Best locations for investing under $50,000

[Michael Conway]

Hey BP!  

I'm wondering if anyone could provide some input on locations in Memphis for my first investment property. I don't want to be a slumlord, and vacancies are obviously important, but i'm looking for cash flow. Just like many areas I understand this can change from block to block, however I would like to narrow down my search to B/B- class neighborhoods, with a max price of 50K. I'm more interested in multi-family units, however is the numbers work I would consider SFR as well.

Can anyone give me insight to this neighborhood...?

Semmes St, Memphis, TN 38111

Seems like it could be a dangerous... typical vacancy rates?

Any information is good information!  Thanks everyone!

Michael Conway

[Chris Clothier]

@Michael Conway - 

I have never been a fan of rating neighborhoods ABC or D.  It makes no sense, tells an investor really nothing and is easily abused.  If you could, please describe how you define a B/B- neighborhood and a few commentators could probably tell you price points you are going to pay to find that.  For local investors, Semmes is probably ok and there is absolutely community pride and pride of ownership in the Orange Mound area.  That being said, there is no way many would rate this a "B" area neighborhood the way most investors use those terms unless they were trying to make a sale to an out of area investor.  

I think as a new investor, it is not a good idea to buy far from home with a max all in of 50K and expect to be in a B neigborhood.  It is not a good idea anyway, but especially not if you think you are going to get houses in the upper half of quality in a city.  Most think of that classification as upper-middle class, median price range and above for both home and income of the resident.  I think it is good to clear your mind of the idea that you will pay 50K and get a home in something you would describe as "B", but we'll see how you describe your ratings.

One other thing to think about.  You are most likely not going to be all in on a property for $50,000 and command a rent much higher than $500 - $595.  Assuming 25% of income for rent, which is probably low for what most people actually pay, you are talking about a resident earning between $26,000 and $30,000 before taxes.  That is a resident that will be insecure in all areas of life.  Food insecure, medicine insecure, transportation insecure.  Meaning that in a life and especially in an emergency they may be faced with making decisions between food, medicine, transportation and living expenses.  The first thing to be cut, skipped or delayed is rent because everything else is essential to earning a living.

That is a big, broad brush picture but in general will be pretty close.