Most real investors are really speculators wanting only appreciation with hardly any regards to cash flow. This by definition is a speculation. And while that is a legitimate technique most people with this mentally chase returns and therefore are late to the party.
I was buying in Downtown San Diego when everyone was scared of downtown. That was the time to buy; every deal I touched was a home run. Now everyone is speculating on condos and there is so much supply that appreciation has topped out. And renting does not produce anything close to the payments.
I had a buddy that bought in the lease appreciated Area in San Diego the year he bought it, the next year it was the highest appreciating area. I have been looking at properties outside Austin TX earlier this year and talked with several real estate investors I know, they all had told me that the market was soft (which I knew) but that the rental market was real soft as well. This scared me off. Well two other people from my office flew down there and bought some homes, the prices were just so low they didn’t care about the rental market. Then hurricane Katrina hits and what do you know, the rental market’s hot again. I don’t hope for disasters to stimulate markets but it’s just that if you go against the grain often times you will find opportunities.
Use your intuition and emotions to tell you what is a good area or going to be a good area. And remember, Real Estate is an emotional investment for most buyers, if you want your home to go up, realize that this is a legitimate way to purchase and don’t try to disconnect from it.
If there are subtleties that you can’t even figure out (consciously) but you just like it better than something else, then go with it. Your potential buyers or renters will most likely feel the same way. Smells, power lines, park cars on the street are legitimate reasons not purchase unless you would be stupid not to (a great price).
I hope this has been helpful. Feel free to contact me if you have any questions.