BiggerPockets

I wonder as well. I invest only in California. But my thought process has been who is actually going to pay you rent if they can't afford to buy at those prices.

Interested to see the responses from BP members who in invest there.

Many people seem to be programmed to live paycheck to paycheck, through bad times and good. Add to that the growing bias against home ownership, even among some who can afford it. And finally, the increased difficulty of getting a mortgage. Home ownership rates are declinIng even in very affordable markets.

There are not a lot of people with jobs that can afford to rent or buy. Ohio has been hit hard since globalizaton and the industrialization of other countries.

I flip properties and rent in this area so I know both sides of the market. The rental market is very strong, but the the sales side of it is not for a few reasons:

1. Most lenders will not want to touch loans for such small amounts.
2. People who would be willing to buy in low priced areas typically do not have a high enough credit score, even though their income is sufficient.
3. A house for 35k will typically have city violations which require funds to be put in escrow until those violations are fixed. This takes cash, which most buyers in this market segment do not have.
4. Some people are still afraid to buy despite favorable prices/interest.
5. Many current renters would want to buy, but cannot because they had recent foreclosures or bankruptcies.

In general people in this area can buy the house they currently rent and save $100 to $200 per month in payments, but the reasons listed above prevent them from doing so.

I would be comfortable renting in this area, but be careful with your flips. You have to make sure the numbers are good and include a contingency for longer hold times.

It is too good to be true. That's gross rent, not cash flow. Even if you pay cash, you have all the usual expenses. $1875 would be closer to your correct cash flow if you paid cash. Nevertheless, that's an 18% return.

double post.

dont know how to delete. sorry

I dont mean to hijack your thread OP.
But Arbitrage8 I would be interested to know where in Atlanta you are getting those type of rates and what property price range?

Originally posted by DAVID GAGE:

Originally posted by Steve Sparks:
Shhhh ;) The problem is they can't get in financed and don't have the cash. 15 to 20K here gets you a $750 rental in a non war zone. Tenants are plentiful as they would rather have a house than an apartment.. or they have lost a house or walked away from a similar house that they owed 100k on and were paying more than the rent on an upside down mortgage loan.

SHHH! is right. I too am living proof that it really is a great time to be a landlord in the rust belt. I bought 3 houses last year all for under 20k and all are rented for 600 to 650 a month. I post the house and get a dozen calls a day. There are a lot of good people that are looking for houses to rent right now. Most are people that walked away from an upside down mortgage. I like these people because they take pride in your property. They know what its like to own a house. My houses are in a rural town 80 miles from Detroit so no war zones here. The economy is coming back here but if gas prices get up around $5 a gallon for any length of time you will see a full blown depression here.IMO

The secret of the rust belt is slowly leaking out. My examples:
Metro Detroit
Purchased 3 houses 3/1 during 2010
Avg purchase price 25k
Avg rehab cost 7k
Avg Rent $825
Rented all 3 with a yard sign and before the rehab was finished..non sec 8.. 2 of the 3 tenants had a foreclosure
You can do the math :cool:

Originally posted by InfusionRealty:

Originally posted by Steve Sparks:
Shhhh ;) The problem is they can't get in financed and don't have the cash. 15 to 20K here gets you a $750 rental in a non war zone. Tenants are plentiful as they would rather have a house than an apartment.. or they have lost a house or walked away from a similar house that they owed 100k on and were paying more than the rent on an upside down mortgage loan.

So for 100k I can get $3750 of cash flow? Almost sounds to good to be true.

I would sell 3 of my properties for 100K that are More like $2,600 net.. not trying to sell them.. Just sayin. And if you buy them distressed here this cash flow was created for 60K.

Originally posted by Ben Kevan:
I just closed on my first property in the rust belt. It may not be the best of numbers, but it was my first property.

I'm looking for a second, and you gotta keep things quiet.. :o).. SHHHHHHHHH..

WOW!!! That takes balls buying your first property 2500 miles away. I hope it works out for you. I myself want to buy some SFH in Georgia but can't seem to bite the bullet. I seem to be a bit of a control freak. Thats a habit I will eventually have to break if I want my business to grow :mrgreen: