Appreciation or rental yield? Or both?

[Anders O.]

Hi!

I am pondering about how much I should focus my investments in one city / area.

Oslo is experiencing a price boom without comparison and the discrepancy between Oslo and other cities like Bergen is getting bigger and bigger. I got a nice appreciation going on two units in Oslo, so I will hopefully have enough equity to take the next step soon. The question is where to invest.

Five years ago, average prices were 30 percent higher in Oslo per square meter, now they are almost 60 percent higher. Both cities have low unemployment rates. Salaries are a little higher in Oslo, but it was always that way, even when the difference was at around 30 percent.

For you US people to get what I'm talking about: Oslo is more like San Francisco or Bay Area, with more money, better climate and quality of life, while Bergen is more like Phoenix (just replace the crazy heat of Phoenix with rain every day all year round except from a couple of months during the summer).

Rental yield will be a lot lower in Oslo and it would be more of a speculation on price appreciation, while Bergen would be more of a conservative bet with higher yields but prices appreciating a lot slower (Oslo: 15-20%, Bergen: 4%).

The most practical would be to invest in Oslo where I live so I could get some economy of scale, but then I would lose the diversification bit and could potentially be really ****ed if the market turns too soon. 

I have friends that could look after rentals in Bergen and its only a short flight away (door-to-door 2,5 hours), so both options are manageable.

What would you do?

How would you go about deciding?