Multifamily investing in suspect areas

[Serge S.]

We are starting to get into multifamily investing. Here in AZ, all the numbers seem to work. Purchased the first one early this year. $42k for a 5plex with 2-3bd units, 1-2bd units and 1-1bd units. Got it up and running within a month and all units rented ($2,300 gross income) within a month. That experience went so well that we bought a few more in the same complex. Now we are dealing with tenant headaches with this being a low income city with the state penitentiary as the primary employer. Vacancies are high, good tenants impossible to come by, nobody can afford the security deposit and major damage to the units. This isn't necessarily a "ghetto" area, just lack of tenants with cash. We sold two of the three at a profit with one left but the multifamily experience has left a bad taste in my mouth.

Question of the day - do you always take the higher returns for more management headache, stay in target neighborhoods or just chase the best deal? I know there is no straight answer but I'd be interested to hear some success and nightmare stories with people and their [b]first multifamily experience.