Landlording & Rental Properties

The $30k Rental Property: How to Finance & Profit From Cheap Real Estate

Expertise: Personal Development, Business Management, Real Estate Investing Basics, Landlording & Rental Properties, Personal Finance, Flipping Houses
120 Articles Written

Like fire bolts out of the sky, there have been quite a few posts (or should I say daggers) thrown around the #biggerpocketsphere (yes, you heard this term here first, folks…) about the 2% rule or 1% rule or whether you should buy under $30k or over $30k. Or “I am a better investor because I am taller than you” (I am well over 6 foot, so probably—and I can actually reach the roof if I am on an incline on the side of a ranch house that is headed up hill). Or “My investment makes .09374% over yours,” or “My paint color is actually far superior to yours; let’s be honest, mine is obviously better.”

Want more articles like this?

Create an account today to get BiggerPocket's best blog articles delivered to your inbox

Sign up for free

Why? Because it’s mine.

Welp. That cleared it up.

Or maybe not.

Why I Like the $30k Investment Property

You see, I initially chose to buy houses in the $30k range because it was an area I understood, they were houses I could afford, and the rate of returns on the properties were solid—in the 2% range.

None of this tells the whole picture. A point many of these posts make is that any place you can buy a $30k house, you can probably buy crack, get shot at, and most likely not walk around after dark—or at all without guns and a bodyguard. I can’t speak for every square block of the continental United States, but I can speak to this:

  1. I have owned houses that cost more than $30k that were in terrible neighborhoods that I regretted buying.
  2. I have owned houses that cost more than $30k that were in great neighborhoods.
  3. I have owned houses that cost less than $30k that were in great neighborhoods.

I can also say, now that I know the neighborhoods to buy in, I haven’t bought a house recently at this price point that wasn’t safe, that wasn’t a solid house, that was in a “bad” area of town, and that didn’t make a great return on investment. The one I just bought a few months ago was $26k, and I put about $5k into it. It’s cute as a button, and my management company calls it “the dollhouse.”

As far as the tenants, they pay on time (usually), everything is ACH transferred, and I receive the funds to my bank account.

Related: Newbies Take Note: You STILL Shouldn’t Buy Houses for $30,000

After thinking through what some may deem the armpit of the real estate investment world, let me help clear up a few things if you find yourself looking at this price point, interested in making 20-25% ROI, and you can’t figure out if you should pull the trigger or not.

rental-property-pros

3 Keys to Succeeding With a $30k Rental Property

1. Understand: it’s $30k… Not $300k or $3m

Guess what, I don’t put granite in my $30k rental houses! I know… crazy, you say. And I also don’t put high end finishes or finely crafted vanities or cabinets.

I DO do the following: make sure the roof is in great condition, as well as all other major expense things, like the HVAC, plumbing system, and electrical system—and I have those things built into my purchase and renovation at the beginning of the project. We make sure the property is clean. We have started to put in tub surrounds and new plumbing lines to the shower/tub. The surround is relatively cheap; we are able to check the plumbing in the bathroom at that time, and the surrounding is easily fixable if there is an issue. We also put money into good, working toilets, faucets, and anything that nickel and dimes us with maintenance later.

Also keep in mind, $30k here in the Midwest is definitely different than $30k in South Florida, or San Diego, or Orange County, or Maui. It’s not the prince’s palace. But it’s a house, a pretty decent house. I can’t buy a house with a bad roof and a broken basement in this price range; it doesn’t make finance sense. But I can put a roof on a house in this range if the kitchen and bathrooms are in okay shape and the house needs things more like paint, carpet or vinyl flooring.

2. Know that Paying $30k Doesn’t Mean You Should Buy in Bad Areas

My properties are in areas where I have driven, chatted up neighbors, walked, and spent a lot of time doing the “homework.”

Understand the demographic who lives in the surrounding blocks of the subject house you are interested in and what the ebb and flow of the neighborhood is. Sometimes it’s simple: it’s families in the neighborhood, and they don’t make a lot of money. It doesn’t mean they don’t take care of their properties, or they aren’t good people. These kinds of neighborhoods can have terrible pockets with a few blocks you don’t want to buy on, or the reverse.

Also keep in mind that for places where there is only a small area that is in good condition, it is more likely that the area can slip quickly into a neighborhood you wouldn’t want to be in if a few more houses become vacant or tenants and owners stop taking care of the properties.

The bad areas of town provide even higher ROI, but there is often active gang activity, higher criminal incidents, and having owned properties in some of these neighborhoods (in my earlier days… I don’t buy there anymore), I also felt the quality of tenant was not great in terms of them caring for the property, and I ended up dealing with costs associated with tenant turnover. I did read the book The Section 8 Bible, and good for those guys. It wasn’t for me.

3. Aim to Set a Precedent With a Nicer House Than the Average in the Neighborhood

The last few properties we have done, I’ve spent just a little more time and a little more money on them. We are talking a LITTLE bit of money, as well as a little creativity. The reasoning was, looking at the surrounding comparable properties, I felt that we could get a better tenant—and make more money in the long run—if we made it a little nicer. With the caveat that I don’t believe this is true in all areas, you need to make sure you think through this proposition. In the section 8 houses I used to own, this was not typically the case, and I spent a lot of unnecessary money.

When you or the property manager meet with the renters, explain your philosophy. It’s a great house, and we have done “x,y, and z” to make sure that all the systems in the house are working. And it’s well insulated, so your utilities will be low, and it has a grand new _____ ,_____ , and  _____.  And our expectation is that when you move out, the walls look as good as they do now, and the carpet is easily cleaned, or you will be paying for these things to be fixed/replaced.

Maintenance is an ROI killer. I have learned this the hard way. We need to stay more on top of issues in these houses because they are typically older, and things do break. Make sure you are in the property a few times a year, and make sure you are communicating with the tenants about what is going on. Explain to them it is not a bad thing for them to call you; you want to know if there is an issue.

Related: Don’t Buy That Cheap Property! (UNLESS…)

Now, on to the lending.

manage-rentals

Both Creative Financing and Bank Financing Work

There are two ways I have purchased these properties.

Private Mortgage

I put down 30%, and the private mortgage holder had a first lien position mortgage. In this area, I paid about 10% interest on the mortgage, and it was a 30 yr AM (amortized over 30 years) with a 3 year balloon.

Bank Financed

Yes, I know. There are a lot of banks that don’t touch anything under $50k or $75k. But there are many that do.

Here is the secret: Pick up your telephone.

Community banks, credit unions, and nearly any bank that makes local underwriting decisions (so far that I have found) has been able to do whatever loan amount they wanted. And even better, it is typically on the lower end of the mortgage person's approval amount; as in, the mortgage person has an approval amount they can do themselves, and then typically the branch VP or President will have an amount much greater than the mortgage banker, and they can approve up to that amount in house. One who I know can approve up to $250k in house.

With the banker, you are paying rates above the owner occupant, but I just got a mortgage on a house for 5.5% and 1 point—for a $30k loan balance. Tell me that ain't sweet! Yeah, it is.

