considering C class SFR, talk me out of it (or into it)

[Ryan McCook]

Here's my situation. I have 9 SFR rentals in Arizona. I'm in a good spot - decent equity, lowish interest, etc. I'm very interested in acquiring more and really expanding my portfolio. I could cash out refi and acquire another 9 or so. However, I'm concerned that I might be buying too high. Cashing out on my current, plus buying more, might just essentially mean I bought 18 properties at a high point in the market.

So instead, I'm thinking about holding onto my current homes with good terms, and investing in an area where homes don't tend to appreciate as much, but where I can buy for cheap and try to cash flow a little. Example, thinking about downtown Fort Worth where I can get some crummy homes on the wholesale market for around 40-50k. Maybe fix up a bit, and get the value to about 100k and refi and get most of my money out.

The thought process is, maybe during a high market, I should put my money where homes don't tend to appreciate or depreciate and try to make a little change with the rents. I know there are risks, but what are your thoughts (experienced investors) in renting to lower income/rundown areas?

[Jim K.]

@Ryan McCook

If you've figured out how to do long-distance rehab and make the bucks running D-class rentals from a distance, you're well ahead of the game. Me, not so much. I buy rental properties in borderline C/D-class neighborhoods, renovate them, and run them as rentals. The difference between what I do and your projected plan is that I live where I buy, I handle almost all of the renovations myself, and I handle almost all the maintenance on these properties myself as well. I'm the pop of a classic mom and pop self-managing DIY landlording outfit. If I tried to do this a state or so over there's no doubt in my mind that I'd get beaten up by the complexities of running these places and managing the tenants who choose to live in them.