Questions from a beginning Investor

So say I want to gather up some funds and attempt to invest in real estate for a bit of profit. What kind of area should I try to invest in; low-income, median-income? The initial investment for the low income option seems like it would require a lower initial investment but should I expect to put more money in the property as the years pass from less than careful tenants? If I went for the median income route, I would expect a larger upfront investment but could I expect to have the opportunity to better screen potential tenants and carefully pick and choose those whom I feel would potentially take better care of my property as tenants thus requiring relatively less maintenance compared to the lower income option?

Are these questions even applicable or do I have a skewed sense of how things work? I am not ready to invest in the market yet but I do think of it as something I could consider doing in the near future. I am less interested in learning the finer points of the practice and more interested in the basics of what can and does happen.

 

I am not a real estate expert but I do know people that have rented properties out. If I were you I would stay away from apartment buildings do to there being multiple renters which means more headaches. Your best bet is to rent out a house, that is one property and one source of income, once you get the feel of things then you can rent out multiple homes. The problem with apartments is that you end up with sometimes hundreds of units and then when there is a problem you are responsible for fixing it. If there is a water leak and it is in an apartment on the 2nd floor, you risk the water damage affecting the other units below. It can be a real mess so you definitely want to make sure you know enough and what is going to be the best way to protect yourself in this type of business. Hope this helps.

 

I am not an expert by any means however in my opinion I would invest in the median area for the simple reason your tenants would be working class and maybe have a family or just starting their family life but have become more responsible. This is turn will make your experience both with receiving monthly rental payments as well as the upkeep on your property a much better experience.

 

I was a long-time renter before recently purchasing my first house, and I am very interested in purchasing a rental property as well. I agree with a median-income area, but I would suggest purchasing a medium to low end house (not too big, not in a fancy area), but still in a location that has good money. Outskirts of big cities and college towns are both good areas, since people who are renting often don't have a ton of extra money, but still want a decent house in a decent area. I live in an expensive area, but the house I rented most recently was small and cute, and on the outskirts, so it was very affordable for us to rent.

 

Thank you all for your replies. Y'all pretty much confirmed what my gut was telling me. I will definitely keep this in mind in the future when it comes time for me to start thinking about investing money.

 

I think that you should buy the worst house, in the best neighborhood. That way you know that you can always get fair rent once it is fixed up, because it is in a nice area. I have read a bit about investing and it says to just buy the "bread and butter" house, you know, very plain Jane, and then fix it up and get get more money out of the property. That is my advice, hope it helps.

 

So true, if a pipe bursts it will wreck 2 maybe 3 or more units, that you have to pay to fix! It is far easier to get a single property aimed at a young couple/old couple who will be easy to manage and will pay you your rent on time!

 

That depends a bit on what state the "worst house" is then, right?
If you have to spend a ridiculous amount of money to fix the house up, that's a significant amount that is eating into your profits.

 

I'm by no means an expert in real estate, but I'd go with the safer bet... which to me would be a medium income one. More likely to have a good tenant and less chances of either the tenant or a 3rd person damaging the property. (those are the 2 main worries I'd see in investing into a lower income area)

 

As Strykstar also points out, it really depends on how bad the "worst house" is. If it costs too much to fix up, you may have been better off with a better house in a slightly worse area! Also remember that the "best area" doesn't always have the best growth over the next 10-15 years, you may end up making more when buying in an up and coming area.