Agree Or disagree and why.

Real Estate Consultant · Cleveland · Member since 2020 · 6k+ posts · 3k+ votes

Everyone has heard, Location Location Location, and most live by it. NOT me. Its PRICE PRICE PRICE, people live everywhere.

Thoughts ?

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Chris SeveneyBusiness Member

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Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes

I have been in real estate since mid 90’s so I am definitely a location location location person

Why - because it’s not as susceptible to as significant a price drop during recessions and they typically recover faster and have greater appreciation which is the true wealth builder in real estate. Just my opinion and feel free to disagree. I love healthy discussions on challenging topics

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Doug Smith
Lender · Tampa, FL · Member since 2013 · 2k+ posts · 2k+ votes
2y
Agree. Price and Condition are the two reasons a property sits on the market. It's one or the other...or both. Location matters for appreciation, desirability, and DOM, but if a property is priced right and doesn't contain a nuclear waste dump in the back yard, it will move.
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Bob S.
OP
Real Estate Consultant · Cleveland · Member since 2020 · 6k+ posts · 3k+ votes
2y
Quote from @Doug Smith:

Agree. Price and Condition are the two reasons a property sits on the market. It's one or the other...or both. Location matters for appreciation, desirability, and DOM, but if a property is priced right and doesn't contain a nuclear waste dump in the back yard, it will move.

I should have clarified, I meant as a rental. Cant edit this
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Vadim F.
Investor · Member since 2020 · 337 posts · 213 votes
2y
Agree! People get too caught up in the whole grading scale of neighborhoods and drink the kool-aid of potential gentrification and not wanting to be late so they pay the premium on a neighborhood thats still a D but will potentially be a C in 5yrs. I will invest in a D class area but if the home is on a nice block who cares. If the price makes sense, you have solid boots on the ground, and are getting a solid return......what else do you need???
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Chris SeveneyBusiness Member
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Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
2y
I have been in real estate since mid 90’s so I am definitely a location location location person
Why - because it’s not as susceptible to as significant a price drop during recessions and they typically recover faster and have greater appreciation which is the true wealth builder in real estate. Just my opinion and feel free to disagree. I love healthy discussions on challenging topics
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Vadim F.
Investor · Member since 2020 · 337 posts · 213 votes
2y
@Chris Seveney agree with you on location but only if it is an appreciation market. If it is a cash flow market, it’s all about price, but that is my personal opinion.
3 Reply
Vadim F.
Investor · Member since 2020 · 337 posts · 213 votes
2y
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Mark F.
Rental Property Investor · Northern NJ · Member since 2019 · 672 posts · 677 votes
2y

Disagree. I've spent 15 years (and continue to this day) in C- and D neighborhoods for work and have zero desire to invest in them. Low appreciation and a much higher rate of tenant drama/problems. I'm acutely aware you can make money but the time/stress value is too out of whack for my personal investment philosophy.

I'll pay (and plan on continuing to) a higher premier for solid B neighborhoods and a more normal class of tenants. I know no class of tenants are without some drama but I also know C/D/ neighborhoods have more. Maybe also that I have a decent paying, very stable W2 job that I thoroughly enjoy so I can park my money into higher priced assets.
I'd invest in funds/syndications/stocks before I throw any money towards them. If your counter argument is that some C neighborhoods gentrify into A and B, I'll happily miss that boat still.
13 Reply
Theresa HarrisPro Member
Member since 2019 · 15k+ posts · 11k+ votes
2y
To me both are important. I would never buy a place that is a steal in a bad area. I will only buy in areas that I would be comfortable living in myself.
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
2y
Quote from @Mark F.:

Disagree. I've spent 15 years (and continue to this day) in C- and D neighborhoods for work and have zero desire to invest in them. Low appreciation and a much higher rate of tenant drama/problems. I'm acutely aware you can make money but the time/stress value is too out of whack for my personal investment philosophy.

I'll pay (and plan on continuing to) a higher premier for solid B neighborhoods and a more normal class of tenants. I know no class of tenants are without some drama but I also know C/D/ neighborhoods have more. Maybe also that I have a decent paying, very stable W2 job that I thoroughly enjoy so I can park my money into higher priced assets.
I'd invest in funds/syndications/stocks before I throw any money towards them. If your counter argument is that some C neighborhoods gentrify into A and B, I'll happily miss that boat still.

