Why do some investors purchase sub-$100k properties?

[Erik Estrada]

I never understood this. Most of the deals have very thin margins, very expensive to finance, and seem like a legal headache if something goes wrong... 

If the argument is the lower barrier to entry, why not put the $20 or $50k in a stock or bond that will yield you 4-10% return on average? Is it a tax-strategy? I really get confused when I see these deals. 

[Jules Aton]

Quote from @Stuart Udis:

Now everyone is told they should and can own investment real estate. As a result, the $100K properties are pushed on many as a way to own investment real estate. There are a ton of transactional fees to be earned through PM, Brokerage, lending etc which is why these properties are pushed so hard.  

I suspect many also perceive the $100K properties as being lower risk due to the low monthly payments and perceived cash flow. Then you have people like James Jones writing:  " The margins aren't thin if you know what you're doing. Cheap houses cash flow harder than expensive ones." Sadly, this fails to take into consideration the realities of today's opex and capex environment which causes many of these properties to be upside down as soon as cap ex and opex realities hit. Doesn't matter how experienced you are, the costs are the costs. Choose to do things the right way, more than likely the real estate can't sustain itself. Cut corners, you stand a chance but that's not the business I choose to be part of. I wouldn't sleep well at night when my personal guarantee is on a loan that is upside down as soon as a few capex events hit knowing I can't absorb the costs to properly address them. Personally, guaranteeing large loans doesn't scare me. Guaranteeing debt that is most likely to be greater than the asset value does and 80% or even 70% LTV loans on a $100k home is more likely to present that dilemma.

The most unfortunate part of this is hucksters are pushing it on people who truly can't afford to lose money.