Purchase price vs rent generated

[Kellen Driscoll]

Hello BP, I have a question that I'm sure a lot of new investors are curious about. On a few podcasts that I've listened too, I hear people buying duplexes around and sometimes under 50k total for purchase and rehab and renting them for $800-$1000 or so a month. This is in states like Washington and Wisconsin and probably more that I haven't looked into. I live in Massachusetts and if I search in areas like New Bedford and Fall River which are higher drug/crime areas I see properties that are cheap at 100k maybe 80k and need an additional 50k to fix up putting me at 130-150k total, which rent could typically be around $1100-1200 a month. Is it just me or is the correlation between purchase + rehab price vs the rent generated in different states very un-proportional??? Even more so the higher the price goes, if I want to buy a duplex on cape cod it's going to run me around 300k and I might make $2800-$3000 a month. I could buy 6 of those 50k houses and make $4800-$6000 for 300k. Is there something I am missing here? Best, Kellen

[Gualter Amarelo]

@Kellen Driscoll You are seeing exactly why the rougher cities are more ideal for cashflow. I am a Fall River investor and currently own 13 units with 5 more UAG. My turn over is low and my cashflow is good. I think that we have to screen our tenants better here, but at the same time we have many more tenants available to us and we tend to fill units quickly even in down markets. I cashflow and average of $300 per unit and have never paid more than $55k per unit and have paid as little as $35k per unit. Let me clarify that these are on multi-families which I prefer over the SFR's for the fact that the vacancy percentage is easier to deal with in a Multifamily. One missing tenant can't effect the mortgage.