A class C location for good cashflow, or no?

8 Replies

I heard a tip from one of the guests of episode #300 of the BiggerPockets podcast that said it's better to invest in a better location (class B and up) while getting less cashflow, than to invest in a class C (and below) location although more cashflow is possible, due to the higher price-to-rent ratios.

This is because better locations generally have better tenants, and although investing in a lower class location gives better cashflow, the possible tenant headache may not be worth it.

What are your thoughts on this?

@Vic Oyedeji

Seasoned real estate investors have their own sweet spots and their own reasoning behind it. Some investors like B and some like C. It really depends on what they have previously owned, how good their team is, what they have previously made money with etc. I have owned C class for 13+ years and like C+/B- areas (quality of the property is less important at purchase). Next time you go to a conference or meetup, ask investors what they like and why and you will get as many different answers as people you ask.

Most of my properties are class C and they have worked out really well for me. I'd rather pay all cash for a class C than have a mortgage on a class B property.

Personally I got into this to make more money not to have zero headaches in life . You are going to pay three times more to buy in those fancy places . Where is the savings in the end ? Pray and hope for appreciation and Easy tenants ? This thinking makes no sense to me when you can put your money to work in less desirable neighborhoods for better returns . Got to screen out the losers

Originally posted by @Dennis M. :

Personally I got into this to make more money not to have zero headaches in life . You are going to pay three times more to buy in those fancy places . Where is the savings in the end ? Pray and hope for appreciation and Easy tenants ? This thinking makes no sense to me when you can put your money to work in less desirable neighborhoods for better returns . Got to screen out the losers

Doesn’t that work with better locations as well, where you can find properties that are distressed, forclosure, or have a motivated seller that you can get with a deep discount, which makes the cash flow numbers make more sense?


It may be harder to find those properties...but ultimately I guess (based on the reposes here) it’s a matter of personal preference if you prefer higher cashflow or easier tenants in a good location.

Can you have a bet each way

A mixture of both, C for cashflow and perhap B for appreciation

This has been my strategy working well for me so far

@Vic Oyedeji

I invest in Detroit Metro.. Mainly zip codes 48124/48101/48127. Within these zip codes, I do for us on specific location. Most of my properties in Detroit metro are around Ford Engineering buildings where I work and hospitals.

@Marisa R. I totally agree. We approach this as a diversification.

Some higher value properties, which cash flow lower, have leverage, offer greater tax advantages, and appreciate over time.

Some lower properties in real blue collar areas, great cash flow, no leverage, not as many tax write-offs, and generally don't appreciate.

Both are wins for us 95% of the time. Both have their share of headaches. So just buy some Advil. 😀