Low end properties are only more valuable, IF you are looking for cash flow. Otherwise, they’re just management intensive, hell holes, for the most part.
Otherwise, if we’re looking for appreciation, eventual cash-flow, and anything else, we’ll invest in ‘nicer’ (bread and butter) properties.
There’s both a cycle and sweet spot to any investment, where the investment remains in most demand, the rents are going up, appreciation is happening, and there’s resultant equity growth. That’s mostly described as a ‘bread and butter’ property (single family, duplex, etc.).
If you’re investing for appreciation, or trying to catch a wave of appreciation, you look for the growing edges of your area, and attempt to invest into that growing edge, so that by the time the area grows up around your investment, you’ll have captured the most appreciation possible. The next step for some investors is take their new equity and move it into “units.”
That’s pretty much the opposite of investing in fully developed, demographically flat, interior zones, for cash flow.
Meantime, deals are negotiated. They don’t fall off the MLS ready to go.
Whatever you decide to go after, you’ve got to know rents and values.
I knew the rents I could get in the ‘hood’ and the prices I needed to achieve the cash flow I wanted. So, I negotiated those prices, and focused on the sellers that didn’t care as much about their price as they did about getting out from under their hell holes. That is, I kept making offers that made sense to my cash flow objectives.
As an aside, it’s amazing to me, how many investor wanna-bies mess around with sellers who flat out tell them, “I’m not in a hurry to sell.” Or “I’m not desperate.”
Really? Anyone who tells me that and they might as well tell me they have full blown, bleeding ebola virus coming out their nose, cuz I’m GONE.
Anyway, look at the rents. Compare them with the prices, and make offers on the ones that seem closer to your goals.
Bottom line is that my example may not exist in your market. But the principle of higher rent/price ratios work everywhere. If you can’t get a 1.5% RPR, then you don’t. But where you can negotiate that, you’re in business. Maybe you can only achieve that by buying severe fixers? I don’t know.
The adage that you make your money when you buy is pretty much true.
Now, we haven’t talked at all about what I actually suggested. That was buying apartments (units) (multifamily residential) like 10, 15, 30 units.
Here you’ll look at the average rents per door, per month, and compare that with the average per door price, and come up with a rent/price ratio.
The principle is the same when looking at the rent/price ratio on apartments.
Hope I answered your question.