoah Rental Property Investor from Washington, DC
    Replied 14 days ago
    Hi Radsford, I hope the coffee tastes good. You don’t have to finish it to understand the gist of what I’m saying. 25% is 25% if all things are equal. But what looks good on a spreadsheet and in theory doesn’t always play out in the real world. The point I’m trying to make is it isn’t necessary to fall for the allure of a lower priced market if you happen to live in a high priced one. You can be successful investing without having to travel afar.
    Daniel Hughes from Hereford, AZ
    Replied 13 days ago
    I think he meant to write that 75k is 25% of 300k, which yes means 75% less.
    Kevin Auyong from Marietta, Ga
    Replied 15 days ago
    Way to many scenarios set up to make author’s points look valid. We all know there’s pros and cons to cheap and expensive re. For a Dr his math is pretty poor. When he says all things are equal and puts a 300k home renting for 2600 with a .87 ration then takes Lizard Lick at 75K renting for 650, that’s a perfect scenario for his article. BUT the ratio is not .87, it’s .0087. That’s a big difference. But putting a PHds poor math aside, quite often the ratio gets much better on a cheaper house. Let’s take a Ca house from my old town for 1 million renting for 3400. The 1 percent rule says rent should be 10K a month. The rent is 3400 so instead of 1% you get .0034 or roughly 1/3 of a percent. Now lets take a rental I have in Lizard Lick Wisc, house is worth about 90K and gets 1200 rent. that puts you over the 1% rule instead of below it at 1.3% 1.3% beats .34%. The house in Pleasanton at 1 million brings in $34K a year. Buying 11 houses in Lizard Lick Wi for the same price brings in $132K a year. Now I haven’t added in all expenses and appreciation, but Lizard Lick is putting a whupping on the Ca. House. As far as Appreciation I have tracked what Ca did versus Lizard Lick and I have done pretty well. The other thing is cost of entry. Who is going to save 200 to 300K as a down payment for Ca. While you are saving you can already buy Lizard Lick and collect rents. Finally the author claims and impressive portfolio of superior properties yet rents to low income sec 8? I would think with those better properties he wouldn’t need sec 8. Heck my little crap holes in Lizard Lick I don’t have to rent to sec 8. The ration is
    Kevin Auyong from Marietta, Ga
    Replied 15 days ago
    correction, rent in Pleasanton is 40,800 a year, not 34K a year. Still less than 132K
    Joseph Asamoah Rental Property Investor from Washington, DC
    Replied 13 days ago
    HI Kevin, thanks for the push back. Sorry to tell you my math is correct – in all fairness, I will concede that I should have said 0.87% and not 0.87 (more on this later). But I obviously disagree with some of your points. 1. Portfolio I don’t claim to have an impressive portfolio, I do. A portfolio built on the school of hard knocks. I eventually, realized that success required me to develop repeatable systems that were based on: clear criteria, processes, metrics, business networks and relationships. This takes time, effort and hard work. Unfortunately, many new investors fail to understand this and think their problems will all go away by placing their trust to gurus, “turnkey operators” and other strangers a thousand miles away with fancy spreadsheets and hoping they “do the right thing.” 2. Section 8: I completely disagree with your notion that renting to section 8 tenants is for losers. I addressed your point in a previous BP article: https://www.biggerpockets.com/blog/section-8-myth-big-money. For the record, I’ve had great success with section 8 tenants. I’me sorry to inform you that my tenants will absolutely NOT live in your crappy hole in Lizard Lick – under no circumstances whatsoever. What you fail to understand is that many voucher holders are no different than you and me – they don’t want to be shot at no more than you do. They want to live in a safe neighborhood and be a part of community – just like you. They want the best for their children – just like you. Once I figured this out, I started buying, rehabbing and renting houses that met their needs. and desires (I call this common sense). The result – tenants that take care of my homes, pay their rents, are pleasant to deal with and most importantly, stay a very long time (10, 15, 20 years). With minimal vacancies and turnovers – the biggest cost centers and cashflow killers. We can debate the pros and cons of section 8 another time since this was not the purpose of the article. 3. Math In terms of my math. It is correct. As I’m sure you know, the 1% rule is calculated as follows: $100,000 home renting at $1,000/month = 1000/100,000 = 0.01 = 1%. Likewise a $300,000 home renting for $2,600 = 2600/300,000 = 0.0087 = 0.87%. You may ask, do people pay $2,600 for a $300,000 home? In the DC area that is not unusual. I’m getting $3,000, $4,000, $5,000 etc. for my homes. That’s just the way it is around here. 4. Appreciation Not sure about you, but I would rather own a fewer number of homes in proven appreciating markets than many homes in non-appreciating markets. The issue is how do you get cash flow in higher cost markets. I think its possible to get both cash flow AND appreciation. I don’t think you need to settle for one or the other. I addressed this in another BP article: https://www.biggerpockets.com/blog/big-city-brrrr-cash-flow-appreciation
    Paul Merriwether Investor from Oakland, California
    Replied 13 days ago
    Joseph … good for you renting to Sec 8. In Oakland for a 4 bedroom they’ll pay approx $4,000/mth. When I owned rentals … I had more problems with people not on Sec 8. Sec 8 people have a lot to lose in high priced areas … they take care of their homes.