Me too.. work there but dont own any .. location is the metric period in my mind..
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Steve K.
Realtor · Boulder, CO · Member since 2016 · 3k+ posts · 5k+ votes
2y
Location. All the way 100%.
You've mentioned on a number of posts that you've done 500 deals in Cleveland. I'd much rather do 5 deals in a good location and retire.
12 Reply
Jim K.
Handyman · Pittsburgh, PA · Member since 2018 · 5k+ posts · 13k+ votes
2y
You would think that with our frequently-stated emphasis in C-class properties I would be all-the-way behind the price-price-price and cashflow belief, but I never have been. I do not buy in D-class in the Pittsburgh area. I will buy in a low-C class area, but only if I am convinced the area has significant appreciation potential.
The dividing line for me between C and D is the rule of law, encapsulated in the often-misunderstood term, "War Zone." This is not a dog whistle term for a lawless minority ghetto. Minority population really has nothing to do with war zones except as an economic issue. If the police can and will respond to a 911 call in a reasonable timeframe in an area, it's not D-class, and that's most minority neighborhoods in my area. There are some 'Burgh hoods, however, where the police would really prefer not to show up.
The way I see it, the only people who can successfully make money in rentals in D-class areas as I've defined them are local organized crime operators. All others need not buy. The properties simply come with too many headaches, extraneous random expenses, and there's only so many people who would voluntarily choose to live in that area. Vet as much as you like, you'll never get the right kind of tenants to respond to your rental advertisements. Reputable contractors typically won't service these D-class locations. Service or personal calls, especially routine rent-collection calls that happen according to a predictable schedule, aren't safe. You get known in such an area as the landlord of multiple buildings, someone who might just carry money around with him, people on the street you don't know just start calling you "boss man" in passing, you're fixing to get jumped sooner or later.
9 Reply
Billy Smith
Shawnee Mission, KS · Member since 2016 · 716 posts · 313 votes
2y
Location is number 1 in my strategy ,.
1 Reply
Marcus Auerbach
Investor · Milwaukee - Mequon, WI · Member since 2010 · 5k+ posts · 7k+ votes
2y
Most live by PRICE, PRICE, PRICE until they learn that leaason (including myself in the early years). You talk yourself into "it has to be possible" and the whole way we analyze properties is centered around cash flow. Many newer investors worry about is $120/enough or should I buy the other one with $147? Looks better on the spreadsheet.
They overloom the 3 elephants in the room: turnover, rehab and capex.
Your single biggest expense is turnover! You don't make any money until you sign a lease renewal. The only other thing that is more expensive is a trashed up unit. But even if it is not trashed, just lived in hard, you'll find yourself between spending 5-10k to make things nice again or renting to someone who does not care about the condition (bad idea!!). You think that's high? Try 2k for new carpet, 2k to paint, 2k for some new appliances, 2k to fix some closet doors, light fixtures, blinds and 2k for vacancy and releasing.
The biggest issue we have in Milwaukee with "cash flow properties" is deferred maintenance. If you buy a 100 year old cheap building, nobody who has owned it in the last 50 years has invested any money in it other than the bare minimum. Everything is old and held together by duck tape. A full rehab will be around $50 per square foot. And yes, you may be able to kick the can down the road a few more years, but it's not going away!
And without appreciation the 8% of the rent you set aside every year will maybe pay for new gutters, but not a new roof. Let alone everything else you need!
We just had a PM panel at the RPA's show and when asked which one of the portfolio's they manage has performed the best long term, every one of them said hands down B+. Fewer turnover, less rehab, less drama, more appreciation.
In other words: LOCATION, LOCATION, LOCATION
12 Reply
Bob S.
OP
Real Estate Consultant · Cleveland · Member since 2020 · 6k+ posts · 3k+ votes
2y
Quote from @Steve K.:

Location. All the way 100%.
You've mentioned on a number of posts that you've done 500 deals in Cleveland. I'd much rather do 5 deals in a good location and retire.

Its ok to agree to disagree. I personally go with pricing to an point. Of course I am not buying in E, F areas .
0 Reply
Steve Vaughan
Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes
2y
I dabbled a bit in the cf 'south side' of my market when I was new.

These were probably nothing like true urban rough, but were rough enough. 800-900 sqft 2 beds I bought for about $75k when they rented for about $850. Better than 1%.

The only way I survived was to be humble and respectful when there to any and all neighbors and passers by.

When the market became a true sellers market in 2017, I started selling 1 to 2 per year because these turned so often. Retailed them up and staged them. Even the cats and birds knew it was a rough area. Pigeons moved in one, cats in another.

Got to know all about live animal traps and mounting spikey things on rafters. Thankfully I did see some appreciation as the rising tide lifted all boats.

