Today's question comes from Dave. Dave says fantastic podcast, Marco, and thank you for all the great information that you share.

Dave, you're very welcome.

Given the fact that I am trying to replace my everyday job income with positive cashflow. I am trying to maximize the amount of cash flow I can get on each property while also maximizing the amount of properties that I can purchase. As I see it, this leads me to think that I should focus on lower-cost properties. For example, under $90,000 with $250 to $350 per month in net cash flow.

First off, do you think this is a sound plan? If not, what holes or pitfalls do you see, and what do you think would be a better strategy if it is a good idea, which markets do you recommend investing in with your team to meet these criteria?

Thanks again - Dave





Okay, well, Dave, very good question. I'm going to summarize this question to basically this. Are low-cost properties, a good strategy for cashflow?  So the short answer is yes.

So let's just be clear. Generally speaking, when you have a strategy that you turn into a plan, you are either focused on predominantly properties that generate better or above-average cash flows or you're purchasing properties in areas that you anticipate will provide solid or above average appreciation. So your strategy is cashflow versus growth or income versus growth.

Sometimes you have a little bit of both and these are transitional markets or what we might call a hybrid situation, not necessarily a hybrid market, but you're focused on generating cashflow or as much of it as you can or appreciation because you're looking at it from a medium to a longterm perspective where you just want capital growth and you're going to give up on that cash flow or that cash on cash return at least for the first year or two. So with that in mind, what you are focused on is maximizing cash flow. In fact, you've said it yourself, you're trying to maximize the amount of cash flow and you're trying to maximize the amount of properties that you can purchase. The answer here is pretty simple. In fact, you've more or less answered it yourself. And what that is is just to focus on lower-cost properties that generate as much cash flow as possible in dollar terms, because that's what you're looking for.

And it doesn't sound like you're too concerned about price growth. At least not initially, at least not right now. And that's fine. So when essentially you're making an investment to generate cash on cash return and that property will pay itself off, it'll pay down the mortgage and it will appreciate nominally over time unless things change in that market. Now, let me give you a couple of examples here, markets like Birmingham. You asked about markets, Birmingham, Dayton, Ohio, Memphis, Tennessee, Northwest Indiana. Those are great markets for this Huntsville, Alabama, Montgomery, Alabama, the York area of Pennsylvania. So these are markets that are very cashflow centric, they're smooth and stuff. Eddie linear markets. They don't appreciate radically. It's not that they're depreciating. They're just very stable, essentially boring markets. Okay. Now let's just be clear about low cost versus cheap because you brought this up. So when you're focused on cheaper properties, let's just make sure that you're focused on lower-priced properties, not cheap properties.

As a lot of people define cheap being, you know, just poorly manufactured, purely renovated in poor condition distressed. It's none of that, what you're doing is you're basically buying on one side of the price spectrum. It's really the, uh, the, the lower two fifths. If you will, if you break a market into Quintiles, it's the second quintile. It's not the cheapest stuff. It's right above that. It's not quite the middle market, although it can be. So just to throw out a couple of quick examples, cause I just went on our website@noradarealestate.