Buy a Class C or D Property or Wait

[Robert Murphy]

I'm looking to buy my first buy & hold property. My question is whether I should go ahead and buy a Class C or D property now, knowing it'll be more work, or hold and save more until I can buy more of a Class B property. My thought is that if I can get a property with some sort of cash flow, even if it's more work, I'll get both a cash flow going and a major education into landlording, then I can upgrade down to the line to a Class A or B. There's also less up-front financial risk and there's the possibility of it turning into a 'lotto ticket' property. Thanks in advance for your feedback!

[Jill F.]

Our first purchase was 8 units (2 side by side quads) in a "D" neighborhood. It was probably better maintained than most in the area because it was owned by the same family for 60 years but still is a 100 year old property and has all the problems those normally have. I believe that the key to successfully running properties rented by low-income tenants is being willing to solve problems for people that the lease doesn't actually require you to solve but that your tenants will probably be unable to solve on their own; sometimes you must bow to reality regardless of what you are entitled to under the terms of the lease. Your tenants will have *NO* access to credit of any type and will be extremely vulnerable to any income interruptions. Since we started 5 years ago I have never been screwed over by a tenant on a payment plan and we have not had a turnover in these properties since 2018. We (judiciously) extend credit and we pay for pest control and act quickly in the event of bedbugs. We include utilites in the rent for a couple of tenants that really struggle managing money and we accept payments weekly or bi-weekly on payday.