location or cash flow

[Mel Rosario]

which is better so so location with cash flow, or desirable location but no to little cash flow? I am looking into a property that has a net operating inc of 52K with a cash flow of about 17k per current owner. Owner is selling the place for about 800k for 8 mixed units. Looking at the area, it is surrounded by businesses, storage facilities, a railroad, and very few rental complexes but near a main highway. My other places are much nicer but don't give me this kind of cash flow. I'm just concerned if i purchase this, how hard will it be to sell it in the future despite the cash flow? Any opinions. does location matter, future appreciation if any, cash flow?

I love this site, so many helpful people!!!

[Silver A.]

Mel,

just as it is more of a challenge to sell a property in a bad location, it is just as challenging to find tenants to a property in a bad location. At least they expect to rent the property for less than similar properties are going for in desirable location. The cash flow might look good on paper but if vacancies are three times longer due to not-so-good location than they would normally be, wouldn't that impact the cash flow? ;)

It might make sense to purchase something in a worse location just for cash flow as a long term investment if you know the area well and are absolutely sure that you can rent it and make a profit - go for it. You could even sell it later with owner financing or lease option... but if it looks like a gamble (you have no solid numbers and you are just hoping that it'll work out) - don't even touch it with a three foot pole and stay away.

What are the "mixed units" ?

[Silver A.]

Mel,

just as it is more of a challenge to sell a property in a bad location, it is just as challenging to find tenants to a property in a bad location. At least they expect to rent the property for less than similar properties are going for in desirable location. The cash flow might look good on paper but if vacancies are three times longer due to not-so-good location than they would normally be, wouldn't that impact the cash flow? ;)

It might make sense to purchase something in a worse location just for cash flow as a long term investment if you know the area well and are absolutely sure that you can rent it and make a profit - go for it. You could even sell it later with owner financing or lease option... but if it looks like a gamble (you have no solid numbers and you are just hoping that it'll work out) - don't even touch it with a three foot pole and stay away.

What are the "mixed units" ?

[Bill Gulley]

There is a reason they say, location, location, location!

If you have a great location, you have potential. If you know what to do with the property and you don't pay a premium because of the location, you can raise income in time more than a property in a poor location.

Assume identical buildings, one in a war zone the other in a great location. To assess the value, look at the property value without improvements and arrive at the difference for the land, that should reflect the difference in the price. More often, a seller will over price a property as the location is preceived to be more valuable.

Another thing, I have made more money off appreciation ofproperties than the cash flow. Depends on how long you plan on holding a property too, but if you are looking at a hundred bucks a door, that's nothing IMO.

You can always sell location, cash flow can be penuts and pays for nothing more than the headaches of holding it.

[Mel Rosario]

Silver and Finance,

thanks for the advice, I wasn't gung ho about the location and realize there are many more properties out there, i just have to be patient

property consists of 1 2bd/1bth, 7 1bd/bth

Mel

[Travis Bontrager]

The important thing is to not become a motivated buyer. I would hold out for the property that is in the location you are comfortable with and accomplishes your goals. Never buy a property because it was the lesser of two evils. Stick with your buying critiera for return and location and WAIT for that deal to come along. Hope this helps

Travis

[Casey S.]

My rule on bad locations is the only time I will go with a bad location is if the cash flow is there AND I think it has good longterm potential for a turn around. These are usually properties that have proximity to something that will maintain its draw longterm but the hood itself has become dated and down. Propertys that may be close to a major univ, close to or on water, near down town in a healthy growing city, etc.... Its IDing the up and coming neighborhoods before they are up and coming. If you cant find any reason why the area will draw better and more people in the future then stay away.

[Jeffrey K.]

I think they should sticky note Travis's post for all new to investments and also for those of us who have seen the markets slow down in the last year and are looking for something to do.