When you are focused on appreciation, I recommend you carefully study the schools that feed to the home you want to purchase. Rental and appreciation are interesting words when used together in our market! We're going to see appreciation (my prediction) near Facebook in Menlo Park/Palo Alto with the influx of the IPO and all the ways that this drives up the home values and drives down inventory.
All of those cities have excellent pockets of schools. There is a trio of schools in Evergreen that are all rated "10s" (this is south of downtown San Jose area and East into the hills).
All of the city of Cupertino has top rated schools, but for a rental investment property, you would have a challenging time with cash flow at the $900K break in point.
Santa Clara has an area of 95051 that feeds to Cupertino schools that is in the $750K break-in point.
Milpitas has strong areas of Elementary-Middle combos in Park Town, but the homes are old and typically need upgrades. They will rent well due to the excellence of elementary (look for Sinnott) and middle (El Rancho). There is a home listed for $410K with offers due tomorrow on North Abbott, excellent elementary school, but with only 9 homes under 600K listed in Milpitas you can expect multiple offers and the sold price to exceed 410K.
You can't necessarily bet on appreciation anywhere in California. What with interest rates at a historical all-time low, you may in fact find that the prices today are the best buying opportunity we may see for some time. You might be getting the best deal now for return on investment for your rental, but nec. appreciation potential.
Let's say the interest rates go to10 percent. What this translates to is that people can afford less home. This will influence appreciation. Because if a home buyer is qualified to purchase $500K and suddenly can only purchase $400K due to interest rate payments increasing -- the value of the homes may possibly decline as a balancing effect.
If you are interested in a rental income property in Atlanta Georgia, where you can pay $60,000 and experience $1K monthly rents, let me know, I work with R1 Real Estate at the national level and I can connect you to their properties. They study all of the rental markets in the US and buy only where you can experience 10 percent return on your investment.
That's not likely to happen in our area for the fore-seeable future!
Erica Glessing Nelson
Editor & Co-Publisher "Sell Your House For the Right Price" slated for July 2012 release
"Buy the Right House" slated for Thanksgiving 2012 release
DRE 01425475, Realtor(r)