Agree Or disagree and why.
Most Popular Reply
Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
2yI 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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112 Replies
- Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes2y
You'd have to be an idiot to ignore the implications location has on a deal.
- 2yJohn MorganPro MemberRental Property Investor · Grand Prairie, TX · Member since 2018 · 2k+ posts · 2k+ votes
@Bob Stevens
Agree with you 100%
- 2yJim ReynantePro MemberMember since 2023 · 53 posts · 24 votes
For me, the answer is Location.
I can own the worst home in the best neighborhood, and I know that it is liquid and I can sell it.
But if I own the best home in the worst neighborhood, I will have a much more difficult time trying to sell the property.
- Real Estate Broker · Minneapolis, MN · Member since 2011 · 5k+ posts · 6k+ votes2y
@Bob S. talking to a specific "realm" of strategy, I get-ya, and agree. In the ~C class, I'm in a long developed market, it's more about population density, everything is older with a "rainbow" of various degrees of last renovated, and things are really all about price.
If can get $___ rent's, it justifies ___ MAO, with ____ condition/deferred maintenance.
Now playing in the ~A "sandbox", at least for myself, it's all about path of progress because being IN the progress of ~A class, it's just too dang expensive usually. So location heavily win's. Getting in the PATH of progress, and being able to correctly peg that.
But if were talking "location" as in water-front, hey, come-on, hard to go wrong with rule of location in that factor right.
So, it's all conditional, like everything else in REI.
- 2ySam YinPro MemberLos Angeles, CA · Member since 2021 · 583 posts · 738 votes
@Bob Stevens
I think you need to add some parameters.
Early in REI journey (1 to 5 years): trying to escape W2 or dabbling.
Mid REI journey (5 to 10 years): have enough cash flow for FI, may or may not even hold a W2.
Experienced in REI (10 plus years) AND have more cash flow than they know what to do with. Just looking to accumulate for long term wealth.
I feel people in different categories will agree/disagree accordingly. If a guy working a W2, making under $100K per year, with a family to support, was trying to get into REI to replace W2, then cash flow all day long. Conversely, a guy with $200K plus income (W2 or REI) with excess savings would/should go for location all day long.
For me, I try to balance both cash flow and location/appreciation. But I weighed heavier on cash flow at the beginning to get me to FI. these days, I am weighing heavier on location, because I can based on the cash flow foundation that was already built.
Thus, its a matter of individual position and perspective.
- 2yBob S.Real Estate Consultant · Cleveland · Member since 2020 · 6k+ posts · 3k+ votesOP
Quote from @James Wise:
You'd have to be an idiot to ignore the implications location has on a deal.
Well as you are very aware, props in war zones have doubled tripled or more in " our" areas. So 25- 30% net caps ( I am sure you have a bunch of them ) plus appreciation. Now sure maybe I should have put an * not buying next to a row of crack houses. But hey, look at the prices 10 years ago, off Eddy rd, or Hough section, vs now. sooooo
- Handyman · Pittsburgh, PA · Member since 2018 · 5k+ posts · 13k+ votes2y
Bob, has anyone ever ODed in one of your rentals? It's happened to me, twice. Would you recommend the experience to any new landlord just starting out? Or is this more of a niche sort of experience to go through as a landlord building a portfolio?
- 2yBob S.Real Estate Consultant · Cleveland · Member since 2020 · 6k+ posts · 3k+ votesOP
Quote from @Jim K.:
Bob, has anyone ever ODed in one of your rentals? It's happened to me, twice. Would you recommend the experience to any new landlord just starting out? Or is this more of a niche sort of experience to go through as a landlord building a portfolio?
As long as you have proper PM place all should be well,
- Member since 2019 · 7k+ posts · 4k+ votes2y
Quote from @Bob S.:
Quote from @Jim K.:
Bob, has anyone ever ODed in one of your rentals? It's happened to me, twice. Would you recommend the experience to any new landlord just starting out? Or is this more of a niche sort of experience to go through as a landlord building a portfolio?
