The $30k rental club.......

Rental Property Investor · Detroit, MI · Member since 2015 · 82 posts · 548 votes

7y

Originally posted by @Account Closed:

Im sure many of us have read all the warnings and reviews of buying low price properties, and the problems typically associated with them, but all that considered, it is what first attracts a lot of people , indeed this is the only path available to some, its a start, so lets explore whats real and possible.........

lets use Detroit, Cleveland, Michigan and Indianapolis as examples where possible ,and set a ceiling of $30k

Personally i dont see the return on higher priced properties attractive enough to invest $80 to $120k plus, and before anyone starts preaching about the pitfalls, ive done this before, over 30 properties over 20 years, just in another country, low cost houses in deprived areas, i know what can go wrong.

The first attraction here is the low cost, funding with personal loans and credit cards etc, is possible, and with high returns , quickly repaid, whereas a large mortgage is on your credit file for years, and has to impact further borrowing, and cannot easily be cleared temporarily in the same way credit cards can, if your credit needs a boost !

How easy is it to get a portfolio of say 3 x $30k properties you own outright (wherever the funds came from !) and then refinance into one loan after 6 months or a year ?........and then repeat this process ?

This is more attainable for a lot of people surely ?

So, anyone with a similar train of thought ?, anyone already doing this ?, any input would help........

Hello, yes I've done this in Detroit for 9 years now and some properties were purchased for $1000. At this point I own 9 properties (10 door) free in clear in Detroit. All occupied, making around $7100 per month. I've already made my initial investment back on almost all the properties and am now seeking a blanket loan on my portfolio. My guess is the total value of the properties as a whole today are $469k. So at 32 years old I owe $469k worth of real estate. But the good news is if the market go up next month or next year I could be worth $600k, then next year maybe $1 million. And i'm confident that the market will go up because it's already hit rock bottom so there's nowhere to go but up from here. Also there's a lot of big investment going on in the city now. I am currently look to purchase a condo in Vegas as well and hopefully moving down there soon. Thanks for you post!!! We need more opened minded people on here that can appeal to the masses without a ton of money.

93 Reply

Brandon Carriere

Realtor · Las Vegas, NV · Member since 2018 · 218 posts · 147 votes

7y

My first 2 I bought back in Wisconsin were the $30k variety.. They've been some of my most solid performers.. Wish I could buy more but they're so rare to find

8 Reply

Brian Garlington

Realtor · Oakland, CA and a Real Estate Investor with Multi-Family Units and a Self Storage Facility · Member since 2016 · 2k+ posts · 2k+ votes

7y

Unfortunately there are many agents and mortgage people that will also tell you that you won’t be able to get a mortgage for a property at the $30,000 level. I talked to several agents and lenders that said this when I reached out to them here on BP and said I wanted to look at this market.

Fortunately I found a mortgage lender that will give you a mortgage loan even if the property is being purchased for as $30,000!!

22 Reply

Account Closed

OP

Las Vegas, NV · Member since 2018 · 100 posts · 140 votes

7y

Sounds like you were very .....fortunate!

Is that it or do you have any more details ?

1 Reply

Chris Heeren

Investor · Janesville, WI · Member since 2013 · 180 posts · 155 votes

7y

I have about 50 of these types of properties in Southern WI. I can't justify buying anything else. I use the BRRRR method to get my initial funds back out. The key is what the properties rent for. The majority of mine are around $900/mo. If you are only able to get $600-$700/mo, I would be very careful. That is just not enough cashflow to support an entire property long term, especially on older houses. (It may look good on paper but not in real life) If you expect to cashflow on a $30K property and are only at 2% rent vs purchase price ration - watch out. It is most likely not a money maker and probably in a C- or D class area with very little appreciation on top of it.

43 Reply

Andrew SyriosPro Member

Moderator

Residential Real Estate Investor · Kansas City, MO · Member since 2014 · 10k+ posts · 5k+ votes

7y

A lot of banks shy away from cheaper properties, but if you portfolio them together some will lend on them. The biggest problem you have is that its very easy to rehab out your equity on cheap properties and the upkeep will often cost more than the rent brings in.