So there are ways to fund and finance these properties besides cash. Ask your lender how they like the property. Maybe the bank doesn’t want to fund the deal until the property is fixed and rented. No problem—have your private or hard money person fund it, fix it, get it rented, and refinance the property. Give your banker as much information as possible at the beginning of the transaction, and keep them up to date on everything that is happening.

Happy buying! Properties at the $30k mark will remain in my rental portfolio for the foreseeable future.

[Editor’s Note: We are republishing this article to help out our newer readers.]

What kind of properties are you buying, and what is your target property, hold timeframe, and ROI requirement?

Let’s talk $30k investments in the comments below!

Nathan Brooks is the co-founder and CEO of Bridge Turnkey Investments, a Kansas City-based company renovating and selling more than 100 turnkey properties per year. With over a decade of experience in real estate, Nathan is a seasoned investor with a large personal portfolio and a growing business portfolio. Just last year, through Bridge Turnkey Investments, he helped investors add over $12 million in value to their real estate portfolios. Nathan regularly produces educational content to fuel his passion for helping other people learn about and find success in real estate investing. He has been featured regularly on industry podcasts such as the BiggerPockets Podcast, Active Duty Passive Income Podcast, Freedom Real Estate Investing Podcast, Fearless Pursuit of Freedom Podcast, Titanium Vault, The Real Estate Investing Podcast, The Best Real Estate Investing Advice Ever Show, the Good Success Podcast, FlipNerd, Wholesaling Inc., The Real Estate Investing Profits Master Series, Flipping Junkie Podcast, Flip Empire podcast, Think Realty Radio, and more. He is a sought-after speaker and writer and can be found on stage regularly at events across the country.

