Buying in an Expensive Market & Expected Returns

[Sheldon Peart]

Hello Everyone, 

Hoping to get some feedback from people who either currently live in an expensive market or have in the past. We currently have been living in a cheap market for the past 6 years and have acquired 12 units here over the past 3 years. These properties yield about 20-25% total return (Equity + Cashflow). The new area we are moving to is 8 hours away and the housing is approx. 70+% higher for the same standard of house here. We are looking at rental properties now and are finding deals that yield about 15% total return (which is roughly made up of 5% cash and 10% equity). 

My questions revolve around the risks of an expensive market. Right now our properties cashflow strongly so we never need to worry about the operating costs being more than the cashflows. We offered on a deal last night and am just wondering if we are overlooking any kind of risks that we haven't experienced before going into an expensive market. The deal is for a duplex that cashflows about $600/mth after all expenses, which i feel is comfortable since the building is only 5 years old and is well taken care of to date. the area has extremely low vacancy (like many places) and inventory is low. It appears to be a strong area to buy and hold, just a bit weary of the expensive market.

Any feedback on if there are some unique risks that pertain to expensive markets would be really appreciated!

Thanks, 

Sheldon