I'm working on a couple properties and doing my research, and have a scenario I'm looking for opinions on.
I'll give 1 example:
Fully rented 4-unit in a so-so suburb. Not a violent part of town, but economically, not so great.
Cash flow is roughly $170-210 per unit depending on expenses such as insurance and water which I would be responsible for. I'm trying to be conservative with my estimates, so let's just say $170-180 cash flow per unit.
Now, like I said, the area is not so great. Not the worst by any means, but I personally probably wouldn't live there! Median household income is ~$46k, minimal violent crime. Lots of access to public transportation and there are some very nice areas within 1-2 miles.
Obviously, I would have to take the good with the bad. This would be my first rental property, so I'm looking to make my first move. I'm to the point now where I'm wanting to do my first deal like crazy, but also suffering analysis paralysis! Looking for opinions, good and bad, all are welcome!
Cash flow sounds reasonable, however, I don't like to buy places that I wouldn't want to live in, both the quality of the property & location.
My litmus test, this may sound cheap or cheesy, but I bring my wife to every property before I buy it and ask for her opinion. If I am showing it to her then it has already passed my test for numbers, and I want a wife/mother's perspective.
I don't buy any place I would not live. Others gladly buy in areas they would not live and are comfortable with it. I look for appreciation as well as cash flow, COC, etc. That just me...and other will have a different opinion. You are going to have to make your own decision on what you feel comfortable with and what your long term goals are.
While location can be important in terms of quality of the tenant you might find and appreciation/value of the house after it is paid off, I prefer to buy something that will flow the most cash for the least amount of money. For 800/mo of cash flow I would be looking to spend maybe 20-30k which is usually not possible in the areas your wife might desire to live.
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