    Bob E. from Queen Creek, Arizona
    Replied almost 5 years ago
    Great discussion. Thanks for taking the positive side of tis.
    Nathan Brooks Real Estate Investor from Kansas City, KS
    Replied almost 5 years ago
    Thanks Bob … and thanks for taking time to read and respond!
    David Garcia from Kansas City, Missouri
    Replied almost 4 years ago
    If you don’t my me asking, what parts of Kansas City do you buy in? I have a couple houses in Independence, MO area and have been looking to buy more houses in the $30k range.
    Angie Carter
    Replied 7 months ago
    What is your opinion on buying out of state property, that you’ve only seen online?
    Matt Rosas
    Replied almost 5 years ago
    Good info Nathan. I hear ya on the loan amount threshold. My lender now says nothing under 90k. Where are you located? Thanks, Matt
    Nathan Brooks Real Estate Investor from Kansas City, KS
    Replied almost 5 years ago
    Thanks Matt … I am located in the Kansas City market. If you are in this range, some private money lenders might be the way to go. What market are you in?
    David Semer Investor from Lincroft, NJ
    Replied almost 5 years ago
    @Nathan Brooks Great article. This is very timely. I am thinking of holding my first rental property that i currently have under contract. I have done mostly Fix and flip. Having a hard time figuring out how to rehab it as to not over rehab but avoid least amount headaches down the road. Would you add a central Air conditioner if the house already had a forced hot air system? I am in the Central Jersey Market and the house is only 600 sq ft. thanks for the advice. Kind regards, David
    Nathan Brooks Real Estate Investor from Kansas City, KS
    Replied almost 5 years ago
    Hi David … I would consider if the comparable properties have the central AC. Generally my units all have the central AC, I have owned some that had old or inadequate central units, and additional window units. I have a great HVAC guy and the prices are pretty reasonable. If it was cost effective, and you have the budget (and make sure you check the duckwork/etc before just pulling the trigger) I would probably just do it. Good luck!
    David Semer Investor from Lincroft, NJ
    Replied almost 5 years ago
    Nathan Thanks for the answer and the article.
    Cameron
    Replied almost 5 years ago
    I’m curious how much profit per month you’re seeing.
    Nathan Brooks Real Estate Investor from Kansas City, KS
    Replied almost 5 years ago
    Hi Cameron … we are $300-425 per door.
    Don Clark
    Replied almost 5 years ago
    Nathan, I really appreciated your blog on this subject, since I am about to embark on building my portfolio of rentals in this price range. There are always skeptics in this price range, but to me, it’s one of the best opportunities. As in anything, understanding, being prepared, and then following through is key Here’s why I like $30,000 rental houses. If an individual finds the right bank(s), the lending on these is virtually endless. All you need is enough money for your first house. You buy, fix it up (if needed), rent it out and put a loan or equity line on it and go on to the next. If you buy it right, the house should appraise for at least $50,000 and you should be able to pull out all your money to repeat the process over and over again. The monthly cash flow per house is not huge when you mortgage the house for $30,000, but who cares. If the bank understands your plan, they will lend over and over, and soon you will have a large portfolio with adequate cash flow. There are banks that understand what we are doing and will lend in this manner. The key is tracking them down and proving to them that this is a good investment. The tough part for me will be staying afloat during the initial building period before cash flow really kicks in from owning multiple properties. I might have to include a pay myself fee every time I buy a house, which will come out of $30000 mortgage/line of credit. Nathan, what is your opinion on finding the properties? Do you market and buy direct from sellers, from wholesalers, or from the MLS? Right now, I am having trouble producing my own leads, so I am thinking about getting them from others. Thanks, Don Reply Report comment
    Don Clark
    Replied almost 5 years ago
    Nathan, I really appreciated your blog on this subject, since I am about to embark on building my portfolio of rentals in this price range. There are always skeptics in this price range, but to me, it’s one of the best opportunities. As in anything, understanding, being prepared, and then following through is key Here’s why I like $30,000 rental houses. If an individual finds the right bank(s), the lending on these is virtually endless. All you need is enough money for your first house. You buy, fix it up (if needed), rent it out and put a loan or equity line on it and go on to the next. If you buy it right, the house should appraise for at least $50,000 and you should be able to pull out all your money to repeat the process over and over again. The monthly cash flow per house is not huge when you mortgage the house for $30,000, but who cares. If the bank understands your plan, they will lend over and over, and soon you will have a large portfolio with adequate cash flow. There are banks that understand what we are doing and will lend in this manner. The key is tracking them down and proving to them that this is a good investment. The tough part for me will be staying afloat during the initial building period before cash flow really kicks in from owning multiple properties. I might have to include a pay myself fee every time I buy a house, which will come out of $30000 mortgage/line of credit. Nathan, what is your opinion on finding the properties? Do you market and buy direct from sellers, from wholesalers, or from the MLS? Right now, I am having trouble producing my own leads, so I am thinking about getting them from others. Thanks, Don
    Don Clark
    Replied almost 5 years ago
    Nathan, I really appreciated your blog on this subject, since I am about to embark on building my portfolio of rentals in this price range. There are always skeptics in this price range, but to me, it’s one of the best opportunities. As in anything, understanding, being prepared, and then following through is key Here’s why I like $30,000 rental houses. If an individual finds the right bank(s), the lending on these is virtually endless. All you need is enough money for your first house. You buy, fix it up (if needed), rent it out and put a loan or equity line on it and go on to the next. If you buy it right, the house should appraise for at least $50,000 and you should be able to pull out all your money to repeat the process over and over again. The monthly cash flow per house is not huge when you mortgage the house for $30,000, but who cares. If the bank understands your plan, they will lend over and over, and soon you will have a large portfolio with adequate cash flow. There are banks that understand what we are doing and will lend in this manner. The key is tracking them down and proving to them that this is a good investment. The tough part for me will be staying afloat during the initial building period before cash flow really kicks in from owning multiple properties. I might have to include a pay myself fee every time I buy a house, which will come out of $30000 mortgage/line of credit. Nathan, what is your opinion on finding the properties? Do you market and buy direct from sellers, from wholesalers, or from the MLS? Right now, I am having trouble producing my own leads, so I am thinking about getting them from others. Thanks, Don
    Nathan Brooks Real Estate Investor from Kansas City, KS
    Replied almost 5 years ago
    Don … I totally agree with the model, and how you suggest here. My thing has been, I had to be patient in the building/acquisition process. So we haven’t bought a ton of properties at once. We are looking to buy 4-6 this next year (rentals). The staying afloat part absolutely should be at least cash reserve, or fund you can build in from your bank note. For me, I had the cash to fix and hold for the month or two to get it rented. I feel much safer that way. I buy wholesale, mls, and some seller financed from other investors. Find the good ones … it’s just patience and persistence. Hope that helps!
    Chi Cheung Investor from Brooklyn, New York
    Replied almost 5 years ago
    I invest in SFRs in this price range as well. I found a national lender (bank) that has no minimums from the BiggerPockets market place. There is cost of obtaining the loan such as appraisals, title company, flood insurance, and other closing costs. But I think it’s still a good deal compared to hard money. The APR for my last loan was about 5%. I’m not sure if I’m allowed to mention contact info here. Search the market place, or send me a note.
    Jamie Claxon from Bedford, Ohio
    Replied almost 5 years ago
    hey, I read your post…who is the bank that has no minimums? Thanks, Jc
