Purchase price vs rent generated

[Kellen Driscoll]

Hello BP, I have a question that I'm sure a lot of new investors are curious about. On a few podcasts that I've listened too, I hear people buying duplexes around and sometimes under 50k total for purchase and rehab and renting them for $800-$1000 or so a month. This is in states like Washington and Wisconsin and probably more that I haven't looked into. I live in Massachusetts and if I search in areas like New Bedford and Fall River which are higher drug/crime areas I see properties that are cheap at 100k maybe 80k and need an additional 50k to fix up putting me at 130-150k total, which rent could typically be around $1100-1200 a month. Is it just me or is the correlation between purchase + rehab price vs the rent generated in different states very un-proportional??? Even more so the higher the price goes, if I want to buy a duplex on cape cod it's going to run me around 300k and I might make $2800-$3000 a month. I could buy 6 of those 50k houses and make $4800-$6000 for 300k. Is there something I am missing here? Best, Kellen

[Peter B.]

Kellen,

I Know of the podcasts you are referring to... Yes these properties exist here in Wisconsin... And yes they appear to be very profitable.. BUT

I will confirm what Patrick has suggested.. ( I own said c properties and I own b/b+ properties).. They do not attract the best tenants.. They are difficult to work on being a converted property.

I think BP over glorifies these properties... They should come with a warning label..(These properties may cause...premature balding, heavy drinking, sleepless nights and frequent use of the words w.t.f..) I know plenty of investors that chase these properties.. These investors also spend a proportionate amount of time in court.... (there is no court button on the bp calculator)

Point is IF they ever return anywhere near that you will earn it.

Peter