So I am trying to figure out if it's worth investing in a bad area of town simply for a higher cash flowing scenario. Property values may never rise much, but for the price it will be really easy to maintain positive cash flow. For instance, a 5 unit building could go for $50k or less. I realize it's more headache dealing with lower quality tenants and that maintenance costs will be higher, but it's hard to think that I can't make a decent profit with a 30%-40% maybe even as high as a 50% cap.
@Jonathan Wheeler How bad of an area is it?
Lower income areas do have higher maintenance, vacancies if your picky with tenants, require more of your time which is also worth money, and the rents are low compared to the CapEx that will come up for the property.
Have you talked to other local investors? I would be curious why others aren't buying those if they are such good deals.