As long as you have proper PM place all should be well,
One thing that I really agree here is the PMC. I can give testimonial that the PMC in cash flow market (price,price), was way way generally better than PMC in appreciation area (location market).
I guess the PMC has much bigger role than the tenant/location itself. I have so much respect to pop-and-mom single-person PMC in cash-flow area (price price price). - NH · Member since 2016 · 56 posts · 73 votes2y
I hear 8 mile has some discounts right now. Check them out
What a ridiculous post. - Handyman · Pittsburgh, PA · Member since 2018 · 5k+ posts · 13k+ votes2y
Quote from @Bob S.:
Quote from @Jim K.:
Bob, has anyone ever ODed in one of your rentals? It's happened to me, twice. Would you recommend the experience to any new landlord just starting out? Or is this more of a niche sort of experience to go through as a landlord building a portfolio?
As long as you have proper PM place all should be well,
And you find you're able to put a "proper PM" in place in that sort of property? The good PMs are banging down your door to manage D-class in the high hood?
- 2yKonstantin GinzburgPro MemberMember since 2021 · 376 posts · 242 votes
I completely agree with Location as a priority above all else and then finding the correct price within that location. Each property we have acquired has had location as our top priority and we have had a fair amount of success due to this. While people do live everywhere, there are certain locations that people typically prefer. Factors such as the correct school district, close proximity to amenities, and low crime rate allows some properties within the same city to attract tenants quicker and minimize vacancy. At the same time, higher rent can be charged in these locations with this rent also having a tendency of increasing quicker. Building in the path of progress also increases the likelihood of increased property value appreciation over time to areas of a town that have stagnated.
- Investor · Fresno, CA · Member since 2016 · 222 posts · 237 votes2y
@Bob S. I think that th e2 sentiments are fundamentally talking about different things. Location (x3) is about defining your customer avatar and price (x3) is about defining the value of what you're purchasing.
Getting a screaming deal in the hood is a terrible deal if you don't want to serve that demographic. Likewise buying a home in an A+ market for 2x it true market price is foolish.
Ultimately these expressions are just guideposts pointing to a general truth, rather than hard and fast rules.
- Investor · Akron, OH · Member since 2016 · 2k+ posts · 4k+ votes2y
We sold our "D" neighborhood properties in 2022. I think we did a good job while we were there and we made money while we owned them but I do not miss managing them AT ALL. We found that in our market, the appreciation is much better in B & C and with renovations we are actually able to get comparable cash flow to the "D" properties in B/C neighborhood. It is way easier to manage B & C properties where I haven't had any overdose deaths, or drug dealers, or the residents of the local "D" area tent city rummaging through our dumpster (and before that steal our rolling cans) leaving all the trash on the ground, and we get a much more stable applicant pool. We were fortunate that our "D" properties did appreciate from 2016 to 2022, but it was not nearly so much as our B/C properties. I don't think Akron has any real "F" war zones like Cleveland; we do have some areas that are borderline but we never bought there... so for us its price, price, price in our B/C location, location, location.
- Investor · Member since 2020 · 337 posts · 213 votes2y
Great points made by everyone. Hypothetically speaking, let’s say there are 2 neighborhoods that are lower C class. 1 area is is getting tons of money poured into it and everyone is hoping it will gentrify in the next 5-10yrs. A single family 3/1 prop will cost $80-100k and bring in $1000mo. The location is prime but and the area will see more appreciation. Then there is an already established C- neighborhood that won’t gentrify but will remain steady and appreciate 3% annually, where you can get a single family home for $50k and get same rents of $1k. Me personally I’m investing in the lower priced property and not relying on potential gentrification in 5yrs because the tenant base will be the same as the lower priced area for at least 5yrs.
My reasoning is, I will have a higher cash flow and in 5yrs the profit I will receive from the cash flow and 3% appreciation will be equivalent to the prime location area. - Member since 2019 · 7k+ posts · 4k+ votes2y
Quote from @Bob S.:
Great points by all. We all should agree, money can be made anywhere as long as you have a team in place and know what you are doing
Lets all keep crushing it
that team thing is really the key in any market.
