Cashflow vs Appreciation - Debunking David - Midwest wins!

[Greg Scott]

In a recent podcast David Greene answered the question of a young person from San Diego.  He commented that total returns in the Midwest are poor because they don't appreciate and rents don't go up.  He specifically called out "places like Indiana" and said this person would be better off buying one expensive property near where he lives vs several less expensive properties in the Midwest. 

I will use data to dispute.

In January 2015, the median home in Indianapolis was $97K.  At that same time the median home price in San Diego was $478K, so you could roughly buy 4 Indianapolis properties for every one San Diego property.  At that same time, the average rent for a typical Indianapolis property was $934 per month and the San Diego average was $1,781 per month.  So, would it be better to have bought one San Diego house or four Indy houses???

If you sold in Feb 2023, here is how your investment would have performed over those 8 years.

Appreciation
- Indianapolis - Those four houses would be worth $852K, a $464K increase in value or a 119% increase
- San Diego - This one house would be worth $884K, a $406K increase in value or a 84% increase

Rent Appreciation
- Indianapolis - Rents rose to an average of $1,458 over this time  period or a 56% increase
- San Diego - Rents rose to an average of $2,959 over this time period or a 66% increase

Gross Rents - Since cash flow would be difficult to calculate without expense data, it is much easier to look at gross rents as a surrogate.
- Indianapolis - Total rents for 8 years from these four houses would be $429K
- San Diego - Total rents for 8 years from one house would be $215K

All total, the four Indy houses look like a better investment than one San Diego house.  As an added benefit, you could sell one of those properties if you want.  With the San Diego house, you can't easily sell 1/4 of it!

Data sources - All Zillow
https://www.zillow.com/home-va...
https://www.zillow.com/home-va...
https://www.zillow.com/researc...