Investing for cash flow- Cap Rates the 'end all- be all?

[Joshua Levine]

Good afternoon all.  First time investing and I'm curious your thoughts on this.  If you are an investor that's main focus is cash flow, why not simply find the highest cap rate you can find and invest in those properties?  What are the risks with that approach as long as you do your due diligence on the #'s of each deal and they look solid.|

Thank you in advance.

-Joshua

[Matt K.]

Generally speaking, those high cap rate and high cash flow properties are very risky. The risk comes from being in at best rough areas at worst they are absolute war zones. The people that live here often don't do it by choice rather it's one of it not only the only option. The chances of your property getting destroyed is much higher (theft, revenge, bad tenants etc). You're going to have higher than normal turn over and you're almost never going to be able to collect against anyone who stops paying or destroys your place. Oh and getting funding for loans under 50k is a pain.... and no one but investors are going to want this property so your exit plan is limited.

But hey they look great on paper... 30k house, rents for 7-800 mo.