If you’re getting started in real estate investing, you’ve probably asked yourself some version of this question:
Should I buy a cheaper property in a more affordable area, or save up for something more expensive in a better neighborhood?
It’s a great question. And like most things in real estate, the answer is: it depends.
Let me walk you through how I thought about this when I got started — and what I’d do differently (or the same) if I had to start over again.
Why I Chose the Cheaper Houses Route
When I was first getting into real estate, I planned to buy in Ann Arbor.
I was living in the Detroit suburbs at the time, and Ann Arbor felt like a great market: strong fundamentals, nice neighborhoods, great schools.
But the numbers didn’t make sense.
I was looking at $250K+ houses that maybe cash flowed $100/month.
And for me, starting out, that just wasn’t compelling. So I started looking deeper into Detroit proper.
My first couple deals were $45K houses in C/C+ neighborhoods.
They were rented, in decent shape, and producing solid cash flow.
I liked that — but I also realized if I wanted to grow fast, I had to find ways to force appreciation.
So I pivoted to buying off-market deals, doing light rehabs, and refinancing my capital back out. That’s when things really started to click.
Today I own 12 doors, all in Detroit, and I’ve pulled all of my original capital out (and then some).
Many of my properties have appreciated 2.5x–3.5x. I couldn’t have done that starting with a $400K house in a B+ suburb.
But that doesn’t mean the higher-end route is wrong. Let’s break down what I see as the core differences.
The Pros of Buying Cheaper Properties
Cheaper homes can be a great entry point, especially for investors trying to scale quickly or maximize cash-on-cash returns.
But they come with unique challenges that need to be understood upfront. Let’s start with the upside.
Stronger Cash Flow Potential
The biggest draw is the cash flow.
When you buy right, even after factoring in repairs, management, taxes, and insurance, you can still see strong margins.
It’s easier to hit monthly cash flow goals when your total investment is lower.
Opportunity to Force Appreciation
These homes often have more room for value-add.
I’d buy properties well below the median for the Detroit market, put in some rehab, and end up with a property that appraised above that median.
In essence, I was getting a home worth $90K–$110K for an all-in cost of $60K–$70K.
That’s the sweet spot — buying under market and finishing near or just below the median value for the area.
If you have the cash to pull this off, there’s no better strategy in my opinion. Best of all, I have a full plug-and-play team that can do BRRRR’s in Detroit for you!
Faster Portfolio Growth
With lower price points, your capital stretches further.
That gives you more opportunities to practice BRRRR or to spread your risk across multiple units rather than concentrating it in one deal.
This can accelerate your learning curve and help you build momentum.
The Cons of Buying Cheap Rentals
Of course, these deals don’t come without their downsides. Managing low-cost rentals — especially in rougher areas — is not for the faint of heart.
Greater Management Complexity
Cheaper properties tend to require more hands-on management.
You’re more likely to deal with tenant issues, deferred maintenance, and turnover.
In many cases, the neighborhoods themselves can be tougher, which introduces more variables and potential headaches.
Slower or Inconsistent Appreciation
Not every cheap home is going to see the kind of appreciation I experienced.
A lot depends on your market.
In Detroit, the city was turning a corner and seeing renewed demand (it still is). That’s not true everywhere.
And when it comes time to sell, resale demand is thinner in lower-income neighborhoods.
Thin Buyer Pool on Exit
Selling a property in a tougher neighborhood can be tricky.
The buyer pool is smaller, financing can be harder to secure, and you’re more exposed to the whims of the investor market.
This can impact your flexibility if you need to exit quickly.
Let’s now look at the flip side — buying higher-quality homes in stronger neighborhoods. It’s a totally different investing experience.
The Pros of Buying More Expensive Properties
More expensive homes often come with stronger fundamentals, lower maintenance, and more predictable outcomes.
Here’s what makes them appealing.
Stronger Tenant Quality and Less Turnover
Higher-quality homes tend to attract higher-quality tenants.
These renters typically have stronger financial profiles, are more likely to pay on time, and (in theory) stay put longer.
