Jeff Brown writes a good article today on his real estate investing blog on appreciation vs. capital growth in real estate investing.  His point is that too many investors are chasing appreciation in high value markets which require large down payments to generate breakeven economics - and that by doing this they sacrifice leverage, which is the key to capital growth. 

His example, in my opinon, actually understates his case.  He compares a investor who puts $100k down (40%) on an expensive $250k property in a high value region to an investor who puts $100k (10%) down on $1 million worth of rental properties in a cheap region.  If the first market goes up by 10% then the investor makes $25k in appreciation.  But if the second market just goes up by 5%, on the other hand, then that investor makes $50k. 

The thing that jumps out at me here is that a one year 10% rise in property prices is huge.  Yeah, it's happened a lot in recent years in CA, FL, etc - but an investor who jumps in with the expectation that this will happen might as well take his down payemnt to Vegas and put it on red.  This isn't investing, it's speculating. 

Which is to say: I agree with Jeff's argument even more strongly than the example he puts out there.