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

308 Replies

Always interesting to hear about other's paths.  We are looking for houses that rent for $30k per month (vacation rentals) I thought perhaps that was the subject of the post based on the subject line, before I saw the body of the post.

@Stuart Smith

I've been reading this thread and seeing how you respond to any "negativity." You obviously have a rock-bottom certainty that things are going to work out, investing in a Rust Belt ghetto portfolio from across the country. I have absolutely nothing to gain by discouraging someone like you, especially someone with the same kind of pure and perfect faith in an investing strategy that a priest has in Christ.

I have repeatedly tried in my BP posts, however, to bear witness to the realities of what it's like in my target area, working as a self-managing, DIY, low-income landlord in low-cost properties. I'm not fully a member of the $30K group in my portfolio, but close enough. I've done pretty well with these properties. I do not like to pat myself on the back about it in an open forum such as this website. I do not do this because I have a healthy fear of identity theft, and hiding with pride is also part of my long-term strategy of never looking even remotely comfortable financially in my community.

It is definitely possible to make money in the sub-$30K market, Stuart, I'll say it again. Real estate in this niche can certainly be a wealth-building strategy. I know at least six individuals in my area (both off this website and on it), who are making a good go of it in different areas of this city. One of my inspirations in this, before he got out, was actually one of Mr. Rogers' set carpenters, an immigrant to this country who took his self-taught skills and built a portfolio worth millions in my area. My grandfather did much the same thing in Queens, NY, many years ago. As a ship's maintenance carpenter, he was able to buy old rowhouses in Astoria, NY, renovate them himself, and rent them out for decades. After he died early, my mom's family managed to lose most of the money...but that's another story for another day.

I got into this with a low-income teaching job that could not possibly make us enough money to get to any sort of financial independence in our lifetimes. My wife is a certified nursing assistant. Again, far from the big bucks. Getting into low-income rentals was not a choice we made from a position of financial strength. I knew I was switching one job for another. This is one of the reasons why I repeatedly tell people that if they have different options, not to choose this one. Low-income landlording in C/D-class SFR and small multifamily wasn't the lever I would have pulled to get to financial freedom, given a choice.

The things I did have were the beginnings of a good hands-on renovation background acquired while I was teaching overseas, an understanding of the basic outlines of the business inherited from my family, a willingness to work hard with my hands, a strong research background to learn a lot of things by myself, a deep disdain for the rat race, and a wife who believed in me. I needed all that, and still do, to keep the ball rolling.

Stuart, I estimate I've got maybe eight more years of this before I have enough to call it quits, sell my current portfolio, and move the money to something less profitable and less of a job.  It's been a wild ride since I bought the first rental in 2013. I think I'm going to make it, even if the economy goes belly up. As you rightly observed earlier in this thread, low-income landlords are often far less negatively affected by recession than others. They just have to have enough coming in from various sources and not be undercapitalized.

We've seen much more on-paper appreciation already than I bargained for, but that's because I both got VERY lucky and I also made some solid strategic decisions based on information I gained by compulsive research into a possible target area. It could all evaporate tomorrow. But for now, I'm taking advantage of this appreciation to leverage my business a bit more, but nowhere near as hard as I've seen others do, buying houses with credit-card introductory no-interest offers, flipping debt from one card to the next, promising family members YUGE returns and stiffing them with a shrug, taking on massive debt and properties that don't cash flow in the false certainty that they'll just HAVE to appreciate someday.

Yet again, it's possible. We're living proof (so far). Focusing only on the success stories, however, also ignores the very real problem of not looking realistically at a problem because of survivorship bias. I also happen to know the stories of multiple families who have failed miserably doing this. To date, I've bought three rental properties from people like this. The guy who sold me my first property is still my wife's friend. We meet regularly to have coffee. We pay for the coffee. He lives in a Section 8 apartment on SSI. His divorced wife is in a dementia care facility down in Florida. I could tell you more but you get the basic picture.

I know absolutely NO ONE in my area who has made it work in these low-cost properties from a distance and/or with clean hands. These people get screwed six ways from Tuesday. They get screwed by tenants with built-up resentments against high-and-mighty landlords they've never met. They get screwed by fly-by-night property managers who harbor no love for out-of-towners and their outlandish ways. They get screwed by local authorities who dislike long-distance slumlords. They get screwed by contractors. They get screwed A LOT by contractors. They get screwed ALL THE TIME by contractors.

