Buy 1 rental home or 3 rental homes

[Paul S.]

Is it better to invest in 1 rental home in a nice area, or 3 rental homes in mediocre areas?

Assuming someone has $300,000 to invest, that would mean buying a $300,000 home in a nice neighborhood that will rent for about $1,700 to $1,800. Or rental homes that cost $100,000 which rent for about $900 to $1000.

Since the rentals in the lower cost neighborhoods may have more possible repairs or damage, how would one evaluate the choices. Of course another option is 2 rental homes at $150,000.

[Michael Lauther]

Paul: from what you posted I would say neither home would cash flow too well both would fall short of the 2% rule. If you wanted to buy and hold for apprecieation and tax benefits In my Opinion the more expensive property would be more likely to rebound and provide profit. On the other hand if you went to a more challenging neigborhood you could buy 6 houses @ 50K each that could rent for 1000 month and cash flow 3000 a month after expenses and make a profit even if the market stayed flat for 10 years. If you bought right and were in a decent blue collar market you could net a capital gain as well.