<Buy, Rent, Re-Finance, Repeat> is a gung-ho approach that works when “the deal is made on the buy” (Dave’s right). But not everyplace offers the deal.
I should also add that not everyone has the skills to maneuver both the paperwork and the plumbing.
Personal experience: We made an offer on a condo a few months back. The location was great, but the price was not. Now I’m not sure if anyone would buy a rental property for zero or a slightly negative cash flow. But if they would, can someone explain the thought process behind that. We also want to be hand’s free and hire a property manager (because your highness shall nibble on those grapes. Hold them tight, dear).
In any case, we lost the condo to a higher bid.
The Reality: There is an irrationality about Real Estate prices in Denver at the moment. When we were pre-approved for $700K, we were euphoric. I even grew an inch taller. We came to our senses the next day, realized that it was insane, and settled instead on a wonderful townhome we call home today. We still want a rental property. But we want to wait for the market to sober.
The Data: Zillow (not affiliated) provides some great data to work with, if you’re keen on historical prices. I ran the ZHVI (Zillow House Value Index) Single-Family Homes Time Series ($) data for Cities. It includes average single family home prices for all states and 9637 cities, for all months from 1996 to the present.
The data, however, needs to be normalized, and ends up having over a million rows. I’d be happy to share the data with you if you’d like. You can either subscribe or send me a Tweet.
This is a yearly ranking. Any seasonal impacts and market depression would likely be suppressed by the many years included in the data.
Malibu is the only on the list I’ve actually been to, and heard of – the rest are completely new to me. I actually have an older relative who lived in Malibu – the lucky aunt married a wealthy Filipino. They separated after a few years. She got the house. Every so often, she told me once, she’d see Sharon Stone (I think) run on the beach.
The list is predominately CA. I expected to see some NY. I suppose the better weather won.
Conversely, the soberer folks live PA and MI. Detroit features, as does the inappropriately named Oil City. The fruits of our recent prosperity has eluded these rust belt cities. CA has seen the highest appreciation in the last seven years. I’d be curious to know the extent to which any fall in these appreciation levels predict upcoming downturn (if there’s a causation). If not, what the correlation is?
On the flip side, cities in IL have suffered massively. Even Socorro, home to the NM Institute of Technology and plenty of cheap golfing. Then again, we, the FI clique, keepers of the sober faith, and the frugal gene carriers, must never golf. Polo, on the other hand, would be okay – so long as the Horse enjoys it. Just how fun it’d be basketball(ing) with your overfed kid on your shoulders.
Curiously, the list includes Atlantic City as well.
On a parallel note, the S&P 500 more than doubled during the same period. What is the correlation, you ask? That, and a whole host of regional overview will have to wait another day. Because while you could gauge a city’s economic health by running rankings like these, a more subjective focus (on the city in question) is needed.
And because the great state of Kentucky, despite what the numbers tell you – especially the obesity ones – is a wonderful state. And Dennis Bergkamp not usually in any first tier rankings of this kind, should always be.
Then, like always, just for kicks – because NY must never be missed.