    Nathan Brooks Real Estate Investor from Kansas City, KS
    Replied almost 5 years ago
    Hey Jamie … I work with a few. Send me a private message and I will be happy to share. Reply Report comment
    Nathan Brooks Real Estate Investor from Kansas City, KS
    Replied almost 5 years ago
    Hey Jamie … I work with a few. Send me a private message and I will be happy to share. Reply Report comment
    Nahan
    Replied almost 3 years ago
    Cheung, Can You Please Send Me The Lender That Does 30k Loans. Thank You
    Kevin McGinnis
    Replied almost 2 years ago
    Chi, Please email bank name that loans in the $30k market. Thanks, Kevin Reply Report comment
    Nahan
    Replied almost 3 years ago
    Cheung, Can You Please Send Me The Lender That Does 30k Loans. Thank You
    Nathan Brooks Real Estate Investor from Kansas City, KS
    Replied almost 5 years ago
    Thanks CHI … that is great info! And a great deal … I would say that would definitely be in line with what we are working.
    Lear Riojas
    Replied almost 5 years ago
    @CHI CHEUNG, I’m very interested in your contact, I found the less than 50k space to be a tough place. I have been wanting to get into an area that has decent properties, a working class area, and solid property managers since I am only in a city for a year or two. But banks and property managers has been a minor stumbling block for me for properties in the <50k price range.
    Nathan Brooks Real Estate Investor from Kansas City, KS
    Replied almost 5 years ago
    There are several companies I am familiar with that do property and turn key properties in this space. Keep working on it .. you will find good ones out there!
    Barbara Long from Martinsburg, Pennsylvania
    Replied almost 5 years ago
    I would be interested in that bank. I purchase 30ks myself. can you message me?
    Clarence Taylor
    Replied almost 5 years ago
    Chi do you mind sharing the national lender information with me.
    Daniel Huynh
    Replied about 2 years ago
    Hi CHI, I am a newbie and really interested to know a national lender (bank) that has no minimums from the BiggerPockets market place. Would you send me the bank Information? Thank you very much and have a wonderful day!
    Kevin McGinnis
    Replied almost 2 years ago
    Chi, Please email bank name that loans in the $30k market. Thanks, Kevin
    Celso Guimaraes Investor from Clearwater, Florida
    Replied over 4 years ago
    Hi Chi Cheung, Could you please, pass me on the lender info, i appreciate your help. Thank you, Celso.
    Chi Cheung Investor from Brooklyn, New York
    Replied over 4 years ago
    @Celso Guiimaraes, thanks for sending me the message, I have replied with the contact info.
    Steven Herring Middle Management from Greensboro, North Carolina
    Replied about 4 years ago
    Hello Chi Cheugn, can you please send me that lender info? My wife and I are going to invest in the 30k and under and for a lender. Thanks
    Handel Carter from Harrisburg, Pennsylvania
    Replied almost 4 years ago
    Hello. I am looking at purchasing my first property to start my family on the road to financial freedom, as they saw. Do you mind passing on the institution that has no minimum? Also, do you know of any that offer rehab loans as well? Thank you for posting and I hope all is well. Handel
    Buashie Yeshua from Los Angeles, California
    Replied almost 2 years ago
    Please send me that contact as well. Thanks in advance
    Steven Herring Middle Management from Greensboro, North Carolina
    Replied about 4 years ago
    Hello Chi Cheugn, can you please send me that lender info? My wife and I are going to invest in the 30k and under and for a lender. Thanks
    Jay Jackson Real Estate Investor from San Antonio, Texas
    Replied about 4 years ago
    Hi Chi, I would be interested in that bank also. Can you message me the lender info for the 30k properties? Thanks
    Mehall McDonagh
    Replied about 1 year ago
    Hello Chi Cheung, if you don’t mind, can you send me the name/info of the National Bank you are referring to. Thanks Mehall mehallmcdonagh at g mail dot com
    Alphonso H. Wholesaler from Columbus, Mississippi
    Replied over 4 years ago
    Chi Cheung…How You doing? Please send Me name of National Lender…and Thanks!
    Jon Trice from Marion, Indiana
    Replied about 3 years ago
    Chi Cheung, Please share the lender’s name, I am currently seeking funding for a a couple properties this summer. Thanks 🙂
    Kurt Stresau Investor from Cocoa, Florida
    Replied about 4 years ago
    Chi Cheung, Would you please send me a message and let me know who this national lender is? I have tried dozens of lenders in my area for smaller loan-properties and I have come up empty. Thanks.
    donnie way
    Replied almost 3 years ago
    Can i asked for lenders for homes around $30 price
    Ivan Paxton from Denver, Colorado
    Replied almost 5 years ago
    Really liked this post and I’m looking forward to your replies to the comments above.
    Nathan Brooks Real Estate Investor from Kansas City, KS
    Replied almost 5 years ago
    Thanks Ivan, and thanks for reading!
    Connor Graham Publix from Sanford, Florida
    Replied almost 5 years ago
    Wow great article, I just posted a thread regarding this matter! I plan to go this cheap route as I am young, and I can only obtain such a mortgage.. Check out my thread if you can find it and add any thoughts you have to it.
    Nathan Brooks Real Estate Investor from Kansas City, KS
    Replied almost 5 years ago
    Thanks Connor … good luck with your future purchases!
    Ndy Onyido from Toronto, Ontario
    Replied almost 5 years ago
    @Nathan, Thanks for sharing. This is what Lisa Philips has been doing for a while and the model sure works….. Not sure if these opportunities exist in WNY-Buffalo area of NY.. Thanks
    Nathan Brooks Real Estate Investor from Kansas City, KS
    Replied almost 5 years ago
    Thanks Ndy, yeah … I am not sure about the NY market, but there are definitely multiple midwest cities that do these. Expect to pay $45-60k for these same houses from the bigger companies who are selling them turn key … still now a bad ROI.
    Bob E. from Queen Creek, Arizona
    Replied almost 5 years ago
    I agree with the TK pricing of 45-60k. We have offered at least one for sale and we were looking for the lower end of that price range (willing to do owner financing for half). No takers yet so we are just cash flowing it for now and may look to put financing on it. We get another one next week In Milwaukee after we get the former owner out, Our agent walked through the property and to looks really nice with an updated kitchen, we will be all in for @ 15k and expect $850 if we rent it. The problem with this one is it is so nice we might just resell it. AVM shows at 55k so a nice sale with owner financing wold generate long term revenue without the management fees or maintenance headache. And we bought a second REO in Lansing Michigan today (we got our first one a few months ago), bought it for 5k + $7900 in taxes (Michigan is a high tax state). Our PM walked the property after rehab we will be in for 20k should rent for $725 but we are considering if we want to sell or hold, AVM shows as 90k, BPO is for 20k, a really big range. We are considering doing a Ready 4 Remodel sale on it but will see. I think we can get top dollar from a 203k buyer but we need to spend more time working this one.
    Frankie Woods Investor from Albuquerque, NM
    Replied almost 5 years ago
    Awesome examples of proving the $30k concept works! It’s all about buying right!
    Nathan Brooks Real Estate Investor from Kansas City, KS
    Replied almost 5 years ago
    Bob … sounds exactly right. Those numbers are killer where you are … what kind of yearly taxes do you have on a property like that?
    Bob E. from Queen Creek, Arizona
    Replied almost 5 years ago
    Yearly taxes run @ $1,200 on the first property. They are higher for the other second property because it last sold for 50k. I think we might be able t get that reduced after this sale.
    Dan G. Real estate investor from Lake County, Indiana
    Replied almost 5 years ago
    Somewhere a certain someone who wrote the opposite of this article, is turning in his sleep!
    Nathan Brooks Real Estate Investor from Kansas City, KS
    Replied almost 5 years ago
    Turning enlightened perhaps 🙂
    Andrew Sime from Mishawaka, Indiana
    Replied almost 4 years ago
    Haha, love this. Great model Nathan, your model and market seem to be extremely similar to mine. Always enjoy your posts.
    Adam Smith Investor from Detroit, Michigan
    Replied almost 5 years ago
    Great article Nathan. I’m just dipping into this market segment and I haven’t done any borrowing yet, so it’s really heartening to hear that you’re having success with it. Do you have any tips about who to talk to at the banks or what questions to ask? I find a lot of bankers clam up when I start talking about relatively unconventional investing like this. Thanks again for writing. Adam