All that being said, Stuart, if this is what you want, good luck to you. Citius, altius, fortius, per angusta ad augusta, aut inveniam viam aut faciam, δῶς μοι πᾶ στῶ καὶ τὰν γᾶν κινάσω, you gotta want it more than life, impossible is nothing, YOLO.

Originally posted by @Randy H. :

@Ashley Hamilton

You obviously are on the right path. The same path I'd like to get to. As a newbie I could truly look up to you and respect your efforts and advice. I'm really happy to see and hear about your success. Maybe I can bounce some ideas off of you, in hopes of getting to the top too. You have a lot to be proud of.

I want to do this the honest and legal way too, and won't have it any other way. Good luck. Way to go!

 Thanks! Anything I can do to help, let me know.

Originally posted by @Bryan Vincent :

@Ashley Hamilton where did you find the funding to make the renovations?

 Saving the rents from other properties. Last year I purchased and rehabbed two properties off my credit cards. Hope this helps.

Originally posted by @Dan Heuschele :
Originally posted by @Elliott Elkhoury:

@Stuart Smith I'm way into this club. Especially if you're purchasing at well below market, the property is near rent ready condition, and the neighborhood supplies plenty of tenant demand + low operating expenses and landlord friendly laws. As long as we're accurately estimating future cap ex expenses based on present condition and replacement cost of each component & the previous rules apply this works out.

Maybe all of the investors that tell us not to do it are trying to keep all of the best opportunities for themselves ;)

Here's a mind-blower: I just picked up a 3plex that was fully rehabbed but vacant, owned by an older gentleman who was simply done with the enterprising stage of his life and wanted to rest. Bought it for (far below market val) 25k. Rented it for gross 2100 in less than 30 days after purchase with 1k invested in misc. unit preparation. Taxes are 900$/yr... water bill is 35$ a month. Would love to see someone tell me not to buy that sucker again. If I could, I would liquidate my all of assets and purchase it 50 times over for gross rents of 105k/month LMAO.

There are good deals left everyone!

I would pass on having such a property as a buy n hold.  Maybe I would flip it. 

Why would I pass as a buy n hold?  The $700/unit is significantly below my minimum rent threshold.  A large cap ex item can consume too many months of the "cash flow".  I do not know what you projected the cash flow at but each tenant of these smaller unit count units takes time.  Three separate tenants at a rent of $700/unit, no thanks. 

Today I have a fairly high cost maintenance/cap expense due to a water leak.  The plumber has been at the unit 1.5 hours already and has not determined the source of the leak.   At least one BR rug is ruined.  A second BR rug is saturated and possibly ruined.  Walls have been opened up that will need to be repaired.  Granted this is not an every month event, but it does not have to be to be a significant impact on the cash flow.

I would not consider any small unit count property with $700/month per unit rent a good buy n hold RE.

 I understand and respect your position, but the reason I think you think capex will eat up all the cashflow on a $700 a month property is because you don’t realize how cheap labor is in these areas. For the issue you mentioned, on the plumbing leak for example, that would be minimal for me. A case of beer, a pack of cigarettes, and maybe $150 to my contractor. He’ll replumb an entire house with pex for a couple hundred bucks. I had a break between the water meter and the house and had to excavate from the street all the way to the house (20 feet), have a new line run and a shut off valve installed-$1600 total. If something needs to be fixed, I can get someone over there for $20 because he’s working on my next project. If I didn’t have that, maybe $100, but it would have to be a pretty big issue. I can have sewer lines cleaned out for $125. Labor is cheap here. Like others have said, you do the work upfront, electrical, plumbing and hvac. I try to target around 30k after the rehab, 19k purchase with a 10k rehab, somewhere in there. I’ve done better, I’ve done a little worse. I am local. A no slumlord here. Everything is Section 8. We put in several nice features (lower mid grade durable materials) that look like what is going on on HGTV

Updated 3 months ago

I also agree with the above comment that it would be nice to transition into other asset classes later. Once I've achieved financial freedom on these 30k properties and don't need as much cashflow, I'll likely play around in other classes. But I won't forget where I started. I may keep a few projects going close to my foundational 30k investments. I also agree, it is a job. Tonight I drove my contractor to my tenant's house to fix a sink and shut off valve because he doesn't have a car, on my wife's birthday. I should have called Uber but I'm not sure how they would have felt about all his tools. Lol. It's cool though, my wife will forgive me. I'd rather be doing this than sucking up to a boss that may or may not promote me.

