Start With Cheap Rentals or Buy Better Property With a Loan?

[Steve Bob]

I am starting out in real estate, I’d like to hear which approach would be smarter:

• Use $50K–$100K in cash to fully buy lower-priced houses (likely in rougher neighborhoods but already rented out), then wait 6–12 months for some appreciation and refinance to pull cash out and buy another similar property?
  OR
• Use that same cash as a down payment toward a $400K–$500K house in a better neighborhood with better property quality from the start?

Which path would be better for long-term growth and scaling up a real estate portfolio?

[Travis Biziorek]

Hey Steve—great question. You’ll probably get a lot of responses telling you to avoid cheap houses at all costs… but I think it’s a bit more nuanced than that.

When I started out, I actually planned to buy in Ann Arbor (I was living in the Detroit suburbs at the time). But once I ran the numbers, it just didn’t make sense for my goals—too expensive, too little cash flow. So I pivoted and started buying in Detroit proper instead.

My first couple deals were $45K homes in C/C+ areas (not D-class), fully rented and in decent shape. The cash flow was solid, but I realized quickly that to really move the needle, I needed to add value. So I started buying off-market fixers, doing cosmetic rehabs, and then refinancing. That’s when things really started to click.

Fast forward to today: I've got 12 doors, and I've pulled all of my capital out (and then some) through BRRRR. And here's the kicker—everything I own has appreciated 2.5x–3.5x since I bought.

So yes, I believe in buying the cheap houses. But you can’t do it blindly or without a strategy. Detroit is a special market right now—still affordable, and there’s real appreciation momentum happening. I wouldn’t try to run this same playbook in rural Alabama or a flat Midwest town. Detroit has its challenges, but if you learn the market and play it right, the rewards can be huge.

Last thought: if you’re just buying and hoping for appreciation in 6–12 months, you’re probably going to be disappointed—unless you’re adding value.

Happy to share more if helpful.