Passive Real Estate Investing TBT: Ask Marco - Do Low Cost Houses Make Good First Investments?
Dec 25, 2025
A young engineer dives into real estate with $30,000 and seeks guidance on low-cost investments. Marco clarifies the difference between cheap and low-cost properties, focusing on market context. He discusses tenant stability in C-class neighborhoods and the risk considerations involved. The conversation explores cash flow versus cash-on-cash returns, illustrating these concepts with real property examples. Listeners gain valuable insights on comparing deals, understanding market dynamics, and making informed investment choices.
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Cheap Vs. Low-Cost Are Not The Same
- Cheap and low-cost properties are different concepts tied to market context and neighborhood quality.
- Low-cost means below median in a market, while cheap implies distressed areas and higher risk.
Know Tenant Demographics In Lower-Tier Neighborhoods
- Understand the tenant demographic when buying lower-cost, C-class properties because they tend to be more transient.
- Expect more payment issues and plan your management and reserves accordingly.
Cash-On-Cash Vs. Dollar Cash Flow Trade-Off
- There's often an inverse relationship between cash-on-cash return and absolute net cash flow across property classes.
- Higher-priced properties can produce larger dollar cash flow but lower percentage returns because of bigger down payments.