How can you invest in SFH that cost over 500K?

[Leandro Zhao]

In my city, SFH goes for about 400k, and the rent for those unit for 2.5k. After the mortgage, the landlord has no money left to pay for any other fees (property tax, maintenance, etc).

Is there anything i'm missing here?

Cities like NYC where houses goes over 1m. Is it even an investment or just burning cash?

What is your strategy for overpriced cities?

[Chris Mason]

You mentioned NYC, my answer will be biased from SF Bay Area experiences, mostly East Bay and Silicon Valley, with some SoCal mixed in.

People chasing cashflow don't buy SFRs. They buy 2-4 unit properties locally in neighborhoods you might consider "rough," or they look at SFRs that are a 1-3 hour drive away.

People who are already wealthy and high income (maybe from real estate, maybe from a lucky IPO), they are on an appreciation chasing strategy. If it's worth $1.5m today, it's probably had strong appreciation historically. History doesn't always repeat itself, but it's not exactly a terrible predictor either. They don't care about the cashflow, they're betting that Google (Silicon Valley), or Hollywood (SoCal), or the Bay Area housing crisis, are going to yield some combination of high demand and incomes, or low housing supply/production, or both, and thus appreciation per year greater than the short term negative cashflow, averaged out over a decade or two, at which point they unload it all and retire to the Bahamas (or whatever).

In NYC perhaps the example would be a luxury condo a block from Wall Street. If you believe the Occupy Wall Street narrative, and are part of that "Evil 1%," then wealth will keep getting concentrated, and that luxury condo is a super solid long term appreciation bet. If you need the cashflow b/c you aren't already in that "Evil 1%," it's likely the case that you just can't go toe-to-toe with those folks you'd be up against in downtown Manhattan.