    Nathan Brooks Real Estate Investor from Kansas City, KS
    Replied almost 5 years ago
    Hi Adam, my best advice is to have a deal together and ready to go. Have cash in your bank account, and be ready to pull the trigger. Sit with the VP or President, whoever you can get a meeting with, and tell them what you do. Ask what they need for them to say yes … how much down, how much time to close, etc … if they clam up, ask a few questions and make sure they understand you aren’t a slum lord, if they don’t dig it, move on! Keep asking until you find someone that says yes.
    Adam Smith Investor from Detroit, Michigan
    Replied almost 5 years ago
    Thanks for the tips. I can do that. I should be closing my first rental with cash this week or next, I think showing a track record will be a big help, as will bringin gin specific deals rather than speaking in the abstract. Best of luck, Adam
    Gordon Cuffe Investor from Roseville, CA
    Replied almost 5 years ago
    so I am guessing the house was not on Bellefontaine ave? What zip code is this house in? getting a interest rate around 6% on a loan below 30k is awesome. I would think you could pay off the loan with the rents within 5 years.
    Nathan Brooks Real Estate Investor from Kansas City, KS
    Replied almost 5 years ago
    Hi Gordon … the houses I am referring to are in KCK … but there are others in this same mold in the KC metro on the MO side.
    Ericka
    Replied almost 5 years ago
    Thank you for not leaving Lisa Philips alone out there. Think it’s great where you can find good neighbors hoods and get a healthy roi.
    Nathan Brooks Real Estate Investor from Kansas City, KS
    Replied almost 5 years ago
    Hi Ericka! Yep, it’s a model that works for me … that’s what my hope was in writing it. The model DOES work, it was just a way people could approach it and at least understand it.
    Graham Bates
    Replied almost 5 years ago
    I am UK based and looking to invest in a property in the US to rent out. What states/ county can you recommend for getting $30k properties, in a good state of repair that will not have any trouble being rented out? To get them at this price are they generally forclosures/ reposessions?
    Nathan Brooks Real Estate Investor from Kansas City, KS
    Replied almost 5 years ago
    Hi Graham … there are several areas, Milwakie, Indianapolis, KC market … I know there are several people on here that do this in different markets. If I can help with something specific shoot me a private message. Thanks!
    Ken P. Rental Property Investor from Northville, MI
    Replied almost 5 years ago
    We’ve had success in financing under $30k condos via land contracts. We’ve been offering about 20% down and the balance over 4 to 5 years at 5%. At those terms there is no cash flow for the term of the loan, but afterwards we own the property free and clear and cash flow around $350/mo.
    Nathan Brooks Real Estate Investor from Kansas City, KS
    Replied almost 5 years ago
    Ken that is great! I haven’t bought any condo’s for rentals, my only experience with them was in South Florida where the HOA’s in a price range like this really killed almost all of your cash flow. Sounds great man … keep after it!
    Cordell M. Investor from Narvon, Pennsylvania
    Replied almost 5 years ago
    Thanks for the information! We currently own a few homes (with plans of more) in the under $30K range…one we are considering has dropped to $14,500 (we need to walk through yet), but it is beside another current property of ours (other homes on the street list or sell at $25K, so not sure what awaits us…). Part of the issue we believe is the home is oil; for $3,500-$4,000 we can get gas furnace installed/converted. Any thoughts on something of that nature on homes in this price range? Assuming minor cosmetics otherwise? We have another home with oil heat that we drop rent ($75/month) for Dec.-thru Jan. Thank-you for your time!
    Nathan Brooks Real Estate Investor from Kansas City, KS
    Replied almost 5 years ago
    Cordell, It sounds to me if I was all in around $25-30k (what does it rent for?) and you had to put in a $3-4k furnace/hvac … I would do it in a heart beat. Less things that can go wrong the better. I’d get rid of it today if that is roughly the all in, cash flow is solid.
    Cordell M. Investor from Narvon, Pennsylvania
    Replied almost 5 years ago
    Thanks…our other units have been all in for under $25K and rent for $625 or so with tenant paying all utilities.
    Steve
    Replied almost 5 years ago
    Another added value of this type of strategy (at least in my neck of the woods and why this has been my bread and butter) is that it offers several exit opportunities. Rent, sell, land contract. If I have to sit on them for a few months, which I often have to do because of the other job. It won’t break me!
    Nathan Brooks Real Estate Investor from Kansas City, KS
    Replied almost 5 years ago
    Steve … I totally agree, great value, several exits, and it’s not expensive to hold. Although don’t sit long … get someone out there, get it fixed, and get it rented!
    Dawn A. Rental Property Investor from Milwaukee, WI
    Replied almost 5 years ago
    I love the $30k home. Much easier to buy; much faster to pay off then be bringing in the cash flow. You can get some really good tenants and not worry about your investments.
    Nathan Brooks Real Estate Investor from Kansas City, KS
    Replied almost 5 years ago
    Thanks Dawn … I always appreciate and value your opinion! I totally agree with everything …
    Derrick Craig from Memphis, Tennessee
    Replied almost 5 years ago
    GREAT JOB NATHAN!!! The $30k home is my BREAD and BUTTER, I also have homes and apartments that I paid much much more than $30k for but overall my $30k and below investment properties OUTPERFORM all of them put together. CASH FLOW, ROI, 2% come on try 10% or more.. @Nathan Brooks thank you soo much for voicing the opinions in such a great forum/manner. Be ready because the naysayers are lurking and will also chime in saying this is bad and the worst investment any one can get into.. Blah blah blah blah.. I STAND BEHIND YOU!!! AND THANK YOU FOR STANDING UP FOR THE LITTE GUYS LIKE ME !!!!
    Nathan Brooks Real Estate Investor from Kansas City, KS
    Replied almost 5 years ago
    Hey Derrick! Thanks man … yes, this is my bread and butter too! I am sorry I mis-stated the ROI … I meant 2% rule … like $40k house, $800 in rent (or more) … so yes, absolutely over 10% ROI, more like 17-20% + …. it’s all good on the naysayers. The whole value here is there are nearly 50 comments already, and all of these fine people are making great money DOING it. That works for me.
    Michelle
    Replied almost 5 years ago
    I have had good luck getting loans for smaller amounts by taking a blanket loan for more than one property. You might try asking your bank if this is an option. The commercial lending guy at our bank likes to do loans for a larger amount, so I purchased two $30,000 homes on a line of credit, spent some money to fix them up, and took out a $75,000 loan to cover the purchase and the fix up costs on those houses and had money left over to fix up a third house that I am flipping. The two $30,000 houses appraised around $120,000 after the fix-up, so the bank had no problem loaning $75,000.
    Nathan Brooks Real Estate Investor from Kansas City, KS
    Replied almost 5 years ago
    Hi Michelle, that is definitely something people can do. I know some people don’t like to collateralize … so that would be the only question for the investor to ask themselves. But I like the idea of buying it on the HELOC, fixing, and then having more control getting what you want lending wise from your bank. Very good!
    Robert Szalay Real Estate Investor from Colorado Springs, Colorado
    Replied almost 5 years ago
    Thanks for the article. I’m a newbie and just got my first property, a duplex in the Detroit metro area for 37k. Many of the SFR in the area are about that range so i feel it was a good deal. Haven’t gotten it rented yet because the prep is going a little slow but have one tenant moving in on the 15th hopefully. Going to be rented for 650 each and the guy moving in on giving him 500 off of first month for painting both units so I won’t see cash flow until next month.
    Nathan Brooks Real Estate Investor from Kansas City, KS
    Replied almost 5 years ago
    Robert, sounds like a pretty great deal. Congrats on getting the deal, and getting it rolling. Make sure to be happy with how everything is done BEFORE they move in … so much easier to get it done before hand. Good luck!!
    Matt B. Property Manager from San Diego, California
    Replied almost 5 years ago