Podcast Guest on Show #121

10 Reply

Dennis M.

Rental Property Investor · Erie, PA · Member since 2018 · 6k+ posts · 9k+ votes

7y

love me some cheap houses . Easy way to build wealth without going in hock up to your eyeballs

This is one of those areas where folks will often say to you “ oh you can’t make any money on those cheap houses “ even though your doing it , they will assure you can’t do it lol

26 Reply

Lee Bell

Real Estate Appraiser · Isabella lake, CA · Member since 2018 · 628 posts · 491 votes

7y

OK, this is interesting. It is pretty much what I was thinking when I first started reading BP. But the predominant thinking of they are losers, kind of scared me off. LOL.

L.A. does not have $30k houses, but we are thinking about moving retiring to an area that has $50k or $60k houses on the low end.

3 Reply

Chrisitne Mata

Rental Property Investor · Irvine, CA · Member since 2018 · 2 posts · 8 votes

7y

@Brian Garlington

What mortgage lender are you using ?

8 Reply

Caleb Heimsoth

Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes

7y

@Stuart Smith. Sure this can work but I would be very careful with using a lot of leverage and only do this if you’re local.

3 Reply

Jay HinrichsBusiness Member

Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes

7y

its a locals game its a JOB nothing more nothing less. and if you can scale it thats great

but you need to be in the trenchs

@Ashley Hamilton congrats I remember when houses were 1k in Detroit.. took some will power and local knowledge but your the exact person that makes this work some one from out of area.. not so much is my experience. And if you buy in Vegas welcome.. lots going on here

Podcast Guest on Show #222

JLH Capital Partners51 Review

Website View Page

12 Reply

Courtney Kimbrough

Investor · Alabama, United States · Member since 2018 · 31 posts · 17 votes

7y

@Stuart Smith I was modeling my whole business around this concept. Houses from 20k to 40k with no more than 5k worth of work. I hadn't thought of the idea of portfolio loans until you said it. So if I hadn't made it clear I think it's a very sound idea. Depending on how well you screen your tenants. But honestly the same can be said for all price ranges and all neighborhoods.

3 Reply

Rachel H.

San Antonio, TX · Member since 2009 · 3k+ posts · 1k+ votes

7y

@Account Closed There are many investors who do it. But I wouldn't get into it just for price alone. The area and the type of clientele the neighborhood attracts is a key factor. I do it but with mobile homes buying them for all cash. Though, I tend to work in more higher-end neighborhoods and mobile home parks. Hope that helps!

5 Reply

Tanner Marsey

Rental Property Investor · San Diego, CA · Member since 2017 · 439 posts · 578 votes

7y

Not interested in the headaches that come along with the 30k properties. If you can purchase for 30k, rehab and have an ARV of 60k plus, that's a different story. I think in a large number of markets you can up your purchase price and start getting into the 60k range and have decent cash flow, lower expenses, less headaches and more longevity (newer home) but to each their own. If it's working for you then keep on pushing.

8 Reply

Ryan MurdockPro Member

Rental Property Investor · Austin, TX · Member since 2016 · 1k+ posts · 1k+ votes

7y

@Account Closed I've done well with plenty of $30K houses, granted in my market they usually need another $30k in rehab but when the ARV is $125k-ish it's money well spent.

The merits of cheap houses aside, be careful when you cross collateralize anything regardless of property class or value. While it certainly has its advantages there are also disadvantages.

Let's say you finance 3 properties on one loan and you want to sell one of them off at some point in the future. It could be that one is a poor performer or maybe one has a ton of equity and you want to sell it to free up some cash.

In order to do this the bank could require new appraisals on all 3 properties before they'll release one of them from the loan. They want to make sure the remaining properties have enough equity to cover the remaining debt. I've also seen banks require 100% of the proceeds of a sale be applied directly to the principal which really squeezes your options.

Just be aware of what you are doing and the potential future limitations that go along with it.

Podcast Guest on Show #355

22 Reply

Jim K.

