OK, I think we generally agree on the valuation method.
However, the multiple you pay will be higher for “better” areas because the Premiums for rent in “better” areas are much smaller than the Premiums to buy. I learned this in the 90’s when trying to find investment property.
And, you pay 60% more in rent for the privelege of better schools, cool breezes, and peeks of the ocean.
According to rent slicer the avg rent for a house in La Jolla is $2242, for Clairemont it’s $1783, a 25% premium.
OK so the numbers may not be accurate but they are probably within 10-20%.
The purchase premium for La Jolla versus Clairemont is about 150% based on median price. To be fair, if you compare similar properties it’s more like a tad over 100% to purchase (3/2 1500 sf CLMT house for 500K versus starter homes in LJ for 1M+).
So, the premium you pay to rent in a nice area is considerably less than the premium you pay to purchase there. This was true in 1995 and will likely be true in 2009.
As for outmigration and where rents go, that’s another matter. Last year there were 40K who moved out of SD compared to those who moved in form other areas within the US and what happened to rent ? Did it go up or down ?
WHEN prices fall enough, you may even see a lot of former outmigrators (like me) moving back. Some of us miss it there.