    Paul Merriwether Investor from Oakland, California
    Replied 13 days ago
    KEVIN … Your Pleasanton home … in the long run will far exceed Lizard Lick, because of appreciation. The future calculator says in 10 yr’s that CA home will have DOUBLED in value at 7%/yr appreciation.. 11 WI homes & maintenance will hold down profits vs one home in CA. IMO.
    Vaughn K. from Seattle, WA
    Replied 11 days ago
    LEARN HOW TO DO MATH. If one took all that positive cash flow and purchased MORE real estate with it, you will end up with basically identical net worth at the end of the day… The difference is that you don’t have ups and downs, which can KILL you if you don’t have the resources to cover the negative cash flow in a down market. Additionally, I still think you’re trippin’ if you think prices have another doubling or tripling in them in the near future. All these trendy areas have hit the wall where even super high earners can’t spring any more for rent or a mortgage… That’s why they’re all slowing down, and people are moving away to a new crop of trendy cities that are shooting up.
    Vaughn K. from Seattle, WA
    Replied 11 days ago
    LEARN HOW TO DO MATH. If one took all that positive cash flow and purchased MORE real estate with it, you will end up with basically identical net worth at the end of the day… The difference is that you don’t have ups and downs, which can KILL you if you don’t have the resources to cover the negative cash flow in a down market. Additionally, I still think you’re trippin’ if you think prices have another doubling or tripling in them in the near future. All these trendy areas have hit the wall where even super high earners can’t spring any more for rent or a mortgage… That’s why they’re all slowing down, and people are moving away to a new crop of trendy cities that are shooting up. Reply Report comment
    Johannes Schunter Investor from Greenwich, Connecticut
    Replied 15 days ago
    Despite spending several months on due dilligence, I lost 120% of my capital over 2 years in a out-of-state turnkey property deal brokered by the Real Wealth Network (thanks for nothing Kathy Fettke!). Never again out-of-state.
    Joseph Asamoah Rental Property Investor from Washington, DC
    Replied 13 days ago
    My condolences Johannes. Fancy spreadsheets and slick marketing doesn’t always work out the way the promoters say they should. Unfortunately, sometimes, the real world can be frustrating and disappointing. Reply Report comment
    Joseph Asamoah Rental Property Investor from Washington, DC
    Replied 13 days ago
    My condolences Johannes. Fancy spreadsheets and slick marketing doesn’t always work out the way the promoters say they should. Unfortunately, sometimes, the real world can be frustrating and disappointing.
    Joseph Asamoah Rental Property Investor from Washington, DC
    Replied 13 days ago
    My condolences Johannes. Fancy spreadsheets and slick marketing doesn’t always work out the way the promoters say they should. Unfortunately, sometimes, the real world can be frustrating and disappointing.
    Paul Merriwether Investor from Oakland, California
    Replied 13 days ago
    Johannes … lets hear the story. Maybe it’s not as bad as you think and it might help many others.