- Handyman · Pittsburgh, PA · Member since 2018 · 5k+ posts · 13k+ votes2y
Quote from @Bob S.:
Great points by all. We all should agree, money can be made anywhere as long as you have a team in place and know what you are doing
Lets all keep crushing it
My worry, Bob, is that newbies see things like this and think that the fine-looking abstract numbers in D-class will mean that they can reap pretty profits from these properties. That, especially as newbies, is just not true as a rule.
My view, which I've stated here many times, is that you can specialize in properties that are just above the lawless D-class cutoff and make SOME money -- there are many, many C- class neighborhoods and pocket neighborhoods on the edges of D-class where this is true. But it's a specialization, and it's usually hyperlocal, and it really helps if you self-manage and in most cases are able to work as your own handyman and small-scale renovator, supported both financially and emotionally by your spouse (as I was).FURTHERMORE, this would simply not have worked out well for us if we hadn't done some crucial work beforehand. We would have just been statistics in an ocean of bad mom-and-pop investor numbers.
BEFORE you aggressively focus on acquiring property in a questionable neighborhood, one of the best things to do is to gain some useful deep information about it, as I did. In my case, I learned (just through public records, the information was readily available to anyone willing to dig for it) that the municipal and school funding of the area was about to DOUBLE due to the expiration of a tax scheme. Anyone could have done this, but not enough small-scale real estate investors were willing to do the thankless, unpaid researching it typically entails.
The basis of the three- and four-fold appreciation of my target area in the last ten years is largely due to the expiration of that tax scheme. Our risky strategy ended up working out great. The many heartaches and difficulties of initially investing in my area were largely repaid. But without the tax scheme, without the appreciation? I'm really not sure. Price, price, price would certainly not have beaten out location, location, location. I would not be crushing it. I would be getting crushed under the weight of this game.
And I'm not even talking here about the importance of building the close relationships I have with my main contractors. I'm not explaining everything I did to earn the trust of local building inspectors. I would say I still pay gold-plated prices for everything, but now I know why. I still do a lot of my own minor maintenance. And I still lose money from time to time, and some of those losses would easily break a newbie risking it all on their first high-risk moves.
- Member since 2023 · 18 posts · 4 votes2y
I agree.I can’t afford the location location location houses right now but I can afford lower price and slower equity that cash flows beautifully I’ll take it I’m just starting out have purchased 3 properties below 90k each
- 2ySam YinPro MemberLos Angeles, CA · Member since 2021 · 583 posts · 738 votes
@Jim K.
I second that!
Jim, I have seem some of your older posts and I know you are a hands on guys in all fronts. I respect that. Because I do it too. It takes a lot of sweat equity to make up for lack of capital in order to keep the REI momentum going.
I am always weary of posts that could lead a newer investor down a risky path.
It takes lessons in life to see and mitigate risk before it's too late. I'm able to do about 90% of my own maintenance and repairs. I have reroofed, repair all sorts of plumbing, frame, electrical, dry wall, windows, etc... I have battled with inspectors, code enforcement, and utilities companies. I have had to drag out my old tractor to rip out trees and weed and junk just to keep the county off my back, even when it was not technically on my property/land. I keep my auger, rototiller, disc, and ripper all ready to go when I need to load up the tractor. thus I am able to absorb a bit more risk than some investors. Don't get me wrong, I hardly do any of it anymore. I probably do about 1% these days. I have a team to do it now, plus a few in reserves. But I do still go out to do it on rare occasions or when I'm bored/in the area. I think it keeps my team on their toes. I started out 100% managing everything myself.
I have yanked out several tenants, transients, trespassers, and illegal gangsters off my property, never having to break leather, but it was at the hip, loaded and ready to go. That's on the extreme side, and I know most investors need not care to do. But it is an example of my sweat equity to make up for my lack of funds.
Some investors do not care to learn to do any of it. Not even to PM or basic maintenance. They rely on PMs and Contractors and use math to justify. Nothing wrong with it, but I think that induces risk because you can be over reliant. I have heard some do really well, but I have heard some nasty stories from others, particularly the long distance investors.
