Then I noticed all the foreclosures in my neighborhood which were starting to get neglected.

While driving through a neighborhood, we came across a house that is empty.

Don't completely avoid Natomas, Antelope, Rancho Cordova and Elk Grove, just make sure you're purchasing in neighborhoods where you would live yourself.

Assuming you can convert your $300 - 400k of equity into $300k of cash, you should be able to use leverage and smart shopping to get upwards of a $50,000 a year return on that money.

Shop it around and tell the people you talk to that you're actively shopping looking for the best deal.

After shopping around I have found a lender that has offered a 20yr fixed @4% and will offer a HELOC up to 80% LTV.

I've lived in some rough neighborhoods myself over the years, so I can deal with a bit of roughness as long as it's not extreme.

Oh, and the area the home is in is fairly decent..its in the inner-city..i havent actually went by the property, and i dont wanna label it as a war zone..cause here in st.louis..some parts of the city will be i quiet neighborhood, and 10 blocks over would be a war zone..help!!

Problem areas - if neighborhood is so run down it looks like a war zone, drug dealers are openly selling on the streets and prostitution is rampant - perhaps you should look for a better area.

., and a cap rate of 10%, I come out with a fully loaded ARV of $396K which seems absurd considering the neighborhood and the other apartments in the area.