Handyman · Pittsburgh, PA · Member since 2018 · 5k+ posts · 13k+ votes

7y

@Jay Hinrichs

Every time I see Jay mention that low-income landlording is a job, not a passive investment strategy, not a wealth management strategy, I back him up, because he knows exactly what he's talking about. If you're willing to DIY and self-manage, yes, you can build wealth, and yes, you can build wealth more quickly than most would expect, and yes, you can do it with (mostly) lower risk than others believe you can.

But you and everyone in your family had better commit to being in the trenches of renovating, maintaining, and managing your own properties. It will be nasty and it will be brutish and you will go home at the end of your very long days with your whole body aching and all kinds of stink up your nose.

Having others do for you is not a feasible business strategy in the hood. If you can find an electrician, a plumber, an HVAC outfit, and a roofing crew that's willing to work with you in your target area, bless your luck and treat them like the vital business associates that they are.

I would tell any head of household that's already making upwards of $100K a year to stay out of this niche. Cut your expenses to the bone, max out your tax-advantaged money buckets, invest in sweet little B-class properties in sweet little B-class neighborhoods that appreciate nicely, take it slow and easy as you build up to larger multifamily investments. Pull the income lever to financial freedom as hard as you can before you try something different.

Don't look to the ghetto to help you get out of a well-paying job you can't stand and into a nicer, easier, gentler lifestyle. It ain't gonna happen.

43 Reply

Tyler Emerson

Rental Property Investor · Member since 2018 · 11 posts · 4 votes

7y

@Chris Heeren

Is there anything specific you are doing to attain $900/month rent from lower priced properties? I’ve read/heard where some investors have their standard list of items they fix, no matter what like, when they first buy a lower priced property just to try and save time and money on additional costs of maintenance in the future. Items such as flooring, sinks, toilets, showers, etc.

In some of my areas the average rent runs about $600-$700/month. Most of the neighborhoods are quiet with little to no history of crime. Demographics show that the average age range runs from 25-35.

1 Reply

Account Closed

OP

Las Vegas, NV · Member since 2018 · 100 posts · 140 votes

7y

Some good points , but some of you didn’t read the question.....

It’s also clear some of you have never been through a recession.....I can guarantee, from considerable experience , that when a downturn comes , your class B super neighborhood tenant, the flash guy with a Merc and a house full of toys and kids will be the first to lose his overpaid job, and the first to default on the $1500 rent.....whereas Mr Reliable in Detroit who works at Walmart and pays $450 a month will continue to do so.....

But this is about $30k houses, local or out of state......about DOING this, going this route, not reasons why not too......

19 Reply

Ashley Hamilton

Rental Property Investor · Detroit, MI · Member since 2015 · 82 posts · 548 votes

7y

First, OMG @Ryan Murdock voted on my post, I'm definitely fanning out lol.

But I have to strongly disagree with everyone saying it's only because I'm local and that its a job. It wasn't a job and I was actually able to retire at age 23, However I turned into a job and started my own property management company after a hedge fund that I was bidding against on a property ask me to do for them what I was doing for myself. I have investors whos never been to Detroit who made $100,000 in 4 years, and everything can be proven. It's seems like no one wants to be patient and make that investment upfront and wait a couple years to recoup. Like @Account Closed said when a recession hits and no one can afford the expensive rents, then you all will be in trouble as for investor with cheaper properties are pretty much safe. Tenants who work at walmart and restaurants will still be safe. Also Like I heard someone on the podcast say before when you own the property free and clear or have low mortgages on them your recession proof because if the economy is bad you just lower the rents. By not having a mortgage payment you have no payment to make, So you can make the rents $300 if you have to. The key is always having a strategy. I can debate all day, but unless you actually doing this you shouldn't call it a job.

45 Reply

Account Closed

OP

Las Vegas, NV · Member since 2018 · 100 posts · 140 votes

7y

@Ashley Hamilton......exactly!

The biggest negativity I’ve read on here by so called experts is that is so so difficult to find tradesmen and teams to repair out of state, .....why is it ??

They talk as if it’s some secret gentlemens club, that we won’t ever gain entry to !!