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Jonathan R McLaughlin
Rental Property Investor · Boston, Massachusetts (MA) · Member since 2016 · 2k+ posts · 2k+ votes
2y
generic locations are widgets, in a market where widgets are profitable, you will do well. In a market where there is a decline you will be hit. Lots of people make money in widgets.
Good locations tend to hold value better than generic ones, attract the better tenants and have a greater likelihood of appreciation and a sale to a non-investor with a higher strike price when you exit. Not to mention quality of life for the property owner.
You can make good cash flow every month and be losing money if the area is losing value. We haven't seen that in a while but a higher interest rate environment might change things. Flight to quality is a real thing in a downturn.
5 Reply
David Ramirez
Investor · Tampa, FL · Member since 2019 · 1k+ posts · 1k+ votes
2y
In my opinion, I'd prefer to invest in a property in an area that I know has enough demand to support low vacancy rates, attract high-quality tenants, experience annual rent increases, and offer job opportunities, among other factors. I wouldn't consider a rental in a rural area with a small population where the demand doesn't meet any of the criteria mentioned above, even if the price is right.
1 Reply
Vadim F.
Investor · Member since 2020 · 337 posts · 213 votes
2y
Location vs Price is relative to the market you are investing in. I invest in Cleveland, majority of the city is C class and below. Tons of investors are trying to buy up Clark-Fulton on the west side because of MetroHealth is pouring in $1b. The area is is near Tremont and Ohio City which are the 2 of top neighborhoods in Cleveland. Clark Fulton is currently a C-/D+ area but yet investors are paying premium prices because of the "Location" but gentrification is still a long ways away, maybe 5-10yrs. There are comparable areas on the East side of Cleveland that are C-, with a solid tenant base and you can acquire a property for much less.
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Bob S.
OP
Real Estate Consultant · Cleveland · Member since 2020 · 6k+ posts · 3k+ votes
2y
Quote from @David Ramirez:

In my opinion, I'd prefer to invest in a property in an area that I know has enough demand to support low vacancy rates, attract high-quality tenants, experience annual rent increases, and offer job opportunities, among other factors. I wouldn't consider a rental in a rural area with a small population where the demand doesn't meet any of the criteria mentioned above, even if the price is right.
Well I have been hearing this for 10 years. Well, I have seen D areas double triple or more over the last 10 years, on top of the 25% + net caps. I am not speculating I live and breath it
All the best
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Linda S.
Investor · Richmond, VA · Member since 2016 · 1k+ posts · 2k+ votes
2y
@Bob S.,
If you remove the human/life element, then price/price/price works just fine! If it's
It's when you realize that it's cheap for a reason, and often the reason is most decent people don't want to live there! What you don't pay for in price, you pay for in headaches. I used to say "it's about the quality of the house" but learned my lesson-- quality of the house doesn't mean anything if neighborhood kids are breaking in and throwing bricks at your windows! This is coming from someone who has bought houses at $8500 -$9500.
If it's the right location, you can rent anything and someone will live in it.
If it's the right price (free) you can get someone to rent it, but you will always have problems and it will cost you more. Problems you don't have at the right location-- that's the difference.
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Jaron WallingPro Member
Rental Property Investor · Indianapolis, IN · Member since 2018 · 4k+ posts · 4k+ votes
2y
"drink the kool-aid of potential gentrification" - We don't like kool-aid and we see improvements and growth in neighborhoods we target. There's no potential about it.
Location will always be a factor for investors.
2 Reply
Gustavo Delgado
Houston, TX · Member since 2015 · 261 posts · 170 votes
2y
for a rental, its price and condition. Location is relevant to the tenant and people will rent where it is convenient to them.
0 Reply
Carlos Ptriawan
Member since 2019 · 7k+ posts · 4k+ votes
2y
Quote from @Bob S.:

Everyone has heard, Location Location Location, and most live by it. NOT me. Its PRICE PRICE PRICE, people live everywhere.

Thoughts ?

I see Location Location as sort of racial confirmation bias for discussion behind the door though. Doesn't quite really like it unconsciously. I kinda agree with you.
0 Reply
Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
2y
Quote from @Carlos Ptriawan:

Quote from @Bob S.:

Everyone has heard, Location Location Location, and most live by it. NOT me. Its PRICE PRICE PRICE, people live everywhere.

Thoughts ?

I see Location Location as sort of racial confirmation bias for discussion behind the door though. Doesn't quite really like it unconsciously. I kinda agree with you.

My dad had this poster in his office it was an Oak Tree sitting alone on a small ridge with brown grass kind of like you would see in CA. and the quote went something like this Land is land where its at creates the value. I mean how would one be if they owned 500 homes in the SF bay area and oppossed to 500 homes in East cleveland or South jackson MS.. ??? nuff said.. 500 homes in the bay area would be 500 million or so.. 500 homes in south Jackson MS would be about 25 million.. Same effort to buy and own them.. And the prices in the late 60s were basically the same . .
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Carlos Ptriawan
Member since 2019 · 7k+ posts · 4k+ votes
2y
Quote from @Jay Hinrichs:

Quote from @Carlos Ptriawan:

This is why the best "mind" I believe personally if one really able to forecast the future. Without bias of course. Real Estate is very easy. Thinking CA going up in value like today from twenty years ago trend is very easy thing to do as well (even spoken from 2009 era). Many times, being contrarian to "Biggerpocket" folks is the best approach.
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