Housing Bubble vs. Other States

[Kelvin K.]

What are your thoughts about investing in housing bubble states such as Arizona and Nevada; where there are high rates of foreclosures and many heavily discounted properties available. In comparison to slower appreciating states like Texas (not considering high property taxes), where there is a strong economic outlook but there may or may not be as many discounted deals.

My thoughts are that buying in a housing bubble state would provide the investor with a nicely discounted property, with the potential of long term appreciation. However the concern is that there would be too many "for sale" signs, competing landlords, high rental vacancy rates and unemployment.

On the other hand if you purchase in Texas, the rental market would be driven by the strong economy. However you may never see a sharp rise in appreciation there.

Assuming this is for "buy and hold" and that the initial down payment and cashflow are similar for the targeted property in all states. Is there a recommended investment strategy that has worked for anyone, during the previous housing cycles?

[Bryan Hancock]

I think you should buy in markets you understand well. I understand the greater Austin area, DFW, and Houston well. Arizona and Nevada may be great places to invest, but I would have to rely on information from others. One of my old business partners knew Phoenix and Scottsdale well so that would be a good market if we were going to team together.

I truly believe in Texas and think the state will do very well coming out of the repression. People are already flooding into the state because the economy is doing pretty well in many areas. It is hard to argue with demographic trends, even if you can get bigger discounts in other areas. It all really depends on your style of investing and what you are hoping to accomplish.