Cash Flow or Location?

Question

For the past few days I've been weighting out the pros and cons of two properties. Property (A) is a triplex that could use some TLC on the interior and exterior and in a D class neighborhood of the city. Within the last two years several multifamily apartment buildings have be developed in this neighborhood. Therefor I can see potential for this properties' value to increase.

Property (B) is duplex that needs a few repairs on the exterior and in a B class neighborhood of the city. Just by taking a quick drive around the neighborhood, it is obvious that home owners take care of their properties. Not to mention, this property is five minute walking distance from the nearest Medical center.

I will be using FHA to finance either deal and using the house hacking strategy to begin my empire. Given the circumstances, what's more valuable the property's location or the property's potential value?

Michael Dumler · Answer

@Isaiah Miller you can only assess and analyze what you currently know to be true, everything else is pure speculation. With that being said, I would go with property B, for a house hack deal, you don't want to be living next to D-class tenants. How about putting an offer in on both though and seeing where the cards fall? Hope this helps!

Isaiah Miller · Answer

Its done! I have officially placed an offer in on both properties, lets see how the cookie crumbles.

Isaiah Miller · Answer

I once heard the "right time" is now, that means ill start preparing to pull the trigger.

Jonathan R McLaughlin · Answer

@Isaiah Miller b all day for a lot of reasons but especially for a first rental.

You say you put in properties on both properties. Do you have the ability to close on both if they are accepted? Be careful of your reputation. Backing out of stuff like that can come back to haunt you.

Dave Skow · Answer

@Isaiah Miller- I would  go for  property B -

Eliott Elias · Answer

A properties location will indicate it's potential value. Buying a cash cow in a D class neighborhood won't build wealth via appreciation, but will be a good cash flowing property. You can't always have both, I tend to lean towards appreciation and location

Zierry Eme Carl T. Tagbas · Answer

Hello Isaiah, it sounds like you have a been doing your homework. With real estate, my mentor always tells me that you want to be in a great LOCATION. If I was on your shoes, I would pick the Property (B). I would be less headache for you and you are already in a great location!

Goodluck out there!

Steven Foster Wilson · Answer

For me it’s all about the numbers. I like to run the numbers and see if I will get good cash flow and how much the property will appreciate. I have never regretted buying a property. I know right now you’re saying it’s a choice of one or the other but could you by chance pull together other investors to get both? Go big or go home right? https://www.calculator.net/ren...

Above is a Calculator I used to do my numbers.

Jonathan Styer · Answer

With this amount of information, I'd go with Property B, chances are in 10 years you'll be more happy you own that property. It's possible you won't even be able to purchase that property and cashflow by then, so you'll have "gotten in" at a good time. A D area is going to come with a lot of headaches once you move out.

Cash Flow or Location?

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