Passive Real Estate Investing · Real Estate Investing with Marco Santarelli, Investor and Entrepreneur.

TBT: Ask Marco - Should I Invest in a Cheap Property?

·13 min·1 clip

A cheap property in San Francisco could cost $800,000, but in Memphis it might be $80,000—here's why that matters.

This Throwback Thursday episode of Passive Real Estate Investing features host Marco Santorelli answering a listener's question about buying low-cost investment properties. Marco, an experienced real estate investor and educator, revisits foundational advice that remains relevant despite market changes. The core question comes from a 22-year-old listener named Yair, who has $60,000 and is considering markets like Jacksonville or North Carolina. Marco immediately clarifies that "cheap" is a relative term that depends entirely on the local market and neighborhood. He illustrates this by comparing a "cheap" property in San Francisco, which could be $600,000-$800,000, to one in Memphis or Indianapolis, which might be $80,000-$100,000. He advises investors to analyze the effective price range of a market by excluding the top and bottom 10% of listings to find the median. Marco strongly recommends targeting specific neighborhood types, grading them as B+ or A- areas with a mix of white-collar and blue-collar tenants. He argues these "bread and butter" communities offer a strong pool of responsible tenants, reliable retail sales comparables, and fewer issues with property appraisals. A crucial insight is that investors should not start their search by fixating on a low absolute price. Marco's sixth rule of investing is to first identify strong markets and desirable neighborhoods, then seek the best deals *within* those areas. He emphasizes that the investment must "pencil out," generating cash flow to cover all expenses and mortgage payments while leaving a surplus. Marco also updates a common investment metric, noting the traditional 1% rent-to-value ratio is now often 0.8% or 0.9% due to significant property appreciation. The most surprising claim is that focusing solely on price is "just asking for trouble," as it can lead to undesirable neighborhoods with weak tenant demand and poor long-term viability. The episode is educational and advisory, delivered in a clear, conversational style as Marco directly addresses the listener's query. The tone is pragmatic and mentor-like, drawing on Marco's personal investment criteria and experience. Listeners new to real estate investing or those feeling pressured by a limited budget would gain the most from this episode's structured, top-down approach. Seasoned investors already focused on specific markets or those seeking advanced financial modeling techniques might find the content too foundational.

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