New to RE. HCOL vs LCOL investing

2 Replies

Hey everyone!

I’m a completely new to RE and currently in the process of analyzing different markets.

Have a question about HCOL vs LCOL areas.

If this is a common knowledge that a one can expect to get $200/mo from one unit after all the expenses, what is the point of investing in, let’s say, LA vs Houston?

For the price of one unit in LA, you can probably get 2-3 of them in Houston or Chicago.

I was thinking about prices and it seems like you can still find an area with the same price growth, but with an actual price per house being way lower than LCOL markets.

I’m definitely missing something and would appreciate your input!

@Ruslan Nazarenko

HCOL area will also have greater natural appreciation and low cap rates that increase the return on increasing NOI on a commercial property.

LCOL area is much more efficient for your money initially.

What's right for you depends on 1,000 different factors all unique to you but it will come down to what do you want to do, how do you want to invest, what is your timeline for investing, where do you want to get to, and how much risk is a tolerable amount?

$200 a month costs me less than $6,000 on average in LCOL areas. I can't rent out my 3/2 in LA County for positive cash flow that I bought in 2011, but I am going to be able to sell it and pocket $300,000 of natural and forced appreciation during that time.

Don't be a HCOL or a LCOL investor. Just be an investor. Spend money on things that can make you money, analyze opportunity costs, sell things when opportunity costs exceeds return, and hold things when they won't. Constantly learn and evaluate alternate investing strategies and pursue multiple avenues. The best path to wealth is a diversified portfolio.

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