BRRRR in bad areas only

[David Slamer]

I am a newbie and working up to my first deal. However, one thing that is concerning to me is that all the potential BRRRR deals I am analyzing in my market (Dayton/Cincinnati) are in D-F areas that are showing little to no signs of improving in the near future. Right now I am mainly just working off Zillow, Redfin, real estate postings, etc.

Am I doing something wrong? Is that the general nature of doing BRRRR deals? Do I need to continue to expand my network so I can gain access to deals in better areas?

Thanks so much!

[Johnny Wolff]

Think @Colby Fryar - hit it on the nose here.  Starting with D/F property to rehab as your first ever real estate investment isn't advisable.  A few notes on these types of areas:

-Can you cash-out refi in the area?  Banks sometimes are not open to loaning in these types of areas (East KC is a good example - cash purchases are the only options)

-Is there at least 2 good property managers willing to take the property in such an area.  You're going to hate your life if the answer is "no," your property starts having issues, and life gets too busy for you to be heavily involved on an ongoing basis  It has happened to me.  It's seriously the worst.

-A true F area (legit 100 out 100 on crime scale...like east KC) is pretty dangerous.  Are you comfortable going out there to supervise?  Will good contractors be willing to work there?  How will you protect your property whiles it's vacant/being rehabbed?

A D/F areas are really towards the advanced level of RE and should definitely be tackled by experienced folks whose business revolves around the benefits and challenges of that type of real estate.  There is a reason the cash returns are highest in D/F areas.  Just like penny stocks, there us some appeal on paper, but there are tremendous risks.

Conversely - A areas may have the lowest cash yields, but like blue-chip stocks, that's because they are high quality, liquid, and much less risky...and I'd recommend getting as close to that as you can, with your first investment.