Wholesaling in cheap market

[Chad Ellerbrock]

The top 10 cash transactions on single-family homes in Toledo, Ohio are neighborhoods that retail for $15-30,000 per house. I have sent out yellow letters and put up bandit signs and most that are calling are either underwater or would have to pay me to take their property as it would only bring $3000-5000 in the current condition. Can you make money in markets like these wholesaling? The cash on cash returns to rent is amazing but who would want to be a landlord in F class neighborhoods? 

[Mitch Messer]

Hey @Chad Ellerbrock. The challenge with F-class neighborhoods is often that the cash-on-cash returns are only amazing on paper!

These returns quickly come back down to earth once you factor in real-world costs, like:

• Soaring vacancy rates (20-30% and higher)
• Increased maintenance and turnover expense
• Increased rent collection effort and expense
• Increased property insurance costs
• Higher repair costs due to the limited number of contractors willing to serve F neighborhoods

That said, if you check recent area sales and discover that someone is actively buying these things for investment purposes, then absolutely there is money to be made wholesaling in your market!