low cost cash flow ppty - pls help me understand

[Mary Joe]

Can someone please help me understand the the reason why these low cost properties are so popular?

It seems that many people are purchasing these low cost properties that generate a net positive cash flow of about $100 per door after all expenses and reserves for repairs/maintenance. Typically these properties can be as low as $20K to $30K each.

I understand the appeal of owning homes that are so inexpensive. But I don't understand why these are good investments.

Say if I purchase 20 of these low cost properties at $20K each, the finances will look like this:

*20 low cost properties
*total cash investment = $400K ( ie 20 x $20K per property)
*net profit per door = $100 (that's the average CF what I was told)
*Total cash flow per month = $100 x 20 properties = $2000 per month in cash flow.

My question is instead of spending $400K cash to purchase 20 low cost properties, wouldn't it make more sense using the $400K cash to buy just ONE decent property free and clear in a nice and stable area? There must be some areas across the country that can generate about $2000 a month in cash flows by owning just one property.

Why subject ourselves to the headache of managing 20 properties when the returns is about the same ?

Besides, my biggest biggest concern is the potential liability from owning 20 units. Based on my example above, my chance of being sued by tenants automatically goes up 20 folds.

Am I missing something ?

Any advice would be appreciated.

thanks
MJ