Location, Location, Location vs. Numbers, Numbers, Numbers!!!!!

[Sharad M.]

What would you choose - a 20% cash on cash return in a decent neighborhood or 35% cash on cash return in not the best neighborhood? Everything else being equal.

If you could also explain why you would choose one over the other.

Thanks!

[Frank Adams]

Great answers above, I really liked Rich's. When I was doing buy and holds I noticed that the spread on those returns was never that far, the DIFFERENCE between 20% and 35% is NOT 15%, it's 75%.

I knew that the hassle, work and vacancy on turnovers was much less on the higher end places. Higher end tenants were ALWAYS stable enough to see the value in a MINIMUM TWO YEAR lease. And once they were there for 2 they stayed an average of FIVE. Regardless of the difference in monthly cash flow the difference in NOT painting, NOT carpeting, NOT replacing broken screens and NOT doing other stuff that is easier to do in an empty unit more than makes up for it.

I never wanted a place that my wife would be uncomfortable living in, and I knew that eventually I would be the one selling and I was always the one leasing. People who are interested in a crappy place are going to be crappy tenants.

Frank