The grim reality of the 2% rule

[Nick L.]

A lot of people here are attracted to the idea of buying Class D properties in rust-belt cities like Milwaukee. The math seems so obvious... buy a cheap duplex for a pittance, rent it out for 2% or even 3% of the purchase price, and the cash will flood in! How can you go wrong?

Another good question is, why are those properties so cheap? At last week's sheriff's auction I saw a SFR sell for $12k that is assessed at $85k, and a duplex sell for $8k which will probably get $500 top and bottom. Are most people too dumb to buy them, or too savvy?

This recent article gives some nuanced and balanced insights into the grim reality of owning and renting Class Ds in Milwaukee. If you've ever been tempted by 2% deals, read this before you reach for your wallet and ask yourself if you really want to be a part of this world. http://www.newyorker.com/magazine/2016/02/08/force...

[Jay Hinrichs]

Risk = Reward   the market is placing the value on the risk..