It’s not rocket science, even if you know nothing about property, you get 3 quotes, you get local recommendations, you check the firms out....and if they don’t turn up, or don’t do the work to standard, you don’t pay until they do !!

What’s so difficult ?

7 Reply

Ashley Hamilton

Rental Property Investor · Detroit, MI · Member since 2015 · 82 posts · 548 votes

7y

When I started I worked as a waiter at a restaurant making 16k a year. Here's an example of what I've done 10 times. I purchased a home for $1900, put about $17k worth of work, I made everything nice and new so I would have repairs for 2-3 years. Once the house was finished I rented out for $800/ moth. That same tenant has been there for 5 years. So I've received $48k, taxes are under $1200/ year, and I've literally replaced a faucet and snaked a drain in 5 years. The tenants pay all utilities so I don't have any expenses. So lets say in 5 years with taxes and rounding up I've spent $8k. So I made $40k in 5 years off this property when I originally invested under $20k. Now today the same property is worth $40k, so If I sell today I would have made $60k in five years without doing anything beside the initial renovations and using the phone to call a plumber a couple of times. I've done this multiple times already, and I don't see how it doesn't make sense.

And another this, just because the property in $1000 or $30k doesn't mean it's in the ghetto or in a bad neighborhood.

41 Reply

James Galla

Attorney · Akron, OH · Member since 2016 · 535 posts · 389 votes

7y

Ah, the classic pro forma rust belt out of state investor issue. Pro forma, the deals look great, but that's a far stretch from how they play out. You'll ultimately be forced to use a property manager and they will over upgrade the property for whatever damage you face. It's a nice built in conflict because it is in your interest to have low repair bills, but that's how they survive. Plus, when you're in the lower grade areas, they get double the ground to rob you since you don't know any better and it isn't like you can personally inspect the unit.

Let's not forget the judgment proof wrecking ball tenants that completely disregard no pet rules and jam in more people than the unit is suitable for without getting them on the lease.

This all goes to say that it is best to use extraordinary diligence in buying the property beyond the fact that it is just a low price deal. You'll easily find dozens of $30k properties, but that doesn't mean they are suitable investments. Because they can be volatile, you ought to be in the vicinity to manage them.

Don't let this make you think it's impossible to work with $30k properties, though. It can be extraordinarily profitable. It just so happens that more often than not, folks get trapped in the pitfalls. That's why you don't see an ultimate real estate solution of buy as many $30k properties as possible under the claim that it works and will get you rich quick. So, make sure to consider your experience with high maintenance properties and tenants prior to just diving in.

On a side note, I see folks talking about lending, so I'll throw out three banks that I've seen give approvals for properties under $30k: Key Bank, Dollar Bank, and Farmers Bank. Consider, though, that these loans may have been for primary residences and are made as a charitable effort/program to incentive home ownership in the area.

9 Reply

Account Closed

OP

Las Vegas, NV · Member since 2018 · 100 posts · 140 votes

7y

@Ashley Hamilton

What about starting “The $30k Club”....

10 investors @ $10k

The club buys 3 $30k properties, the $10k left is to cover expenses

Entry criteria

Little or zero experience in real estate

$10k must be a considerable amount of money to them

15 Reply

Account Closed

OP

Las Vegas, NV · Member since 2018 · 100 posts · 140 votes

7y

@James Galla ah the classic pro forma I’m holier than thou negative predictable reply.....yawn

6 Reply

James Galla

Attorney · Akron, OH · Member since 2016 · 535 posts · 389 votes

7y

Originally posted by @Account Closed:

@James Galla ah the classic pro forma I’m holier than thou negative predictable reply.....yawn

Haha ok. I don't think I worded it like that, but if I raised some doubts, that's good. You'll be more careful when looking.

But, if you're looking to be condescending, I'll suggest making it the $10k club - head right on over to South Akron, West Hill, or Sherbondy Hills in Akron, and just dump your $100k into 10 properties. You'll be rich in no time.

6 Reply

The $30k rental club.......

The $30k rental club.......

Most Popular Reply

316 Replies