Cheap Duplex for Cash or Decent Duplex w/Mortgage

[Aaron Jones]

Hi BP,

Need help deciding on my first intentional rental property purchase. I've found a cheap duplex for ~ $40k that this currently occupied and in pretty good condition, but in a C- neighborhood. I've also found a duplex for ~$140k that is in a B-/C+ neighborhood. I can buy the cheap duplex for cash, or put a 25% down payment on the decent duplex. Cash flow for the cheap duplex would be about $500/month, and about $250-300 on the other. Either property would be managed by a property management company.

I'm intrigued by the larger cash flow of the cheap duplex, and the idea of buying a few properties like these, holding them long term, and possibly getting a blanket equity loan to scale. The larger cash flow would enable me acquire more properties quicker. Disadvantages are low appreciation, harder to sell, and possibly troublesome tenant class. The other duplex will offer less cash flow, but more appreciation, and would be easier to sell in future years.

What are your thoughts? Anybody have experience with both types of properties?