Less expensive markets under $50k for rentals?

[Victoria Gambardella]

I got into real estate investing 2 years ago purchased a condo and rented it out with positive cash flow $500 per month. This past year I bought a townhome and got roommates to pay the mortgage/taxes/HOA so virtually living for free relative to previous years. Now as I step back and calculate my next moves I realize I’m in a fairly expensive market I.e things costing $150k + which leaves for hefty down payments and more mortgages. I was thinking of switching my strategy to significantly lower cost markets I.e single family homes / condos / multi family in the range of $50k or less. Where I could buy properties outright,rehab for a buy and hold strategy. I realize this often comes with big risks: tenants in lower income neighborhoods, sometimes higher crime rates, trouble finding contractors willing to work in these areas due to crime rates, possibly working with section 8, etc. Are there any markets people would recommend that are looking primed for gentrification or would fall into these categories? I’m considering Trenton NJ but would love other perspectives and rationale for markets to consider. (Side note: I’m currently in Burlington VT, spent time in NYC area, and originally from Philadelphia suburbs would prefer something in an 8 hour drive but it’s not a deal breaker if it’s a market further out would just need to feel comfortable managing from afar).

[Casity Kao]

@Victoria Gambardella

If you go to significantly lower cost markets you run the risk of having more competition to finding properties because more people can afford them. In addition to that but in the 50,000 price range, when you factor in Capex and the type of tenant you will get I personally think there is not a cost savings. Locally here to West Michigan I can tell you Muskegon, MI is a market that is turning around quickly as it was once an area that was thriving, so it has well built homes and one of the most beautiful beaches in the state. My suggestion would be to invest in areas you know or you have an agent/friend/investor/relative or anyone you trust to vet the market. We personally invest in rentals in the 110-160k range, in particular duplexes because it seems to be a good range to attract high credit quality renters and often times we convert our renters into clients down the road when they are looking for a home or settling down.