New to real estate investing

[Taylor Petersen]

Hi everyone, 

I am new to real estate investing or even the workforce for a couple of years. I will be graduating from dental school in May and I have accepted a job in Oklahoma. I am happy that in Oklahoma it is cheap to buy real estate but when looking ahead to where we are going to be living, I can see homes for the cost of 60k to 120k with average rents in the area of 900-1300 a month. That exceeds the 1% rule but my question is, is it bad to buy cheap real estate that cash flows high or better to buy more expensive real estate that cash flows low? (For the purpose of tax benefits and appreciation) 

They are a little older homes and in maybe a less desirable part of town.

[Liam Naughton]

Hi Taylor!

Appreciation tends to be more insulated on higher-priced homes because those neighborhoods tend to have populations with higher incomes who are less affected by any market swings.

In terms of tax benefits (always talk with a CPA) it depends on how you're running your properties. If you're spending a lot of money fixing them and managing them you're going to have more to write off. Depreciation will be higher on more expensive homes because it's percentage-based.

High cash flow is great! As long as the houses (and tenants) don't continually cost you money in renovations. Make sure you reinvest the money into the property and have cash on hand for any capital expenditures you might need in the future.

Good luck!