A good English teacher will drill into you.....

READ THE QUESTION !!

There should not be any negativity in this thread, this is for information gathering, not attention seeking......not for wanting a piece of the game just because it’s at the top of the page

If it’s not for you, not your chosen path, not something you want to be involved in, DONT EVEN READ IT, let alone reply .....why would you want to ??

Imagine if this were a car forum.....

I’m hell bent on buying a old mustang, you want a new corvette ......I can’t imagine you would want to contribute to a thread I started entitled

“Mustang 1968 tail lamp discussion”

Why would you ?, you’re not interested....

But you can bet your life some in here would reply to “My old Mustang blew up “ with many varieties of “I told you not to buy one”

Really helpful and useful......not !

I have already decided the world is flat, don’t waste your time , or more importantly, my time, trying to convince me that the world is round.

@Stuart Smith It's a question thread. If you have all the answers why did you pose the original question? You have plenty of intelligent responses and people who you can learn from on all sides of your thread. Seeing you haven't been on the site for long it's obvious you don't know the value you can learn from some of these people you are disregarding. I'm doing the type of investing you seem bent on doing, but I continue to do so after learning from the viewpoints of many, so I can make more informed decisions moving forward. That is why I started reading your thread, looking for a nugget, it can come from anywhere. I love hearing from everyone, some of these people you are saying bye Felicia to are iron, and iron sharpens iron. I'd read a book on emotional intelligence before you do anything else. Then come back to this.

Originally posted by @Jonathan R. :

@Stuart Smith It's a question thread. If you have all the answers why did you pose the original question? You have plenty of intelligent responses and people who you can learn from on all sides of your thread. Seeing you haven't been on the site for long it's obvious you don't know the value you can learn from some of these people you are disregarding. 

Its a shame you didnt READ the first line................seeing you have been on the site for 100 years its a shame you cant distinguish between useful factual additions to a thread and blatant pointless long rambling repeats of stuff we have read a thousand times

Every day is a school day, but i have learned im not going to learn anything by reading the same negative , badly written articles that dont have any real association to the subject at hand

Im perfectly happy i can sort the wheat from the chaff thanks

@Jim K.

Thank you for that. As someone in the exact scenario you described, I very much appreciate your (and Justin’s) experience. 👍🏽

Originally posted by @Stuart Smith :
Originally posted by @Jonathan R.:

@Stuart Smith It's a question thread. If you have all the answers why did you pose the original question? You have plenty of intelligent responses and people who you can learn from on all sides of your thread. Seeing you haven't been on the site for long it's obvious you don't know the value you can learn from some of these people you are disregarding. 

Its a shame you didnt READ the first line................seeing you have been on the site for 100 years its a shame you cant distinguish between useful factual additions to a thread and blatant pointless long rambling repeats of stuff we have read a thousand times

Every day is a school day, but i have learned im not going to learn anything by reading the same negative , badly written articles that dont have any real association to the subject at hand

Im perfectly happy i can sort the wheat from the chaff thanks

 Re-read your original post. “How easy is it to get a portfolio of say 3 30k properties you own outright and then refinance...” “Anyone doing this? Any input would help....”

Let’s see, I have more than three 30k properties owned outright. Less than two years. You’ve already had several responses on it being possible to refinance out, or brrrr. I’ve used personal unsecured loans, a 401k, cash, credit cards, lines of credit from Home Depot and Lowe’s, student loans even, and partnerships.

You got input from someone with direct experience in what you are trying to do. What were you looking for?

What did YOU contribute ?, you have nothing to say .....why are you still here ???

My recommended reading for you would be Olde English Witchcraft

Originally posted by @Stuart Smith :

What did YOU contribute ?, you have nothing to say .....why are you still here ???

My recommended reading for you would be Olde English Witchcraft

 Done.

Originally posted by @Jonathan R. :
Originally posted by @Dan Heuschele:
Originally posted by @Elliott Elkhoury:

@Stuart Smith I'm way into this club. Especially if you're purchasing at well below market, the property is near rent ready condition, and the neighborhood supplies plenty of tenant demand + low operating expenses and landlord friendly laws. As long as we're accurately estimating future cap ex expenses based on present condition and replacement cost of each component & the previous rules apply this works out.