    Susan Maneck Investor from Jackson, Mississippi
    Replied 15 days ago
    I’ve yet to see a out-of-state Turnkey property I liked. I didn’t like the price, I didn’t like the neighborhoods and the rents they said you could get were way out of line with the rest of the neighborhood. I own 9 properties in Mississippi. A house which cost me 35K rents for $825 a month. The only one that rents for less I bought for 14K. Most of my houses are in walking distance from where I live (I paid 30K for my current principle residence.) I’ll be retiring soon and moving to South Lake Tahoe in California. I’m gradually turning my houses over to a property manager. a real estate broker through whom I bought these places in the first place. Some of these properties will appreciate and some won’t but rental income is so good, I don’t want to let them go. But when people contact me from California to ask about doing this, I have to warn them to be very careful. They think any property that costs less than 50K has to be a good deal no matter what shape it is in or the neighborhood where it is located. A lot of the time that isn’t the case.
    Joseph Asamoah Rental Property Investor from Washington, DC
    Replied 13 days ago
    Good points Susan. I wish I could buy houses around hear for $35K (only in my dreams). Enjoy retirement – you deserve it. Your a very savvy investor.
    Joseph M. Rental Property Investor from Sacramento Area, CA
    Replied 15 days ago
    Hi Joseph A., All I have to say is It Depends. Sometimes, the market you are in is a good market (solid LT growth, good rental rates, fair housing prices…) while sometimes it is not (numbers out of whack, out of control local government, lower tenant market..) . That is the business. Some people will agree that it is best to focus on your local area. Others say focus on the region with growth and yield. I say it is OK to do both. I started out by investing in my backyard (Sacramento area, CA). Once that market got to a point where it did not make sense, I went to a market about 2hours away (Reno, NV). Once that market got to a point where the numbers did not work, I expanded to other areas farther away. If I would have stayed ONLY local, I would NOT have what I have today. No where close. I created a system and was able to transport that system to other areas and prosper. But that worked for me. It may not work for someone else. Hence, my it depends. Just my 2 cents. Hope you hit a home run on your next deal. Joseph M.
    Joseph Asamoah Rental Property Investor from Washington, DC
    Replied 13 days ago
    Good points Joseph M. Your approach makes total sense. Start local, develop systems that are repeatable and then replicate where it makes sense to do so. I disagree with those that think starting out, they should venture hundreds and thousands of miles away without any systems in place and putting their trust in total strangers. I’ve worked too hard for my money to play Russian roulette with it.
    Paul Merriwether Investor from Oakland, California
    Replied 13 days ago
    Good for you Joseph M. Now it’s time to convert those garages in the SAC area to ADU’s for ADDITIONAL CASH FLOW!!!
    Deanna Opgenort Rental Property Investor from San Diego, CA
    Replied 15 days ago
    You can be buying outside “your” area, but still have local connections. My parents live 800 miles away, and scouted out both of my investment properties, and help with the minor management stuff (drop off keys, paperwork etc). I do the screening, organize repairs, and do the hands-on projects when I visit (Tax deductible visits, I might point out) . Out of area doesn’t always mean completely unconnected.
    Joseph Asamoah Rental Property Investor from Washington, DC
    Replied 13 days ago
    Hi Deanna, I agree with you the importance of having a local presence. The problem is that many investors have an “out of sight, out of mind” mindset when it comes to long distance investing. To me, it sounds too much like a train wreck waiting to happen.
    Joseph Asamoah Rental Property Investor from Washington, DC
    Replied 13 days ago
    Hi Deanna, I agree with you the importance of having a local presence. The problem is that many investors have an “out of sight, out of mind” mindset when it comes to long distance investing. To me, it sounds too much like a train wreck waiting to happen.
    Al Pendleton Real Estate Consultant from Oakland, CA
    Replied 14 days ago
    Properly prepared your sweet spot grows in portion to your tool box… The market should not determine your income, any market can and will produce steady profits if we do our homework. Excuses or solutions we all have to make a choice.
    Joseph Asamoah Rental Property Investor from Washington, DC
    Replied 13 days ago
    Wise words Al. Couldn’t agree with you more.
    Scott Huber
    Replied 14 days ago
    I have the same perspective as the author. I am even more closed minded, not investing in anything outside a 25 mile radius. I understand cash flow and rates of return, but I won’t drive or fly to a distant investment when a crisis occurs, and having done this since I was a kid, I guarantee a crisis will occur. Many. Most of what I’ve seen of out of town properties that are great deals are multifamily units that locals won’t touch. Single family homes are usually picked up by local investors. I’ve tried it in the past, but the element of control is too important to me. Way too much risk. And, good luck when you try to sell in a small market. Good article, Joseph.