    Nathan, This is some really good and inspiring stuff! It seems like you invest locally for properties under 30k. Do you think this strategy can be used successfully for out of state investors? I have heard from some people to buy minimum of B class properties to avoid issues with lower quality tenants. Also (sorry if you already answered this) but where do you have most luck finding your 30 k properties? MLS, wholesale, auction, private sellers? Thanks!
    Barbara Long from Martinsburg, Pennsylvania
    Replied almost 5 years ago
    Matt B. I’m finding NOT lower class of tenants in this lower end K. I’ m finding well off people are down sizing to be able to do more traveling and vacationing without owning or renting a huge home. I live in Pa retire ppl are looking for this kind of home. the are hot on the market!
    Nathan Brooks Real Estate Investor from Kansas City, KS
    Replied almost 5 years ago
    Matt B … I do think you CAN do this out of state. I know there are several people (myself included) who do these kinds of properties, and have various systems in place to handle them. I am mainly finding these on the MLS … but also through tax sales, and working on some wholesale deals as well.
    Sergiu Spinu Real Estate Investor from Pittsburgh, Pennsylvania
    Replied almost 5 years ago
    Great article NATHAN i am in the same market and i love it Sometimes the banks are really hard to work with Do you work with Mortgage Brokers? i heard a lot of positive things working with these people Thanks
    Nathan Brooks Real Estate Investor from Kansas City, KS
    Replied almost 5 years ago
    Hi Sergiu … the guys I am typically working with are the loan officers or VP of a specific bank. I am not sure if they would be calling themselves mortgage bankers … I know the titles of the two I use, and they aren’t that title. The best thing I have found is the direct lending/underwriting that is local … that’s by far the best. Look the person in the eye, and make decisions there. Good luck!
    Jeff Rabinowitz Investor/Landlord from Farmington Hills, Michigan
    Replied almost 5 years ago
    I have found that I am not as fond of managing my properties now as I was a decade ago. The answer is easy for my lower priced homes. They cash flow nicely even after paying the property manager.
    Nathan Brooks Real Estate Investor from Kansas City, KS
    Replied almost 5 years ago
    Jeff … I don’t manage my own either. I’d rather them deal with it, and I receive the direct deposit into my account!
    Ken Adams from Orange, California
    Replied over 4 years ago
    Everyone will be shocked at the much higher prices by 2022-2024. Gains will be higher in the better areas. What can actually drag the “gains” are the stagnant areas that will never go up. Don’t invest there. The Biggest points for MUCH higher prices (since 2012) are 1. Too much demand chasing too little “retail” ready supply (Hello Economics 101). 2. Interest rates around 4%. Are you kidding me – Have you looked at the last 50-60 years-that is way too low and makes it much more affordable. 3. GREED – This will push Better Real Estate much higher – IT NEVER FAILS. There is way way way too much CASH on the sidelines – THEY ALWAYS chase higher yields. I don’t know what #3 above will exactly look like. It could be Crazy Investor Loans – giving loans on investment Real Estate packaged by Wall Street (think about the Stupid Loans they gave to Home Owners – So why not Stupid Loans to Investors eventually – just a thought. Watch how the FED always mentions Housing Prices, etc. The Gov’t will probably want to find a way to get banks, etc. to make loans. The Government actually LOVES INFLATION. Don’t be fooled. They (gov’t) can then pay off their debt with cheaper money. I’ll be selling pretty much everything in 2022-2024 as GREED BUBBLE inflates. I’m still buying $30K homes with $700-$800 rents. That’s my niche. These homes used to sell for $100K+ during bubble. History may not repeat, but it will probably Rhyme.
    John C. Investor from Wixom, Michigan
    Replied over 4 years ago
    I bought 2 houses in the end of 2012. I though tax auction for $6010. Put in $6K and rented for $800 for a little over a yr. and then sold it for $35K. Other one was bought for $12,300 and put in about $6K. Rented for $800 and sold in about 1.5 yrs. for $55K. Sold both in 2014. The market here in SE Michigan has increased and so we will see what kind of deals to be had. Just bought our own house in foreclosure and got a good deal so I’ve been busy renovating it but should appraise about $30K -$50K more once we are done but will be living in it. Then will be looking for more deals but I am still looking for private money or bank financing for these small $30K houses. I will probably find, fix, rent, and then sell within 2 yrs. So, if you have a contact for lending please let me know. Thanks!
    Randy Reed Real Estate Professional from Odenville, Alabama
    Replied over 4 years ago
    Even though this is an old blog post, I have to post my “like”. Thanks for the affirmation!
    Gordon Cuffe Investor from Roseville, CA
    Replied about 4 years ago
    go to google and look for small credit unions or small banks in Cleveland to see if they will lend on such a low loan amount. There is a guy on bigger pockets name jerry padilla who says he lends on small loan amounts.
    Brandon Phillips from Cranberry Twp, Pennsylvania
    Replied about 4 years ago
    I bought a duplex in a “poorer” part of town, but the people are good and the crime isn’t bad. $30K cash and I inherited two good tenants. I pulled about $25K out with a commercial loan to invest in other properties and I put about 5K back into the place for new windows, baseboard heaters and some other fixes. As of right now I am sitting about about 27% ROI, I was hoping for closer to 35%, also cash flow of about $400 per month. So the numbers look nice in theory, but I’m starting to wonder if $400 per month is enough for the hastle I have to go through with the occasional call and time I spend running out there to fix a toliet or sink.
    Brandon Phillips from Cranberry Twp, Pennsylvania
    Replied about 4 years ago
    I bought a duplex in a “poorer” part of town, but the people are good and the crime isn’t bad. $30K cash and I inherited two good tenants. I pulled about $25K out with a commercial loan to invest in other properties and I put about 5K back into the place for new windows, baseboard heaters and some other fixes. As of right now I am sitting about about 27% ROI, I was hoping for closer to 35%, also cash flow of about $400 per month. So the numbers look nice in theory, but I’m starting to wonder if $400 per month is enough for the hastle I have to go through with the occasional call and time I spend running out there to fix a toliet or sink.
    Clayton Buchanan
    Replied about 4 years ago
    Just completed my first purchase of a 30K home in the Jacksonville, Florida area. Once rehab is completed it will appraise for 55-60K but I am having the same problem finding a bank to cash out and repeat the process. Anyone know a bank in this area? Reply Report comment
    Clayton Buchanan
    Replied about 4 years ago
    Just completed my first purchase of a 30K home in the Jacksonville, Florida area. Once rehab is completed it will appraise for 55-60K but I am having the same problem finding a bank to cash out and repeat the process. Anyone know a bank in this area?
    Clayton Buchanan
    Replied about 4 years ago
    Just completed my first purchase of a 30K home in the Jacksonville, Florida area. Once rehab is completed it will appraise for 55-60K but I am having the same problem finding a bank to cash out and repeat the process. Anyone know a bank in this area?
    Bob E. from Queen Creek, Arizona
    Replied about 4 years ago
    We have a note in the Jacksonville area. May need a contractor referral
    Clayton Buchanan Investor from Lake City, Florida
    Replied about 4 years ago
    Bob, What do you mean I may need a contractor referral?
    Bob E. from Queen Creek, Arizona
    Replied about 4 years ago
    If the house comes back to us it will need rehab. We are out of state investors so don’t have a contractor in the area yet.
    Brian Peals from Pflugerville, Texas
    Replied almost 4 years ago
    thanks for the write up great info
    Ike Elam from Merrillville, Indiana
    Replied almost 4 years ago
    Great job on this point of view. I’m also looking to start my rental business.
    Vincent P. from Catonsville, Maryland
    Replied almost 4 years ago
    Nice article NATHAN, but this is impossible because BEN LEYBOVICH said so.
    Yany Rivera Investor from Olympia, Washington
    Replied almost 4 years ago
    Thanks for the article Nathan! I have a couple of properties just above the 40k price and completely agree with you that these properties can be good rentals and is not a reflection of the neighborhood being in decline. Its just the median price of the entire area.
    Joe Canfield from Cleveland, Ohio
    Replied almost 4 years ago
