Equity and Buy and Hold?

[Adam Mittermeier]

I have been keeping my eye on a couple duplexes and I am having trouble trying to find comps for one of them. I could make 2% per month on it but I am just afraid that I may possibly pay too much for the property. Any of the comparable properties I found were sold at $30,000, This one is in auction for approximately $41,000 right now (minimum not yet met). 

So I am thinking I am paying too much for a property that I would be starting out in the hole.

Is this different with Buy and Hold when I plan to hold onto it for 3-5 years?

I wanted to run this by the experienced investors and get your inputs.

[Ned Carey]

@Adam Mittermeier  On the surface this just doesn't sound like a deal. 
First it seems you are paying  as much as $10K more than nearby properties.

Next it is a C area, is that a C on the way up or a C on the way down?

The problem with low end properties is the relative cost of repairs. If you need a new roof it is going to cost you say $3,000. If you are getting $1,200 a month rent, that is a real annoyance. If you are getting $500 a month rent that can crush you. 

Back to the first point, paying more than a neighborhood is worth is OK as long as you realize that is what you are doing. You may have a legitimate reason to do so like great cash flow. If you make  that choice you need to understand the risk you are taking. 

I have a friend that uses that strategy. He buys in one low end neighborhood. Hey only pays $10k~ but after repairs he is into the properties for more than the neighborhood is worth. He is making great cash flow. It works for him.  However he is a VERY experienced landlord and I certainly wouldn't recommend his strategy.