Maybe all of the investors that tell us not to do it are trying to keep all of the best opportunities for themselves ;)

Here's a mind-blower: I just picked up a 3plex that was fully rehabbed but vacant, owned by an older gentleman who was simply done with the enterprising stage of his life and wanted to rest. Bought it for (far below market val) 25k. Rented it for gross 2100 in less than 30 days after purchase with 1k invested in misc. unit preparation. Taxes are 900$/yr... water bill is 35$ a month. Would love to see someone tell me not to buy that sucker again. If I could, I would liquidate my all of assets and purchase it 50 times over for gross rents of 105k/month LMAO.

There are good deals left everyone!

I would pass on having such a property as a buy n hold.  Maybe I would flip it. 

Why would I pass as a buy n hold?  The $700/unit is significantly below my minimum rent threshold.  A large cap ex item can consume too many months of the "cash flow".  I do not know what you projected the cash flow at but each tenant of these smaller unit count units takes time.  Three separate tenants at a rent of $700/unit, no thanks. 

Today I have a fairly high cost maintenance/cap expense due to a water leak.  The plumber has been at the unit 1.5 hours already and has not determined the source of the leak.   At least one BR rug is ruined.  A second BR rug is saturated and possibly ruined.  Walls have been opened up that will need to be repaired.  Granted this is not an every month event, but it does not have to be to be a significant impact on the cash flow.

I would not consider any small unit count property with $700/month per unit rent a good buy n hold RE.

 I understand and respect your position, but the reason I think you think capex will eat up all the cashflow on a $700 a month property is because you don’t realize how cheap labor is in these areas. For the issue you mentioned, on the plumbing leak for example, that would be minimal for me. A case of beer, a pack of cigarettes, and maybe $150 to my contractor. He’ll replumb an entire house with pex for a couple hundred bucks. I had a break between the water meter and the house and had to excavate from the street all the way to the house (20 feet), have a new line run and a shut off valve installed-$1600 total. If something needs to be fixed, I can get someone over there for $20 because he’s working on my next project. If I didn’t have that, maybe $100, but it would have to be a pretty big issue. I can have sewer lines cleaned out for $125. Labor is cheap here. Like others have said, you do the work upfront, electrical, plumbing and hvac. I try to target around 30k after the rehab, 19k purchase with a 10k rehab, somewhere in there. I’ve done better, I’ve done a little worse. I am local. A no slumlord here. Everything is Section 8. We put in several nice features (lower mid grade durable materials) that look like what is going on on HGTV

 Nail.Head.Perfect.

Originally posted by @Stuart Smith :

What did YOU contribute ?, you have nothing to say .....why are you still here ???

My recommended reading for you would be Olde English Witchcraft

Forget the $30k home. Need $30k in punctuation and typing classes. What the what. Your posts up and down this thread are challenging to read. No wonder you can’t get a straight shot answer and keep getting frustrated.

@Aaron Hunt really ?, I’m not writing a white paper for the United Nations, it’s a forum using a phone.....and I’m English, not American English

Originally posted by @Merritt S. :

Let me open with this. If the houses in the hood are so profitable, how is it do you suppose that the locals have not already jumped all over them? Do you think the fly-over states are void of people with capital? Are we all just so incredibly stupid here?

Incurable. It's an appraisal term. It's when the cost of repairing something will not return in value at least the same amount it cost to make the repairs. This is one-part of the simple explanation of why the houses in the ghetto remain houses in the ghetto (the other part is cap-ex in relation to rent). As Joe pointed out, there is a difference between a $30k house that could sell for $100k after repair and a house that will never be worth more than $30K no matter how much you sink into it.

That means, if you want to buy in the hood, it's buy and hold only. That appreciation you think is coming, might take longer than you will live. It might take longer than your kids will live. It might not ever happen. We are not talking about a block or two here, we are talking about thousands of homes on thousands of blocks. 

You gotta see it to believe it folks. Ever been to Gary IN? Heck, Gary is literally next door to Chicago. Part of it even. Closer to downtown than most of the Chicago suburbs. Talk about depressing. (Sorry Gary, you are what you are.) How is it that investors are not scrambling to buy in Gary?

I really liked Joe's post and am going to reiterate it again. The profitable way to buy in the hood is to not make any repairs. And this is truly the part of the story where it gets personal for me and I start to get angry. Slumlords help nobody but themselves and leave destruction in their wake. It is money over respect. Heck, money over humanity. Me, myself and I. Screw the rest of the world.

