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

316 Replies

Originally posted by @Clay Sellers :
Originally posted by @Mike D'Arrigo:

Not only is @Jay Hinrichs ........ It's also a myth that these cheap properties cash flow better than better class assets. You may get lucky and get a higher CoC return but it's mathematically impossible to squeeze more cash flow out of $600 rent than $900. The higher the rent, the higher the cash flow. It's basic math.

Not trying to be snarky but "The higher the rent, the higher the cash flow. It's basic math." isn't cash flow dependent on expenses? Now, it might be said, that lower class assets have more expenses in the long term. However, assuming you own the house free and clear like @ashley hamilton, you've done a fairly decent rehab, you manage them yourself or have a good property manager, thus keeping your expenses low over the next 5 years, do rent rates really matter? 

Seams like expenses are the more important factor to look at.

Of course, if you throw up the same scenario with a higher class property with a higher rent than, yes, the cash flow would be better. 

 Clay, rents matter a lot. just like in any business, profit (cash flow) is a factor of both income and expenses. The point that I was making is that properties with higher rents will have higher cash flow because you obviously have more income coming in but a lot of your expenses will not vary with rent. It costs as much to fix a stopped up drain or replace a furnace on a house renting for $700 as it does on one renting for $1000 just as it doesn't cost more to make a higher end property rent ready again at tenant turnover. In fact, it's just the opposite. Turn over costs are very high on low end asset classes  due to the types of tenants they attract. Insurance will vary with the value of the property but a big percent of insurance cost is for liability that is the same regardless of the value. Insurance isn't going to be 30% more just because your rent is 30% more. In fact, insurance can be higher on low end properties due to their age and type of construction. To your point about good property management, I have yet to find a property manager that can get good tenants to live in bad neighborhoods. In fact, most of the good PM's won't manage these types of properties. They spend 80% of their time on 20% of the portfolio which tells you something.

When I was in the military, I purchase my first rental for $20k in 2000. That rental has been a great money maker with little problems because I conduct preventive maintenance on my properties. I am very proud of that little house.  Since then I have been purchasing rental properties from $30k to $60k.  Retired from the military and collect my cash flow from those properties.

Originally posted by @Luther Avery :

@James Galla

What is your ideal SFH deal look like? Purchase price, rehab costs, finance terms, rent, and cash flow?

So, for something in the $30k club, I normally want a ranch-style home under 1200 sqft. Utilities should be centralized in the home. This means no random maze of pipes for utilities. Toilet should be close to the stack, etc. Neighborhood is critical and cash flow will be related to the neighborhood, but you can normally get gross rental of around $600+/month. I'm at a mix between cash/credit for the $30k club.

I know some folks that buy the $500 properties, put in $10k for renovations and rent by the bedroom. That's not my style.

Originally posted by @Luther Avery :

@James Galla

Thanks for your response. I am curious what kind of properties you normally invest? I am assuming 30K club is probably not your thing.

I have experience in many price ranges. I don't hold anything against the $30k club. I actually enjoy that range as well (I enjoy working with and volunteering for lower income folks), especially for my area. The issue I frequently see in that range is folks from California, Colorado, and Washington coming into the idea that the $30k club is often viable. Then, when they jump in, the tenants and property management companies kill their margins. So, my skepticism online isn't really how I view it. I would just prefer that folks don't walk into a trap or get the wrong idea that low-income investing is easy or some magic ticket to wealth.

@Chris Heeren can you give me some pointers I have one single family 4 br 2 bath on a double lot that I’m in the process of fixing up and I want to purchase another so that I would start off with 2 properties I also have a duplex 2 br 1 bath on each floor that I can get mortage and insurance runs 450 a month on it. My question I wonder would I be bitting off more then a can chew my first time around.

Hey all!

My name is Amil and I'm in an investor in Indianapolis. Just found this thread and it has some amazing content! You guys are killing it here! I have a similar philosophy and I'm wondering if there are any others located in Indianapolis who want to connect, share contacts, share ideas, etc.

Thanks

Amil

Lenders:

Ei8ht Street Funding told me they have an affiliate program that can lend on these under 50K properties in Detroit with reasonable interest rates, but you need to be living in MICHIGAN to qualify. 

I don't.

For out-of-state investors, portfolio lending seems to be the way to go - I've been told a portfolio value of as little as 100K can qualify me for reasonable refinancing rates.

For the little guy (me, right now): I'm still on the hunt for a lender to refinance my two properties values 40K to 50K each, so I can purchase more property. My newest lead is Lima One.

Originally posted by @Kere Jenner :

Lenders:

Ei8ht Street Funding told me they have an affiliate program that can lend on these under 50K properties in Detroit with reasonable interest rates, but you need to be living in MICHIGAN to qualify. 

I don't.

For out-of-state investors, portfolio lending seems to be the way to go - I've been told a portfolio value of as little as 100K can qualify me for reasonable refinancing rates.

For the little guy (me, right now): I'm still on the hunt for a lender to refinance my two properties values 40K to 50K each, so I can purchase more property. My newest lead is Lima One.

Kere, if you own a $40k and $50k property it's easy to refinance out of those. DM me and I'll send you Joe Randall's info at LevelOne Bank. He's working on a cash out refi (technically delayed financing) for me right now on a $40k house I bought last month.

It appraised for $45k and we're cashing out 75% of that. He does them all the time.

 

Originally posted by @Travis Biziorek :
Originally posted by @Kere Jenner:

Lenders:

Ei8ht Street Funding told me they have an affiliate program that can lend on these under 50K properties in Detroit with reasonable interest rates, but you need to be living in MICHIGAN to qualify. 

I don't.

For out-of-state investors, portfolio lending seems to be the way to go - I've been told a portfolio value of as little as 100K can qualify me for reasonable refinancing rates.

For the little guy (me, right now): I'm still on the hunt for a lender to refinance my two properties values 40K to 50K each, so I can purchase more property. My newest lead is Lima One.

Kere, if you own a $40k and $50k property it's easy to refinance out of those. DM me and I'll send you Joe Randall's info at LevelOne Bank. He's working on a cash out refi (technically delayed financing) for me right now on a $40k house I bought last month.

It appraised for $45k and we're cashing out 75% of that. He does them all the time.

 

Hey @Travis Biziorek can you DM me his info also?

 

Stuart, Thank you for asking this question. I am looking to begin and this is my starting place as well.  I know the cautions people have shared, but I also know about having access to just enough capital to get started.  People have surely invested more for less return - student loans, stocks, a wedding!  

Thank you for your comments, I'm looking to start in that range then "graduate" to "bigger" higher priced properties. That said, I'd appreciate some guidance even a mentor that has SUCCESSFULLY done this, purchased 30K properties, and built a profitable portfolio. 

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