7 Things You’ll Regret Downsizing in Retirement

Inexperienced rehabbers often drool at the prospect of a cheaply priced house, thinking it will bring them riches as a rental. They ignore the fact that there’s a reason for the price. Brian Davis, the co-founder of SparkRental, learned this the hard way.

“My particular mistake was investing in super low-end properties, chasing super high returns,” he said. “In rental investing, bad neighborhoods look great on paper, because the typical numbers that investors use to forecast income and expenses miss many of the risks. An investor sees cap rates of 14% in the bad neighborhood compared to 7% in a good neighborhood, and think they’ll earn twice the return without having to invest nearly as much money per property. Meanwhile, they don’t realize they’ll constantly battle crime, vandalism, rent defaults, evictions, property damage, break-ins and high turnovers.”