In the real estate market that we’re in today, I disagree with the approach that you have laid out. Were someone to follow it in my area, which is Southeastern Michigan, they would ultimately end up buying and renting properties in the city of Detroit, pretty much every time.

But now is not the time to be buying those properties. Now is the time to buy the very best properties that you can find that will cash flow as rentals. In the area that I now target, which is the best school district in the state, the first time in history that homes there could be purchased at prices where they would cash flow was about 14 months ago. I’m buying these houses, which usually need nothing more than smoke detectors to be rentable, and renting them before I even close on them. And they stay rented.

The list of advantages to buying and renting these types of homes is endless – they’re occupied when I buy them so they are rent-ready at close. They typically have bulletproof mechanicals because they have been very well maintained. My renters want to be in the area and school district so they stay a long time. The top school district attracts some unbelievably great renters with great jobs and rental histories. They pay on time, etc etc etc.

And while the monthly cash flow may not match what’s available in the other areas like the city of Detroit, I’ll bet that my net profit is higher for three reasons.

#1 – my properties stay rented so I don’t have periods of vacancy as often as in the other areas.
#2 – when they do turn over they’re not trashed so I’m not spending a lot of money. And the biggest reason is
#3 – since these types of properties are basically “set and forget”, I don’t have to pay a property manager 10% or some other outrageous percentage of the collected rent every month.

So my advice is to buy the best available right now. You’ll get the biggest appreciation kick when the market turns around, plus you’ll have spectacular no headache rental properties that will be generating good cash flow for years and years and years.

Plus, properties in crappy areas like Detroit, Hazel Park, and Pontiac will always be available.

So buy the good stuff now while you can and go back to the crapy areas when the market rebounds.

Dennis Fassett