Impact of recession, low income neighborhood properties?

6 Replies

I am a newbie and I am just amazed at the success stories on this wonderful forum. But I am little apprehensive about this model and I have few questions. I would be obliged if few experts can chime in.

1) I live in SoCal and I would be investing out of state. Is it still possible for me to do Brrrr or I have to mainly look at good cash flow deals?

2) I have generally seen that low income neighborhoods and cheaper homes <50k give the best ROI (around 2% rent to value). Though these investments look enticing, how do they weather a bad economy and a recession? Or does it make more sense to investment in better neighborhoods and earn lower returns?

3) Do people use private money lenders just for flips? If I have to hold the property long term, is conventional loan the only option?

4) Would be interested to get in touch with some investors from San Diego who are investing out of state. Would like to learn from local experts on how they are investing out of state?

@Aditya Namjoshi  - see notes below.

1) The BRRR approach is typically used for your primary residence so living in SoCal and investing out of state isn't possible (I don't want to sound negative). Investors still use the BRRR approach on investment properties though. Regardless, the BRRR approach is powerful!

2) The 1% and 2% rules don't apply in SoCal. Assuming you buy a property that needs a lot of work, the rents will be far below these percentages but can potentially be good investments in markets where you can substantially increase rents. I'm sure there are other parts of the country meeting the 1% or 2% rule in good neighborhoods where other properties are in bad neighborhoods. Know your market.

3) People use private money for all deals. If you want to acquire a property using private money, utilitize the BRRR approach to raise the property value, refinance and pay off your investor. And do it again!

4) I only invest here in San Diego but I know @Michael Swan invests out of state and is very insightful. 

Hi @Aditya Namjoshi and @Casey Murray

I noticed you mentioned me here Casey. Your boots on the ground are key, along with talking with investors that can give you lots of info regarding the areas they are investing in. Feel free to reach out to me anytime. I was the featured guest on Podcast 238 too. Recently the Old Dawg's REI Network Podcast had me as their featured guest 5 days ago too.

I love this stuff!!