    Joseph Asamoah Rental Property Investor from Washington, DC
    Replied 13 days ago
    Thanks for the kind words Scott. I totally get it. For the record, I’m not saying that long distance investing is bad. My point is one should proceed with extreme caution if doing so. In today’s competitive environment, its too easy to get sucked into the long distance investing trap by false advertising. As I said in opening paragraph, the grass is always greener on the other side until you get there.
    Cody L. Rental Property Investor from San Diego, Ca
    Replied 14 days ago
    tldr but here was the logic for me: 1) I wanted to buy RE and build up a nice portfolio 2) I couldn’t do that where I lived (San Diego) or conceivably anywhere I’d want to live 3) That left out of State. The trick is not to pull a state/city out of a hat based on whatever place someone on BP says is the best. You really need to have SOME tie to the place. Friends, family, somewhat close, or somewhere you’re visiting for some reason (or can realistically be expected to do so). You HAVE to know the submarkets well (that’s more important that being there and NOT knowing the submarkets).
    Joseph Asamoah Rental Property Investor from Washington, DC
    Replied 13 days ago
    Thanks Cody. I think we are saying similar things in different ways. If you must invest out of state, then to me, it doesn’t make sense to do so based on some fancy advertising or a downloaded spreadsheet. It doesn’t make sense to me and I just don’t get it. I agree with you that “knowing your sub-markets well” is very important. But I would add that just “knowing” your sub-market in itself, is not enough. I can “know” a market, but unless other factors are in place (e.g. systems, processes, relationships, metrics etc.) then long term success is unlikely.
    Paul Merriwether Investor from Oakland, California
    Replied 13 days ago
    >>>In my experience, appreciation delivers the biggest profit. <<< Appreciation for me has always been the key to making money over time. Small cashflow can easy be eaten up over time with just routine maintenance expenditures. You are also correct that 1 – 2 hr's outside of your expensive market generally you can find property at a far lower value and again feel more comfortable in that market than of state with totally different real estate laws regarding taxes, rentals etc.
    Sandeep Pai from Milpitas, CA
    Replied 13 days ago
    There are so many issues in the arguments in this post that it undermines the few half-decent points made. For one – in most cases you will see that the rent to price ratio is highly disproportionate in expensive markets like CA vs less expensive mid west markets. This is what attracts investors in the first place as without this mismatch, the property likely won’t be being cashflow positive. Properties with 400K+ price tag in CA have the same $ rent as properties with 100K price in some OOS markets which is a great arbitrage opportunity. No savvy investor will go for proportionate decrease in rent OOS. Anotherargument (which is really the naivest argument not to be expected from someone with 30+ yrs of experience in RE as claimed here) is that 25% of X is way less than 25% of Y. If an investor has 300K to invest whether he buys one property in CA or 6 properties in OOS will yield the same $ amount of appreciation. The few decent arguments made here about local knowledge and trusted partners would have made more impact if there was some supporting data/anecdotes behind them rather than just words.
    Joseph Asamoah Rental Property Investor from Washington, DC
    Replied 12 days ago
    Hi Sandeep, you make some interesting points and I will try and summarize them: First and foremost, as I mentioned to Sunny in a previous post, I do not consider myself to be naive. I would suggest you save that characterization to investors who think that nirvana will be reached by hopping on a plane to some place where they have no business investing their hard earned money. Or to people who fall for the marketing spin of turnkey operators and other promoters who sell the idea that all you have to do is send them your money and everything will be just fine just like they said in the brochures and spreadsheets. It appears we have a fundamental difference of opinion in terms of real estate investing strategy and tactics. 30 years experience (and the financial statement to prove it) has lead me to the belief that the REAL money is through appreciation AND cashflow. To be clear I under no circumstances recommend negative cash flow properties. You may then ask, well how can I get both cash flow and appreciation living in a high priced market. Since I don’t live in SF, LA, NYC, Boston etc., I can’t speak for those places. I live in the Washington DC area and therefore, my challenge was to figure out how to do it in this area. I discussed my approach and included some photos (for you naysayers — and people who think I’m naive) in the following BP article: https://www.biggerpockets.com/blog/big-city-brrrr-cash-flow-appreciation If you live in a high priced market, then I challenge YOU to figure out how to make it work where YOU are. It can be done, and I can guarantee you that some astute investor in YOUR local has figured it out without having to hop on a plane. Perhaps when you speak to this person(s) you can inform them they are naive also. If you speak to successful investors in your high priced market that have a decent portfolio, it is highly likely they will share the following wisdom: In addition to having systems, processes, networks, relationships etc. in place, they probably will tell you: 1. They wished they started investing in their high priced market earlier 2. They wished they bought more houses, and 3. They wished they kept more of the houses they bought. Look, it is ALWAYS expensive in these markets. 