From Utah to Muncie Indiana

[Jake Maughan]

Guys, I need some help.  

I'm currently looking for my first rental and after scouring the MLS, I realized that I needed to be creative to find a good investment. I reached out to a mentor who has been in the rental business for decades; his speciality is storage units, but I know that he also owns many single and multifamily units. After many emails, he let me know that he just purchased a new storage facility and was unloading his small properties to focus on this facility. He has several SFR close to my (and his) house, but after doing some quick calculations, I realized that they would only be cash flowing about $200 a month after the mortgage, taxes and insurance. It's difficult to find a SFR of Multi in Utah County that will do much more than that right now and, from what I know (which isn't much), you have to depend on appreciation, depreciation and long-term gains to really get your value out of buy-and-holds here. It's nearly impossible to find a property that meets the 2% or 50% rule here.

He also offered me his 5 units in Muncie, Indiana.  He's been upfront with me and told me that the rentals are in a terrible part of town, they usually attract lousy tenants, there are a lot of evictions, they're old houses so they require upkeep (however, he's put a lot of money into fixing them up), and he has to be careful of theft when they're vacant.  He has a management company managing them though, so he doesn't have to worry about any of that and after all expenses (including mgmt fees), they net him around $500-$800 per month.  He bought them during the crash and is offering them to me for $50,000 (total).  He's been assuming that the market in Muncie will come back (as it has everywhere else), but it hasn't yet.  He's tired of them and allocating his money elsewhere.  

Everyone says that you should buy in your backyard and you should manage your first property yourself to get the experience, but the returns here are so dramatically different.  I need some expert advice.  I could purchase the Muncie properties with cash (should I?) or I could finance the properties here.  Or should I keep looking?

Any advice/feedback is greatly appreciated!