One of my investor clients recently wrote me: "I hadn't been looking at the 40 or 29 zip codes. Are these similar to 49, 50, and 54? Also, would you comment further on Stone Oaks and Westover Hills?"

And I answered in my usual brief fashion:

The 78240 and '29 zip codes are east and west of the Medical Center. Most of those neighborhoods have older homes or condos. The 78249 zip code is oddly shaped and goes in general north of the Medical Center. The '50 and '54 are to the west and are the newer tract home subdivisions as well as the older (my favorite) subdivisions of the Northwest Crossing area west of Bandera Road.

Stone Oak prices are higher than they should be for what you get (lots of traffic), and the high school, Reagan, was capped last May and the kids are being bused to MacArthur high school. So a lot of the frenzy to get in the neighborhood has died down. However, it's still a good investment-just not going to get the best cash flow. I think Encino Park is a better bet, since the school is the same, but the older homes start at for lower prices. There are lots of lovely trees in the area, too.

Westover Hills is booming. The school district boundary line for Northside goes through there, and if you get on the wrong side you're in Southwest ISD, which isn't the best. The new tract homes were being sold to investors, and after builders stopped selling, people continued to buy rental properties in the lower-end neighborhoods. There are a lot of rental properties in that zip code. The only neighborhoods I have felt like selling in are Sierra Springs and Spring Vistas, just south of Sea World. The builder is good, and the neighborhoods look better than Culebra Crossing and some of the others off of Culebra, Potranco, and Hunt Lane. On the northwest of Loop 1604 are some other new, good neighborhoods; the prices start in the high $150,000s.

It's always a trade-off between sales price, the rent you can get, and the appreciation you can expect. Each client has to decide what's more important. Your two properties are a very good mixture of income and appreciation, in my opinion. If you want to go in a different direction, more towards appreciation and less cash flow, then Stone Oak or the higher-end properties in Westover Hills would be a good way to do it. Or in older neighborhoods with the best-rated high schools, such as Castle Hills, Hunters Creek, Northwood/Northridge, Deerfield-and the list goes on. Prices would start in the $190,000s and they would need to be marketed as executive homes to a higher-end tenant."

Only in my reply to my client I typed Hunters Chase, not Hunters Creek. Oops! Hunters Chase is a good rental neighborhood just north of Parkwood in Northside school district; Hunters Creek is an older, much nicer neighborhood, with higher prices, in the North East school district.

But he knew what I meant!