How typical are non-paying tenants in lower economic areas?

[Christopher Davis]

The more I read and learn about investing, according to the bigger pockets strategies, the more questions I have.

Wouldn’t renting in a low economic area, where homes are selling for under $100k, wouldn’t that also invite less prosperous and less responsible tenants who will more frequently default on rent?

BP never mentions this, but I read it elsewhere. BP also seems to present the idea that owning 40, or even 20, homes is a breeze to manage. Not a big deal. I would think you would need a manager to manage all this? Especially if properties are located in different states?

I just see a lot of problems and headaches in owning numerous low cost homes in poor areas. I have no experience though, so I can’t say.

Can any experienced landlords here comment on this?

[Jim K.]

Thanks for the mention, @Jay Hinrichs.

@Christopher Davis I have C/D-class borderline SFR rentals in a major Rust Belt city, several of which cost me $25K or less per unit to acquire.

Point 1: Does running cheap rentals mean that you're going to get tenants who default more often on rent? Not always.  But managing to get the right tenants into C/D units is, I believe, a more involved process than what A/B landlords typically go through.

Point 2: Managing 40 homes is possible in low-income rentals. The way we run our business, we renovate one acquisition at a time, we maintain all our own properties, and and we manage all own properties ourselves. I believe the far upper limit for this sort of business is 25 SFR, at which point running a single renovation as we do as well as managing and maintaining that many rentals will become more than a full-time job for one person with helpers to call on at need and a few key contractors to lean on, namely plumbing, HVAC, electrical,and roofing. I doubt I will get to that point before I start looking to unload my portfolio and transition to a different property class. Or completely change my business model.

Point 3: There are a lot of problems and headaches in owning numerous low-cost houses in poor areas. Well, yes. But if you stick with it, if you hone your craft, if you're willing to become a good handyman, and if you're willing to live where you invest, if you're coming to it from a job where you're not pulling down a lot of income and you're willing to gradually abandon such a job for full-time handyman employment, I believe it's a much less riskier strategy to make some money in real estate and tuck it away for a better retirement than a lot of other ideas I've seen on this website.