The thing is, the rest of us live in that wake. Human beings. This is the part where everyone can take their self-help crap and stick it where the sun don't shine. The game is, and always has been, rigged. It's not fair. I'm not a commie and I'm not saying the U.S. is not the land of opportunity - not at all. I'm just saying it isn't as even-steven as some dreamers imply. I'll give you one example from my home town, and it's an ugly, ugly thing.

The United States as-founded and has long-been, extremely right-wing (and for goodness sake, learn what right and left actually mean people - omg). However we have also long had many left-wing traditions, one of them being the ideal of upward mobility through equal opportunity, brought by the great equalizer of a quality public education for all our children. The education system in the City Of Milwaukee is so bad, one could say it is a crime against humanity. I have a friend who worked in the system for a time. She was reporting her students grades to her superiors and they were not good. The response from her superiors was, dumb-down the tests so the scores will go up. Wow. That's what I'm talking about. This is also why anybody around here that can afford to live outside of Milwaukee in a better school district does. (And by contrast, the suburbs can boast some of the best school systems in the country.)

If investors want to come to a place like Milwaukee and give it a go, fine. I can't stop you. Don't say I didn't warn you. I might even laugh a little when you step on a landmine. But know this, slumlords are NOT welcome. We have enough systemic and generational problems already, we don't need greedy out-of-towners, who don't care about us, who refer to us as fly-overs, coming in here and sucking the last bits of life out of an already dying community.

That's the nice version. The not-so-nice version is GFY.

I put my heart and soul into each property I buy. I fix it up nice so my tenants have a nice place to live. Some of that is respect, some of that is strategy. Every time I get a new one, I go down the street and pick up all the trash on the entire block, both sides of the street, each and every time I go to the property. Neighbors take notice. Neighbors get friendly. People follow suit. When people start to feel good about where they live, they start to feel good about everything else too. It's absolutely contagious. Things begin to get better. People stop shooting each other. The same is true in the opposite way. Slumlords are the last thing an already distressed city needs. Please go away.

And finally, because the only thing people on here seem to understand is numbers, the second piece of the financial story is cap ex. Dan's post explains this dynamic perfectly. Every house is costing you money in cap ex if it is vacant or rented, no matter the cash flow. Envision a dial that spins continuously and never stops. Most repairs cost the same per sf if you have a ghetto house or a suburban one. Rents to pay for these however, vary greatly. Run the math on that and get back to me.

Now, if you do not intend on being a slumlord, welcome. I mean that. We need the properties fixed up. However, I still suggest you run the math again. I make it work because I self-manage, self-repair, self-books, self-taxes, all of it.

And for the guy who said people like me are naysayers because we don't want the competition? Plueeze. I would love nothing more than to see the thousands of distressed homes in Milwaukee and Detroit and Gary and everywhere descended on by a swarm of investors who were interested in fixing them up and improving the communities. There is plenty for everyone and really, there aren't enough investors out there to get the job done.

Sigh.

In a somewhat related vein, I can't figure out why people always say they want 20 doors. That just seems so dumb to me. Why not have 1 door that is 20 times as valuable? My strategy is to start where I must, and then when I have the cash flow that suits me, begin to trade up and out of bad areas to better, from more units to less. Of course that can only be taken so far, but I just wonder why nobody ever seems to talk about doing it.

My uncle is pretty loaded. He has one rental property. It's a million dollar condo on the coast of Florida he rents for $300-400 a day. I hardly think it's the most profitable rental property out there, but it sure is easy. The best part is, I can stay for free. I sure am glad he doesn't own 50 ghetto houses instead.

K. I've said my peace/piece.

THIS!!! Every single bit of THIS^^^

Merritt, thank you for so eloquently stating the facts. I've been through Gary, and it is not a place I'll ever willingly venture through again. I love love LOVE that you go in and pick up all the trash all the time. Small things make such HUGE differences. The neighbors see that you are taking care of the place, and then they want to help you take care of your place, too. Make friends with the neighbors, because they are there all the time and you are not. 

OP, you seem to be very upset with anyone who is not agreeing with you. You called it negativity. It's not, it's reality. The members of this site are trying to help you see that it isn't just "buy a house and become rich." $30k properties cost that much for a reason, and it doesn't seem like you're really looking for the $30k-that-needs-a-bit-of-work-to-fit-into-the-$100k-neighborhood homes. You seem to think that buying any home in Detroit, Cleveland, or Indy will yield massive cash in your pocket.