    I started buying in this segment in early 2015. I have 15 properties/22 doors. My properties will be very profitable over the long term because I buy them right, pay cash for everything, control costs while providing quality place to live for folks, and develop good relationships with all my tenants. It’s not rocket science – it’s real estate. Don’t let the numbers or analysis paralyze you. Take action. If that action doesn’t deliver the result you want, take different action.
    Lisa Phillips Real Estate Investor from Arlington, VA
    Replied over 3 years ago
    Nice! Nathan – is the stigma finally gone! Do I have a sergeant in arms for the Sub30k Income Warrior Brigade?! There’s a reason your article gets 87 comments by the time I read it, and Im glad to know there is another Sub30k Income Warrior manning the charge in the midwest – the goal is to educate, not de-motivate 🙂
    Nathan Brooks Real Estate Investor from Kansas City, KS
    Replied over 3 years ago
    Lisa! I love your comment 🙂 Thanks! I agree … keep it up!
    Alex Sanfilippo from Jacksonville, Florida
    Replied over 3 years ago
    Thanks for this post. This is actually the first and only positive 30k investment post that I have seen! I’d love to read / hear more about how this has worked for you. Just two ‘off topic’ questions here… 1. What is the 2% rule or 1% rule? 2. ROI as mentioned above is the same thing as cap rate, right? Thanks again for this great post! Thanks, Alex
    Andrea Wilson Investor from Cleveland, Ohio
    Replied over 3 years ago
    Hi Alex, I think positive experiences in the 30k range comes from area/location. I am in Cleveland OH market and we come across these deals all the time and lower. The rent usually goes for 950. Or so and they rent very well, single family houses and tenant pays all utilities. -Andrea #brickhouserealty
    Nathan
    Replied over 3 years ago
    Would Someone Please Let Me Know Of A bank That Does 40k And Under Loans
    Nathan
    Replied over 3 years ago
    Would Someone Please Let Me Know Of A bank That Does 40k And Under Loans Reply Report comment
    Nathan
    Replied almost 3 years ago
    Would Someone Let Me Know Of Any Banks That Does Loans Under 50k Thank You
    Nick Rutkowski Rental Property Investor from Cortland, NY
    Replied almost 2 years ago
    I bought a duplex for 24,500 on auction and had it recently appraised for 70,000. It’s crazy what you can find for under 30k.
    Nikki Dade
    Replied almost 2 years ago
    That’s awesome! Where did you buy exactly? Good luck!
    Jim McNeill from Tallahassee, Florida
    Replied almost 2 years ago
    Great post. Interesting and your comments cracked me up. If real estate goes bad you could make a living as a writer.
    Briana
    Replied almost 2 years ago
    Born and raised in the Seattle area.. it totally blows my mind that anyone can get a house for 30k!!! If you want to buy a total gut within an hour of Seattle you’re gonna spend 300k minimum, and that’s gonna be a disaster. Makes me want to consider investing out of state… 🙂
    Kiran Kapoor
    Replied over 1 year ago
    @BRIANA same feeling here. Even fixer uppers in SF Bay area (If there are ones) would cost 500k
    Kiran Kapoor
    Replied over 1 year ago
    Does anyone know what housing markets have 30k homes for outright buying?
    Ryan Stucki from Riverton, Utah
    Replied over 1 year ago
    Nathan, I really appreciate this article. Some of the articles on BP almost scared me off from buying these types of homes, but encouragement from other investors got me to take the plunge back in August with our first “cheap” rental, and so far so good. I actually just bought three houses in the last few weeks in KSMO, so we’re expanding. Plan on picking up a bunch more. This article is helping me feel even more confident we made the right choice to focus on this asset class for our rentals. We did extensive due diligence, so I’m feeling good about the homes we’ve picked up. Thanks again for the great article.
    Brett Michael from Arlington , Tn
    Replied over 1 year ago
    I’m considering diving in and purchasing a couple sub 30K SFH’s. It’d be not the best neighborhood (as you would suspect), however, according to the for sale description these houses apparently rent for $600-850 and they’re already “tenant occupied”, or have just renewed a “new one-year lease”. Or duplex- “Long term tenants”- I called the realtor for that one and he says that the mother lives in one side, and the daughter lives in the other. So you would think that would be a great investment. Thinking of doing a Cash-Out refi on our paid for 100K SFH we’re currently renting out for 1K a month and purchasing a couple 30-40K properties. I’m hoping with a cash offer I can lower the sellers down by 5-10K. We have a great location for our 100K SFH that we own outright, but it’s quite intriguing when we consider selling/cashing out refi it to acquire 2-3 more.
    Vilson Nikollaj Real Estate Broker from Miami Beach, FL
    Replied about 1 year ago
    I see this thread is still going strong for 4 years. Any one have lenders that will finance < $30k homes, but not in your personal name? We've tried the local route and none of the smaller banks want to do the workload required (3 homes at $30k vs 1 home at $100k).
    Lewis Tse Real Estate Agent from New York City, NY
    Replied about 1 year ago
    Great read, Nathan. I love this article and what it stands for. One problem, I’m located in New York City, 30k gets me…a closet space. There’s enough business around me so I’m not worried, but 30k wouldn’t even be a pipe dream in this city haha
    Ryan Mayes Rental Property Investor from Albion, NY
    Replied about 1 year ago
    Problem in NYS with 30k properties is that our closing costs (including crazy high taxes here in Orleans and Monroe County) are so high and they have to be below around 10% (don’t remember exactly number) in order for a bank to legally be able to lend a mortgage on it. Or at least that is what the banks told me last year, and a couple dif banks told me same thing. So without lots of cash, private money, or a personal loan there is no way to by the 30k properties.
    Kurt Stresau Investor from Cocoa, Florida
    Replied about 1 year ago
    My understanding is that there are some consumer protections involved that are tripping people up. Some lenders will charge their fees as a combination of fixed cost for loan processing plus a percentage. Example: $1,500 plus 3% of the loan value. On a $30,000 mortgage, that totals out to 8% of the loan. On a $100,000 mortgage, it works out to only 4.5% of the loan. There are some federal guidelines that limit the total burden on the loan to about 7%. Anything over that is considered a predatory loan and will result in a federal violation. What was designed as a consumer protection, is now getting in your way of actually getting the loan initiated. You cannot waive the consumer protection by saying that you are willingly engaging in the borrowing activity. One possible solution is to purchase two to three properties at the same time and use a commercial lending product. A blanket loan can be structured as a single commercial loan against two to three properties. I would suggest finding a small Credit Union and go in and speak face-to-face with their principal lending officer about commercial blanket loans. You may find that this helps you avoid the lending issue.
    Florentina Ronquillo
    Replied about 1 year ago
    Chi Cheung, I just read thiss very good article, do you mind giving me the national lender’s name because I want to purchase less than $50,000 property? Thanks
    Edison Couba from North Augusta, South Carolina
    Replied 11 months ago
    Also peer to peer lending is also a good financing option at this price point.
    Chuck Walker from Ofallon, Mo
    Replied 10 months ago
    Thank you for writing a post on this topic. I have been buying the “cheap” properties (in the St. Louis market) for several years and have found continued success in this niche. I also find myself attempting to explain all the positives that come with these properties, but it’s often met with deaf ears. I believe some of it is due to the fear factor of the unknown, and some is due to people accepting too many opinions as the truth. I will always agree that an investor needs to learn the market in which they are looking to buy, or at least have a trusted advisor who knows that market. However, dont turn your nose at some wonderful opportunity because joe shmoe doesnt like the idea. Reach put to those who’ve been doing it and educate yourself.
    Deanne Moore Rental Property Investor from Rancho Cucamonga, CA
    Replied 10 months ago
    Great read. And I presume I believe it’s a great read because I share some of your perspective on lower-priced homes. Thank you.
    Jason Barnett Flipper/Rehabber from Memphis TN
    Replied 10 months ago
    Thank you Nathan. The article was very helpful especially since I’m in Memphis where the $30K price point is “plentiful”. Have a great holiday season, Jason
    Charles Maples from Olathe, Kansas
    Replied 8 months ago
