Palo Alto Homes No Foreclosures Here

Silicon Valley companies are doing very well as is evident in premier communities like Palo Alto. Here's an interesting scenario for both the home buyer and the investor. A coworker just bought a home in midtown for $1,425,000 - not huge at all - 3 bedrooms, 1 bath and maybe 1,300 square feet on a normal lot. One day's rental listing on Craigslist.com generated 4 applicants all willing to pay her $4,800 asking rent! Does this make "investment sense"? Not if you consider cash flow as the only aspect of return on investment. Investment return also involves appreciation, debt reduction, tax benefits, depreciation deductions and holding period. Will my coworker make money on this deal - in my opinion - absolutely yes - does it take guts and risk - yes also - but markets like Palo Alto will forever be in demand - so the risk is quite mitigated.