30 years ago when I bought my first house in DC, naysayers told me I paid too much @ $45K. Ten years later, naysayers told me I was paying too much @ $140K. Ten years later naysayers said $300K was too much to pay. Now they are saying $500K is too much (for the record my first house is now worth around $700K) and I bought my latest investment property 1 month ago. Although I don’t have a crystal ball, experience (and Federal Reserve data) tells me that 10 years from now, I will be kicking myself for not buying at $500K when it was “cheap.” That’s just the way it is in these high priced markets. Don’t blame me or accusing astute investors like me as naive — blame the laws of supply and demand. Feel free to continue to pursue your strategy if it works for you. However, don’t belittle a proven strategy that works and has been time tested. I’d love to compare notes with you 10 years from now (god willing) to see how we both fared. Good luck my friend.
    Terry Briggs
    Replied 12 days ago
    What’s your thoughts on Baltimore? In terms of deal availability? Potential rents? Potential appreciation? My middle son lives in Md. and wants me to consider backing him.
    Joseph Asamoah Rental Property Investor from Washington, DC
    Replied 12 days ago
    Good question Terry. As mentioned in the latter part of the article if someone lives in a high priced market (e.g. the DC area), then within 1 hour, exist another market where prices are more affordable, and the dynamics are completely different. Baltimore is approximately 45 minutes from DC and in my opinion, the situation there is markedly different. Since I don’t live in the Baltimore area, by choice, I do not invest there and do consider myself an expert on this market in any shape or form. With this said, I know several real estate investors that have figured out how to make Baltimore work for them. Prices are much cheaper (an order of magnitude lower) and cash flows can be quite attractive. However, appreciation is very block-by-block specific. I suggest you (or your son) attend a few Baltimore area REIA meetings and speak to the successful investors that are pursuing the strategy he wants to do. Ask you son to figure out how he can add value to the investor in exchange for them taking him under their wing. In my opinion, this is the fastest way to jump start a real estate investing career. I hope this helps.
    Vaughn K. from Seattle, WA
    Replied 10 days ago
    So Joe, I’m not trying to be a negative Nessie here, or just harp on you… But a couple more things pop into my head after reading some more of your responses. I read your article on BRRRing in DC. In short, at the end of the day, what you’re basically saying in there is that you’re buying really good flip projects… And then leaving all of your profit, and according to your article often times some of your cash, in the project to apparently positive cash flow a small amount right off the bat. Which for a pricey market ain’t bad! I wouldn’t say otherwise… But… In short, you’re making a big down payment. Because if you just sold those at market rates and pocketed the cash, you’d apparently have a large amount after your expenses. By leaving it in the deal it’s no different than throwing a ton of cash down straight out of pocket, because you created that cash via the reno either way, whether you sell or hold, that profit has been generated through work. In many markets you could put in nothing of your own money, put cash in your pocket at the end instead of leaving it in the project so it can be financed, and still have stronger cash flow than you do in DC. So I think one needs to put it in those plain terms, IE that you’re cash flowing because you put a ton of “cash” down that you generated through a highly profitable flip/reno job. It doesn’t sound quite as magical when you put it that way. I mean it’s impressive that you’re really good at buying great properties with a lot of upside and getting them done with numbers that turn you a healthy profit… But that’s not quite the same thing as buying a place in DC with low cash invested and still being cash flowing, as one can do many other places. Another thing that neither you or the other guy who said he owns some SF properties has responded to is the fact that large studies have shown in the long haul cash flow markets return the same as high appreciation markets overall, but with less volatility. To put THAT into simple terms imagine: Appreciation market: 3-4% cap rates (AKA income baby! 3-4% is common in trendy areas), 6-8% appreciation (6 is long term average in California IIRC) = 9-12% overall per year Cash flow market: 10-12% cap rates, 2% appreciation = 12-14% overall per year Now caveats: In cash flow markets you tend to spend more on maintenance as a percentage of income as properties cost a lot less, but cost of repairs is only marginally cheaper. 