East end vs west end SFR

[Allen Jones]

Hello, 

I'm looking for some advice before I pull the trigger on my second rental home. My current rental is in the east end and rents for $1100/month. Comparable homes in the area would be around $120K.

I'm seeing quite a few west end/Portland homes on the market for $30k or less, that appear to be mechanically sound. Some of these are currently rented for $600-$700/month. 

I've heard I can expect a higher level of vacancy/late rent, greater chance of damage.  I also realize there will be no appreciation on the homes value.

Despite all that, it seems a $60k investment in two west end homes would outperform another $120k east end home.

Is there something I'm missing in this equation? Why are other investors selling currently rented units?

Thanks,

Allen

[Erik Hitzelberger]

@Allen Jones This is a difficult question to answer as we do not know your goals, your experience level or your time constraints. I will tell you that you are kidding yourself if you think that west end homes don't require significantly more time and management than east end homes. Also, vacancy rate is one of the most significant factors in determining your actual profitability. An annual turnover can easily wipe out all of your profit.

Here's a few questions..

1) Why are you buying the house? Are you planning to sell it at some point in the future to pay for some life event (college, a wedding, a vacation home) or do you want the income to live off of in retirement? 

2) What's the long-term exit strategy? If you are leaving it as a legacy, do you want to leave something easy to manage or difficult? If you sell (voluntarily or out of necessity), which home(s) give you alternatives you are happy with?

3) Do you care about wealth-building, cash-flow or both?

4) How much time and effort do you have and are you willing to spend dealing with the property(ies)? 

 Any investment that doesn't support your goals is a bad investment.  Answering these questions should help make the purchase decision obvious.

Good luck!