This weeks story from our investors

This week's story is not such a great one but it's a good lesson to learn.
We have an investor that we haven't worked with yet. We haven't sold him anything although we have tried to sell some of the property that he owns.
This investor bought several distressed properties in distressed areas of town. He used private money to buy them with at very high interst rates. Great for the lender who was taking all the risk but in this case, not so good for the buyer. This really nice young investor bought the properties really cheap and he had a good contractor who did quite good work and got the properties, clean and functioning well and our investor friend rented them out and got really good rents, carefully screened the renters too. So he's getting really good return on these properties and he's collecting the rent every month. So what's not to like??
This great young guy came to us because he's got such a lot of capital wrapped up in these not such great neighborhoods. He wanted to know if we could sell the properties that have the most equity in them so that he could pay back the loans, take the equity and start to buy properties in slightly better neighborhoods.
We tried and we couldn't. What we found to be true was that in these neighborhoods there are no first time homebuyers to buy these modest homes. The homes that sold were the cheap, distressed properties bought up by investors. There were no turnkey homes selling at all. So our investor has a lot of potential equity locked up in these properties. He has good income but no way to leverage his investing activities. He can't refinance these buildings with a bank at competitive rates either, because his ownly income is the income from the properties and this isn't terribly desirable for lenders.
Our advice was,
1. go out and get a regular job, and manage these buildings in your spare time
2. start buying modest homes in neighborhoods that regular people are buying in and fix it up, resell it and gradually move up the real estate ladder. 
3. Or buy something in a better neighborhood as an owner occupier, fix it up, refinance it and use that money to pay off the loans on the other investment property. Gradually paying off the investment property will yield very nice income that can be recycled into downpayment on investment properties in nicer neighborhoods where investment properties can be financed.
4. Or just refinance the properties that are currently financed at a high interest rate, and improve the income that way.
Basically though, we thought that moving into slightly better neighborhoods will allow him to leverage his activities there, and to use bank money at better interest rates and to actually have the investment properties get some appreciation as well as income so that they can be sold easily if necessary. It is going to be much longer to get appreciation in the neighborhoods where he is currently investing, than it will be in some still affordable but slightly more upscale neighborhoods.
If you are interested in investing in real estate call JamieMilek@gmail.com or Gillian@kw.com. We'd love to help you make money while properties are still so inexpensive!