    Just read this as it popped up when on BP. Makes sense.
    Josh Koett from San Diego, California
    Replied 7 months ago
    If I buy a 30k property and fix it up for a rental, would you build a small Adu, or granny flat in the back yard for additional income? Maybe after vetting the property after 6 months to a year to see if the neighborhood is good, rental income is steady, or other things to look for…anybody have some advice?
    Dan Heuschele Investor from Poway, CA
    Replied 7 months ago
    I notice Nathan now flips these (i.e. sells turnkey RE). I suspect it is due to learning that these low rent units have much of the profit consumed by cap expense and that managing units takes effort. Assume I purchase and rehab a RE at $35K and can rent it for $600/month. Seems great. Fast forward 5 years from now when the rehab is a bit older and there is some wear and tear on the RE. I can rent if for maybe $550 (if lucky) in inflation adjusted dollars. But items have 5 years of wear. Any carpets are done, The interior paint is done, The hot water heater is halfway through its life. Faucets are starting to fail. The big ticket items (foundation, roof, kitchen, the exterior paint) are all 5 years older. It is time to spend a significant percent of the profits acquired over the last 5 years but my rent has only been $600/month. I believe Nathan has wised up. He buys the cheap units, performs the rehab as described, sells to an investor at a profit, possibly gets paid to manage the RE. But when it is time for the items to be replaced, someone else will be paying for the cost and covering the lost occupancy. Maybe it is an opportunity for Nathan to purchase and do the repeat of the process. These properties are not easy to make a decent return for the buy n hold investor which I theorize is why that is no longer Nathan’s primary plan of operandi.
    Brett Nobles
    Replied 7 months ago
    Great article. I have a number of $30k properties myself and while I love the returns I have been frustrated with the refinancing process. It seems as if refinancers don’t want to give credit for the actual value of the property or for upgrades. Two main issues I’m seeing: 1. Appraisers only use recent sales from the MLS for comps but in areas with $30k houses many of the properties aren’t sold on the MLS for obvious reasons (why pay for a realtor on low value properties that often get sold between investors?). This means they are excluding a large majority of legitimate sales in their comps and thus lowering the value of my refinancing appraisal based on a limited pool of sales. 2. I often buy houses at a discount (which is what a good investor should do) by finding motivated sellers. However, unless I put substantial work into the property, appraisers have been reluctant to appraise my houses at the same value of comps because they look at my purchase price and dont feel comfortable going much higher than what I purchased it for. On higher value properties this wouldnt happen but in the $30-$50k range the don’t seem to want to appraise at too far above the purchase price no matter what the comps say. Any suggestions on how to handle this?
    Evania Ku
    Replied 7 months ago
    Great info! The nice thing about $30k mortgages is that you can pay them off quickly and use the cashflow to snowball other debt. They may not appreciate much, but they can be cash cows over time!
    Brian Ploszay Investor from Chicago, ILLINOIS
    Replied 7 months ago
    I’ve bought a few of these during the real estate downturn. On the whole positive, but properties in tough areas usually attract tough tenants. The maintenance and turnover costs proved to be significant.
    Austin Reed Investor from Milwaukee, Wisconsin
    Replied 7 months ago
    Good points within this article… I’ve got 38 SFH / Duplex units spread across Milwaukee with similar acquisition price… I’ve found that the SFH properties are less of a headache because the tenants aren’t sharing space as they do in Duplex’s. Seems that tenant management challenges and turnover issues in some of my places could be strictly blamed on inter-unit arguments / interactions. Tenant 1 vs. Tenant 2…. Something I wasn’t expecting!
    Chris Roush from Kansas City, MO
    Replied 7 months ago
    Great article. As a new investor, I have tinkered with the idea of buying at least one of these types of properties as an experiment. The ROI is hard to ignore. One thing I learned is that there are many property managers that refuse to manage in these areas. Just like shopping for a lender, you need to make sure you have a good PM lined up as well.
    Sam Cherry
    Replied 7 months ago
    Here is the best 30K and under deal. Find a property that needs to be demolished in a good rural setting with a functional septic. These sell for pretty much land value. Demolish it but leave the septic. Research your county ordinances for RV restrictions. For example one county I work has a 3 or more RV restriction, meaning at 3 RV’s or more on a parcel you must comply with Mobile home ordinances. So what this means is you can have two RV’s with no restriction. Now the sweet part. Since you have a functioning septic system you install two pads for RV’s and plumb to the septic system. Install Electric for the pads. Rent $500 per month x 2= $1000 gross Expenses: Electric $100/month Average Water: N/A since the parcel has a well (but add county water) Taxes: $60yr because it is land value (no dwelling) Insurance ($300 yr Liability) there are no structures to insure. I challenge you to beat this return. $1000 gross- ($130 expenses) or $870/month net on a $9,000 purchase price. You do the math. No maintenance except to mow the grass on a Half acre. Looking for the next deal now. Forget Risky Flips forget $150K rentals and the stupid 1% rule. Financing can even be done on a cash advance from a credit card at 22% interest and you are still killing it. It just works better when you do it for cash.
    Susan Maneck Investor from Jackson, Mississippi
    Replied 7 months ago
    Let me suggest an alternative and cheaper form of financing, namely first-place HELOCs. You can’t use them to buy your first 30K property but after you’ve owned it for a year you can get first -place HELOCs often at a teaser rate of say, 3%. I’ve used such HELOCs to buy my subsequent houses. Most banks won’t given these for investment properties, but I’ve gotten two of them from Wells Fargo.
    Susan Maneck Investor from Jackson, Mississippi
    Replied 7 months ago
    Let me suggest an alternative and cheaper form of financing, namely first-place HELOCs. You can’t use them to buy your first 30K property but after you’ve owned it for a year you can get first -place HELOCs often at a teaser rate of say, 3%. I’ve used such HELOCs to buy my subsequent houses. Of course teaser rates expire after a year, but I transfer the balances like you might do with credit cars then call for another teaser rate which so far I’ve always gotten. Most banks won’t given these for investment properties, but I’ve gotten three of them from Wells Fargo.
    Kyle Shankin Rental Property Investor from Oakland County
    Replied 7 months ago
    Is just wondering about properties in the 30k range and how to handle them. This post came my way via BP email. Very informative and worth the read. Thanks for your insight!
    Luke Fouch from Fond du Lac, WI
    Replied 7 months ago
    I’ve purchased two rentals in the Midwest for about $30k. After about $5k, they both appraised for over $67k. I love them! They are like little cash machines! I bought them both with cash and then had a local bank put a line against them. Given their age, I only felt comfortable with 60% LTV, which covered the initial investment. Nothing wrong with $30k properties here!
    Barry H. Investor from Scottsdale, AZ
    Replied 7 months ago
    Saw many early posts RE finding hard money to finance these $30K props. I am invested in the same market as Nathan Brooks as a lender for these types of homes. The most important thing for the investor to have under control is their rehab contractor. Finding tenants or the occasional flip Buyer is the easy part – it is getting the property properly renovated quickly and for a fair price which I have found most Borrowers struggle with. I lend with enthusiasm to a Borrower who can show me successful prior acquisitions and rehabs.
    Chris Herman Investor from Avon Lake, Ohio
    Replied 7 months ago
    This is a great article and I agree with Nathan and use similar strategies. Luckily for me in Ohio, there are incentives for investors to purchase homes in certain low income areas of Cleveland and Lorain, (where I am located) that reduce or completely eliminate closing costs on a purchase. I purchased a small 2 bed 1 bath house in west Cleveland for $32,000 and had it up and running in 2 months with a section 8 tenant. She’s great and the ROI is great.
    Lisa Phillips Real Estate Investor from Arlington, VA
    Replied 7 months ago
    We’ve come a long way in 5 years…lol.