Should You Target Cheap Or Expensive Properties For Real Estate Investing?

Should You Target Cheap Or Expensive Properties For Real Estate Investing

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A lot of real estate investors are unsure what price range they should target. Most people think that the more expensive the properties you target, the more money you make.

We examine both scenarios and the best properties to target.

The geographical region determines the price of properties. For example houses are more expensive in California than say, Texas. So your market is the one that determines what is cheap or expensive.

A medium class 3 bedroom house would be considered a safe investment in the medium price range in most places.

So how do you determine the best price range to invest in?

1) Business model

I target houses under $150,000 in Texas. Most investors are looking for these types of houses. There are more potential buyers for these properties, so they are easier to sell.

In my market, there are more medium income neighborhoods with more properties for my business model.

If your business model is lease to own, you may be able to target a higher price range. You cannot do wholesale deals in the same price range successfully.

Similarly when you target luxury homes the price range of the houses you buy goes up.

2) Neighborhoods

Lower end neighbourhoods will have cheaper houses. These come with their own set of problems such as vandalism, defaulted rent payments, trashy tenants, etc. The list goes on and on.

Chances are the properties you target are the most common in your neighborhood.

3) Target profit

Most people associate more expensive properties with higher profits. This may be true. But it could also mean more capital investment such as advertising to target higher end buyers.

It is expensive to repair luxury homes, even touch-ups. This means that you stand to lose more when you target higher end properties if the deals don't work.

In general, you will handle less higher end properties but they will give you more profit per deal. You can handle more lower end properties and probably make more money.

4) Availability of buyers

Higher end properties have fewer buyers. Likewise when you target the lowest end, you will get less buyers because most people tend to turn away from them.

So which is the best business model for real estate investing? It depends on your choice one you consider all these factors.

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