Purchase cheaper cash flowing properties or wait for more...

[Travis Frenchak]

Just looking for your feedback on something I struggle with. Would you/do you purchase lower cost (50-75k) cash flowing properties or would you/do you continue saving and purchase larger higher priced (200k+) cash flowing properties? 

You could purchase more lower priced homes quickly and build up your monthly cash flow. However I feel with those properties there is not much room for appreciation. 

While if you wait for more expensive properties that cash flow you have more opportunity for appreciation but you lose the time it takes to save more money where you could be cash flowing with lower priced properties. 

What are your thoughts? 

[Shiloh Lundahl]

This is a great question.  Personally, I think the answer lies in the game of Monopoly.  There is a very simple formula to winning the game of Monopoly that helps someone win almost every time.  As you go around the board you buy properties you land on.  You use these properties to trade in order to acquire the light blue properties and the orange properties.  Then you build on the light blue properties because they are cheep to build houses on and you put hotels on them as soon as possible.  You use the cash flow from those properties to build on the orange properties.  Once you have hotels on the orange properties you will usually win the game.  Acquiring the railroads are also great for cash flow, but usually not necessary to win the game.

In other words, buying the lower end properties (as long as they are not so undesirable like Mediterranean and Baltic Avenues that no one wants to live there) will give you knowledge and experience in managing properties and they can start creating cash flow for you right away.  Then, as you become more skilled as an investor and landlord, you will start recognizing properties that can cash flow better that may be at a higher price bracket and the transition will probably be more smooth.  

I think one important principle in investing is movement.  Waiting until you have enough money to purchase a larger priced property might become a deterrent to jumping into the investing game.  Things always come up and our interests tend to change over time and waiting may get in the way of doing.  Also, another thing to consider is that we all make mistakes in investing.  So it might be better to make some mistakes on lower-end properties where the price tags for those mistakes are usually lower rather than making mistakes on the higher end properties where the price tags for those mistakes can be a lot higher.  

Good luck to you and let us know how it goes.