low cost cash flow ppty - pls help me understand
Can someone please help me understand the the reason why these low cost properties are so popular?
It seems that many people are purchasing these low cost properties that generate a net positive cash flow of about $100 per door after all expenses and reserves for repairs/maintenance. Typically these properties can be as low as $20K to $30K each.
I understand the appeal of owning homes that are so inexpensive. But I don't understand why these are good investments.
Say if I purchase 20 of these low cost properties at $20K each, the finances will look like this:
*20 low cost properties
*total cash investment = $400K ( ie 20 x $20K per property)
*net profit per door = $100 (that's the average CF what I was told)
*Total cash flow per month = $100 x 20 properties = $2000 per month in cash flow.
My question is instead of spending $400K cash to purchase 20 low cost properties, wouldn't it make more sense using the $400K cash to buy just ONE decent property free and clear in a nice and stable area? There must be some areas across the country that can generate about $2000 a month in cash flows by owning just one property.
Why subject ourselves to the headache of managing 20 properties when the returns is about the same ?
Besides, my biggest biggest concern is the potential liability from owning 20 units. Based on my example above, my chance of being sued by tenants automatically goes up 20 folds.
Am I missing something ?
Any advice would be appreciated.
thanks
MJ