Do I buy more or buy in higher appreciation markets

[Al Caan]

Hi Bigger Pockets:

So I have 5 units in a cash flowing market, section 8 and yes I have tenants that don’t pay etc, my question are:

1) the area does not appreciate like San Diego, so shall I buy more of these ~$60k ~$400 net cash flow, or shall I buy in better appreciation markets?

2) With the properties not appreciating much, can I BRRRR and pull my initial investment back out so I can grow?

Thanks

[David Garner]

Opinions vary wildly on this. I personally own over 100 C Class houses, and I personally enjoy it. 

When I had 25 I was struggling. 

I had to make the decision to either sell all of them and focus on another type of asset with less issues, or buy so many that the scale absorbed the inevitable issues one generally encounters with older properties in rough neighbourhoods with sometimes problem tenants.

I chose the scale route, and we are well on our way to 300 units. The problems are all still there, but if you do it right (and by right, I mean you'll make less money because you'll spend more money), then it can be a great asset class.

That said, it is definitely not for everyone. I have my own team and back office now, and everything is in-house, from contracting to property management. For me, that was the only way to mitigate the issues of poor contracting work, and poor property management and tenant selection.

So, as an owner of these types of houses who is actively buying more pf them at a rate of 5/month, my advice to you is the same as the advice I gave myself...

...either set a plan to scale significantly, or do as most others will say in this thread and sell them to reinvest in more stable assets in better markets.

I should also point out, we have developed a program to encourage our tenants to purchase their home from us with a sizeable deposit and either a lease option or seller financing, which - while not a perfect solution - has mitigated much of the tenant-based drama that is all too common in this space.