More Units vs Less Units

[Alick Patrick]

While doing research for my first REI property I realized that I can generate the same amount of cash flow for a property around $100,000 and for a property around $500,000. Of course the $500,000 property meant better location and equity. However, if I settle for a cheaper property I can purchase a couple more rental properties and thus generate more cash flow.

On the other hand, my first time landlord status cautions me to know right upfront that there will be issues, repairs, other expenses, etc. that not only will cut through my cash flow but could also be stressful for me since I will be dealing with a lot more units. The $500,000 property has two units, one for me to live in and one for my tenant. The three cheaper properties would have a total of 8 units and I most likely would not be living in any of them.

I was told by one of the brokers I am working with that even though my mind is set on a goal of collecting properties for cash flow I would realize that building equity and selling the property after a short period is more profitable. I doubt it that my mind will change but I'd like to keep an open mind since I'm no expert. I also did some research on the threads for this forum section and one member suggested to buy cheap properties on good areas, fix them, and then generate both good rental income and equity. Although that may sound like the perfect route to go a new kid on the block like me would not know how to fix a property and calculate the costs associated with it.

Now my question to the people that were once a newbie like me and had the same exact goal in mind, is the equity route really that attractive that I will end up buying and selling? If so then I will seriously consider location location location on my purchases.