I can buy cheaper than it is to build, will this make me wealthy?

[Jonathan R.]

Hi BP community. I am having a great time in Wichita, KS in my first year and a half to two years of investing; we have taken an aggressive approach by investing in a low income high crime area near downtown Wichita. My question is- if I am buying houses for cheaper than it costs to build a similar home, can I reasonably believe/state that one day the property will appreciate, substantially. Even in a D or F area, everything will appreciate by the time my kids get it. Right? Buy enough of these properties, my kiddos will be swimming in gold coins like Scrooge McDuck in the cartoon with all the other landlords. To clarify, I am stating that every single peice of real estate will appreciate in 20 years plus if bought for a price under the cost to build a similar home and maintained well. The folks saying do not bet on appreciation are wrong or are only talking about a time less than 20 plus years for holding a rental property. Am I missing something?

[Ned Carey]

@Jonathan R. yes you are missing something. That is demand side of the equation.  If there is no demand to live in a particular area, prices simply are not going to go up.  It doesn't matter what it cost to build if no one wants to buy what you built. 

Now with 20 years worth of inflation will your property be worth more? All things being equal yes. But they won't be equal. Neighborhoods change and the most likely scenario is those areas will continue to decline. The economics of simply maintaining the properties doesn't make sense

Of course the neighborhood could turn around and gentrify and you will look like a genius. You might buy a lottery ticket and win $10,000,000 too.