Or so they say…
The other side of this is these tenants may actually turn over more frequently as they look to purchase their own home.
So while this is a perceived benefit, I’m not convinced it actually is.
Lower Maintenance and Fewer CapEx Surprises
More expensive homes are often newer or better maintained, which means less risk of major unexpected repairs.
You’re less likely to inherit decades of deferred maintenance or cobbled-together fixes.
While every property will eventually need big-ticket repairs, the timeline and expense are generally easier to forecast with a higher-end home.
Easier to Sell or Refinance
When it comes time to exit, homes in stronger neighborhoods give you options.
Not only are there more buyers — both investors and end-users — but financing is easier to secure.
Lenders are more willing to lend on properties in desirable areas, and buyers are often willing to pay a premium for the location.
That liquidity gives you flexibility if you ever need to pivot quickly.
Better Fit for Passive or Remote Investors
If you’re managing from a distance, or simply want a less intensive experience, investing in better neighborhoods makes sense.
Stronger areas are typically more stable, tenants are more self-sufficient, and property managers often charge lower premiums when they know they’re managing lower-risk properties.
It’s not truly passive — nothing in real estate ever is — but it’s about as close as you can get.
The Cons of Buying More Expensive Properties
That said, buying higher-end rentals comes with its own set of tradeoffs — especially for investors looking to build quickly.
Less Cash Flow, Slower Growth
Returns are usually thinner.
You’re tying up more capital for less monthly cash flow.
Appreciation may help you in the long run, but you’ll need staying power and a longer time horizon.
Less Room for Forced Appreciation
These properties are often already in good condition, which limits your ability to improve them significantly and extract equity through BRRRR.
The upside is more tied to market performance than your own improvements.
In fact, BRRRR typically doesn’t work in these price points because the rent won’t support the refinance.
That’s why higher-end flips are more common than BRRRRs in these areas — they can’t be held profitably.
Slower Portfolio Scaling
It’s harder to scale when every property requires a massive down payment.
If you only have $100K to work with, you’re limited to one deal instead of several, and your ability to diversify is reduced.
What About the Middle Ground?
Some investors argue that the sweet spot lies in the middle — and they might be right.
Buying in the $150K–$300K range in C+ to B neighborhoods offers a balance between cash flow and appreciation.
You’ll often find decent tenants, manageable maintenance, and neighborhoods that feel stable without being overly expensive.
This is where many long-term investors end up focusing, especially in markets like Memphis, Little Rock, or parts of Texas.
When I first started in Detroit, I was often hovering around the median home price.
But with BRRRR projects, I’d buy well below that number, do the rehab, and end up with an investment that sat near or just under the median — but appraised for more.
That approach let me play in nicer areas with stronger resale values while keeping my capital investment low.
It’s one of the best ways to balance risk and reward, especially in markets that still have affordable inventory.
The Bigger Mistake to Avoid
Some investors think they can buy a cheap property, wait 6–12 months, and then refinance based on appreciation alone.
That strategy works only if you’re actively adding value.
Appreciation alone — especially in lower-income neighborhoods — isn’t going to bail you out.
If your plan is to BRRRR, you need a real delta between purchase price and after-repair value. That comes from doing the work, not just waiting and hoping the market lifts you.
Too many investors assume a cheap house is a low-risk bet.
In reality, the risk is just packaged differently.
You have to manage more of the day-to-day, solve more problems, and stay more involved. But if you’re up for that challenge, the upside can be significant.
Final Thoughts
So should you buy cheap houses as rentals?
If you’re in a market like Detroit, and you’re willing to roll up your sleeves, learn the market, and manage some complexity — it can absolutely work.
But if you want a more passive experience, are investing remotely, or don’t want to deal with tenant headaches and constant repairs, the better-quality property in a stronger area may make more sense.
The key is to match the strategy to your goals, risk tolerance, and time commitment.
In my case, going cheap and going deep in one market worked out really well.
Especially when I could keep my all-in cost near the median but end up with a property worth more than that.
But no matter which route you choose — be strategic, be patient, and don’t chase appreciation alone.
Make sure your deal works today. That’s what gives you options tomorrow.