BiggerPockets

I read a thread this morning on cheapest market. It made me wonder if that really mattered? Is it that important? Is it the most important thing in buying properties?
Each investor can answer that last question for themself. Here is the way I'd look at it. That isn't important to me compared to a couple other items.
1. What can I rent a median price home for in that area? For example, if I buy a 100K home in your area, what will it rent for? If you are in certain areas around the country, you can't play this what if game!
2. Where does that 100K home fit in your area in regards to the median price home in this area?
3. Is this home in an extra high cost area for property taxes and property insurance? Texas, Florida, and other areas that have out of the ordinary costs for these items
4. What is the potential upside for this 100K property? Is it in an area where people want to live?
5.Is this 100K property seriously devalued at purchase time?

Now, if I take the above into consideration, do I still care that Detroit, or Dayton, or other areas like that can be bought dirt cheap? There are some areas that I wouldn't buy, simply because they're in the cheapest areas. I might feel differently if I LIVED in that area that has homes that are dirt cheap.
It would also be important to me to make sure the property being purchased cheap didn't lose its' allure due to extensive repairs or upgrades neccessary.
Like all other real estate characteristics, buyers should not get tunnel vision,i.e. "cheapest market", "gimmick terms", "owner financing", etc. Many of these things are simply the outer cover on a defective product, once you get inside and see it for what it is.
Good luck to us all in this turbulent time. I'm not trying to pour cold water on ideas you may have. I'm just suggesting youview the entire picture. I compare it to taking a snapshot of a scene. You see very little. If you take a video of the same scene, you'll obtain a more complete picture. That is what we should all be doing in this market. A snapshot would be "just seeing cheapest market". A video would include the study of all the items that I've listed above, and others you may think of . Rich in Vegas.

For someone with few posts on here, you seem on base with your thinking. Anytime you have questions or thoughts, share them on here. Rich

Tim- my questions began with "what can I rent a median price home for in your area?"
Then, I give 100K as an example. I also stated that many areas won't be able to play this what if game. Most of CA, areas of NY, HI, WA, etc. I just took an average that seemed to fit for most areas, imo. Rich.
p.s. Obviously, the thread was useless. Not a single poster answered any of the questions. Oh well, its' daturday.

Tim,

I live in Santa Monica, CA -- $100,000 out here? Forget cheap -- that's a steal.

I bought property in Pittsburg for less than 25K and I rent them for $600.
I know I can't go wrong there. My tenants always pay on time.
The only problem is to deal with the snow in winter.

I am not paying utilities. Never that will be a huge mistake.

Susan-if you are just trying to buy a property with rent that covers the loan, that is not a good investment. you it will be hard NOT to lose on that type of investment.

I agree, covering your loan is definitely not enough.
I shoot for 15% above all my costs. I had to go out of my area to find inexpensive rentals where they pay $750 per month, after all my expenses including PM, I clear $450. I invested $28K. For my first one I am happy. Now I need to find some seller financing properties.
Rich, thanks for raising all the great questions, it is easy to apply them to neighborhoods as well.

Great post Reese,

As always, the economic definition of what is expensive becomes individual. There is no global answer.

An investment arm question is, where can one afford the ARV discount inherent in a business plan.

For example, I am going to focus on Augusta, GA because:

1. I know the territory and do not wish,
at onset, to invest time to learn
another.
2. I can afford 60 - 70% of the $100,000
3 - 5 year SFR's

Just because one knows the trends of a neighborhood or it's a relative "deal" (i.e. CA homes now priced at $160K vs $240) if it falls outside the limits set by careful financial analysis and a business plan that term is largely irrelevant