The point is, most start up investors should be careful when they hear all the success stories. It's not all sunshine. It can take you out of the game or really delay your growth. Growing from zero to 100 units, or zero to $500k cash flow, in under 5 years are rare and require a lot of risk tolerance and PERSONAL KNOWLEDGE of intentional PM and maintenance.
This is why it is strange to debate location/appreciation versus price/cash flow. Most newer investors can be led to a not so optimal path for their circumstances.
- Handyman · Pittsburgh, PA · Member since 2018 · 5k+ posts · 13k+ votes2y
Quote from @Sam Yin:
@Jim K.
I second that!
Jim, I have seem some of your older posts and I know you are a hands on guys in all fronts. I respect that. Because I do it too. It takes a lot of sweat equity to make up for lack of capital in order to keep the REI momentum going.
I am always weary of posts that could lead a newer investor down a risky path.
It takes lessons in life to see and mitigate risk before it's too late. I'm able to do about 90% of my own maintenance and repairs. I have reroofed, repair all sorts of plumbing, frame, electrical, dry wall, windows, etc... I have battled with inspectors, code enforcement, and utilities companies. I have had to drag out my old tractor to rip out trees and weed and junk just to keep the county off my back, even when it was not technically on my property/land. I keep my auger, rototiller, disc, and ripper all ready to go when I need to load up the tractor. thus I am able to absorb a bit more risk than some investors. Don't get me wrong, I hardly do any of it anymore. I probably do about 1% these days. I have a team to do it now, plus a few in reserves. But I do still go out to do it on rare occasions or when I'm bored/in the area. I think it keeps my team on their toes. I started out 100% managing everything myself.
I have yanked out several tenants, transients, trespassers, and illegal gangsters off my property, never having to break leather, but it was at the hip, loaded and ready to go. That's on the extreme side, and I know most investors need not care to do. But it is an example of my sweat equity to make up for my lack of funds.
Some investors do not care to learn to do any of it. Not even to PM or basic maintenance. They rely on PMs and Contractors and use math to justify. Nothing wrong with it, but I think that induces risk because you can be over reliant. I have heard some do really well, but I have heard some nasty stories from others, particularly the long distance investors.
The point is, most start up investors should be careful when they hear all the success stories. It's not all sunshine. It can take you out of the game or really delay your growth. Growing from zero to 100 units, or zero to $500k cash flow, in under 5 years are rare and require a lot of risk tolerance and PERSONAL KNOWLEDGE of intentional PM and maintenance.
This is why it is strange to debate location/appreciation versus price/cash flow. Most newer investors can be led to a not so optimal path for their circumstances.
This is the reality of the situation versus the sloganeering and taglines, and I wish more people would see it. Thank you for your post, Sam.
- 2yJohn UnderwoodPro MemberInvestor · Greer, SC · Member since 2014 · 13k+ posts · 17k+ votes
@Bob Stevens
It depends.
For a top dollar money-making flip, I would stick with location.
For a property you get at a really good price, it would still be ok to flip or keep as a rental.
- Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes2y
Listen y'all, you can make money anywhere sure, but you can also lose money. You can also put forth varying levels of work to make or lose this money. It's true that the end result will be different for everyone based on a ton of factors, but there are patterns. There are occurrences that are more common than others. There are typical outcomes and outcomes that go against the grain. There is the norm and there is the exception.
For example, in the Cleveland market, when investors want to get rid of properties they bought because they didn't think location mattered, more often than not, they call my company. A huge portion of my income comes from helping property owners who didn't think location mattered sell their houses.If you are wondering how often this happens, when I 1st started selling real estate in my early 20's, I lived in a 900sq ft house on a tenth of an acre that had 3 beds and 2 baths...Today my house is on 22+ acres, has 7 beds, 8 baths, a pool house, and an 11 car garage.
Having said that, you've got to ask yourself, just how often do people who thought location didn't matter call me so they can sell their properties? Is calling me because they changed their mind on location not mattering the norm, or the exception?
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