2% appreciation assumed there is essentially the inflation rate, which even the most boring areas have kept up with easily, barring total disasters like Detroit. One could perhaps find a few trendy markets that are higher than 6-8% long term appreciation, maybe JUST SF or NYC might beat this… But here’s the thing, it doesn’t matter! There have also been non appreciation markets that have been more like 3%+ appreciation, and some maybe a percent lower. There are areas where the income is ABOVE 12% by a good margin too. My point is merely to illustrate that overall the TOTAL figures of rental income + appreciation work out almost IDENTICALLY. You can plus or minus a couple percent one way or another for different particular cities, but nationally the above figures are pretty indicative of “normal” numbers for those 2 types of markets. One also has the in between ones that may split the difference with 7-8% cap rates and 4% appreciation… At the end of the day the market prices the overall returns almost IDENTICALLY thanks to the invisible hand… Funny how that works. Bottom line is even just using the most basic figures, one can see that the numbers are within spitting distance of each other. Neither one is leaps and bounds higher return than the other OVERALL. But again, the cash flow markets are less volatile… Leave you more fluff room in downturns… Which is why I’d say risk adjusted return is better there than up and down fancy cities. AND FINALLY, have you not heard of the crisis that has slowly unfolded over the last few decades? Ya know the one where housing costs have risen far faster than wages and have been squeezing all the spare cash out of people in major cities? Which is why 6 figure earners in trendy cities have the standard of living of high school drop outs who picked up a decent blue collar trade in the rest of the country? It’s a thing. Not a good thing either. These places go up, then correct back into where fundamentals say they should be during corrections, then climb even higher the next time… Every time it gets worse. But the thing is, there ARE limits to how far it can go. Somebody can theoretically pay 60% of their income in rent… But they can’t pay 120%. Which is why sales/rental prices are ultimately ALWAYS tied to wages in an area over the LONG HAUL. An example. Seattle wages have gone up A LOT in recent years. We’re over $80K a year now, one of the highest in the country. Which is why by the fundamentals, Seattle home prices would be long term sustainable in the $400-480K price range, which is far higher than they were saaay 20 or more years ago before the tech boom got going in earnest. Yet they hit almost $800K before the market started sliding last year, and are still over $700K. There SHOULD have been a TON of appreciation that was warranted by wage increases… Just not all the way to almost $800K. Maybe even throwing in a slight premium would be reasonable over and above fundamentals, but not a 60-100% premium. Even world class cities don’t HOLD such premiums during corrections according to stuff I have read. Places like NYC, London, etc all drop back into the 5-6x median income = median price range during corrections, which is where most sane markets live perpetually. Unless you expect somewhere like SF or Seattle to have median incomes in the $300K a year range, when national median incomes are only saaay $75K in a decade or so, prices simply can’t double/triple again anytime soon. As the old adage goes, anything that can’t go on forever WILL STOP. The current long term trend in housing can only go so far before it just can’t go up any more. Maybe there’s another little bit it can go up, but 6% appreciation in Cali cannot continue with wages going up by 2% a year for much longer. We’ve slowly built up an immense problem that is just waiting to correct itself back to sane and sustainable levels if you ask me… Counting on something that mathematically CANNOT continue indefinitely to keep happening indefinitely doesn’t make much sense to me. If you like what you do, keep at it. You’re obviously doing well for yourself, and enjoy what you do. You will make money overall. But I don’t think you’re going to see the appreciation rates you think you will over the long haul. If anything the Nashville’s, Atlanta’s, Austin’s, Boise’s etc of the country will be the ones pushing to the upper limits we see Seattle, SF etc at now… And maybe we’ll even see Cleveland, Detroit, Pittsburgh, Cincinnati, etc become proper mid priced cities… But Average SF/DC/NYC prices WILL NOT be 2-3+ million bucks in another decade. Maybe in 3 or 4, but that’s the magic of inflation over long periods of time, not real massive increases in inflation adjusted terms. I’m math brained… And I just can’t help but see that the math simply does not work for this trend continuing indefinitely. So IMO it’s only a question of WHEN it will stop.