appreciation and current income must add up to make economic sense:
In rough terms for homes:
In Texas = income 7- 8 % + appreciation 2 - 3 % = about 10%
In SFBA = income 3% + appreciation 7% = about 10%
Added 5 min later: Exactly for the above reasons, lot of investors do not like CA (or SFBA) real estate because you end up locking your money for the same rate of return. I know some investors who could not sell their homes after 2009 for almost 5 years.
In a down market even Texas home values go down. Home values donât appreciate much doesnât mean they donât fall. So you wouldnât have been able to sell in Texas either if you had bought in 2009.
2008-2009 recession had minimum impact on home prices in Texas because these homes had smaller appreciation in the first place. Prices did not drip 20%-50% as they did in California.
The person who told me the investment strategy is a syndicate investors is known to me. He favors properties whose values do not fluctuate . He takes money from several investors and then buys big properties (like apartments), keeps them for some time, and then sells them. For him, income (rent) and price stability are important. He needs flexibility to enter and then exit at will. That is why he does not invest in California.
I am not suggesting you should not invest in California. Feel free to do so. Even my friend has a few investments in California. It is all about matching your investment goals with the right investment vehicle. Just follow Buffet. Understand the company (or property ) you are investing in.