There are real issues to consider and plan for so you don't lose your shirt. I don't invest in Detroit, but at one point, as soon as you closed on the home the city started foreclosure proceedings for back taxes because they are broke. Basic services are not being provided. Yes, you can make money in Detroit, but you have to know what you're doing. 

The members who are saying don't do it are trying to help you out. 

Originally posted by @Merritt S. :

Let me open with this. If the houses in the hood are so profitable, how is it do you suppose that the locals have not already jumped all over them? Do you think the fly-over states are void of people with capital? Are we all just so incredibly stupid here?

Incurable. It's an appraisal term. It's when the cost of repairing something will not return in value at least the same amount it cost to make the repairs. This is one-part of the simple explanation of why the houses in the ghetto remain houses in the ghetto (the other part is cap-ex in relation to rent). As Joe pointed out, there is a difference between a $30k house that could sell for $100k after repair and a house that will never be worth more than $30K no matter how much you sink into it.

That means, if you want to buy in the hood, it's buy and hold only. That appreciation you think is coming, might take longer than you will live. It might take longer than your kids will live. It might not ever happen. We are not talking about a block or two here, we are talking about thousands of homes on thousands of blocks. 

You gotta see it to believe it folks. Ever been to Gary IN? Heck, Gary is literally next door to Chicago. Part of it even. Closer to downtown than most of the Chicago suburbs. Talk about depressing. (Sorry Gary, you are what you are.) How is it that investors are not scrambling to buy in Gary?

I really liked Joe's post and am going to reiterate it again. The profitable way to buy in the hood is to not make any repairs. And this is truly the part of the story where it gets personal for me and I start to get angry. Slumlords help nobody but themselves and leave destruction in their wake. It is money over respect. Heck, money over humanity. Me, myself and I. Screw the rest of the world.

The thing is, the rest of us live in that wake. Human beings. This is the part where everyone can take their self-help crap and stick it where the sun don't shine. The game is, and always has been, rigged. It's not fair. I'm not a commie and I'm not saying the U.S. is not the land of opportunity - not at all. I'm just saying it isn't as even-steven as some dreamers imply. I'll give you one example from my home town, and it's an ugly, ugly thing.

The United States as-founded and has long-been, extremely right-wing (and for goodness sake, learn what right and left actually mean people - omg). However we have also long had many left-wing traditions, one of them being the ideal of upward mobility through equal opportunity, brought by the great equalizer of a quality public education for all our children. The education system in the City Of Milwaukee is so bad, one could say it is a crime against humanity. I have a friend who worked in the system for a time. She was reporting her students grades to her superiors and they were not good. The response from her superiors was, dumb-down the tests so the scores will go up. Wow. That's what I'm talking about. This is also why anybody around here that can afford to live outside of Milwaukee in a better school district does. (And by contrast, the suburbs can boast some of the best school systems in the country.)

If investors want to come to a place like Milwaukee and give it a go, fine. I can't stop you. Don't say I didn't warn you. I might even laugh a little when you step on a landmine. But know this, slumlords are NOT welcome. We have enough systemic and generational problems already, we don't need greedy out-of-towners, who don't care about us, who refer to us as fly-overs, coming in here and sucking the last bits of life out of an already dying community.

That's the nice version. The not-so-nice version is GFY.

I put my heart and soul into each property I buy. I fix it up nice so my tenants have a nice place to live. Some of that is respect, some of that is strategy. Every time I get a new one, I go down the street and pick up all the trash on the entire block, both sides of the street, each and every time I go to the property. Neighbors take notice. Neighbors get friendly. People follow suit. When people start to feel good about where they live, they start to feel good about everything else too. It's absolutely contagious. Things begin to get better. People stop shooting each other. The same is true in the opposite way. Slumlords are the last thing an already distressed city needs. Please go away.

And finally, because the only thing people on here seem to understand is numbers, the second piece of the financial story is cap ex. Dan's post explains this dynamic perfectly. Every house is costing you money in cap ex if it is vacant or rented, no matter the cash flow. Envision a dial that spins continuously and never stops. Most repairs cost the same per sf if you have a ghetto house or a suburban one. Rents to pay for these however, vary greatly. Run the math on that and get back to me.

Now, if you do not intend on being a slumlord, welcome. I mean that. We need the properties fixed up. However, I still suggest you run the math again. I make it work because I self-manage, self-repair, self-books, self-taxes, all of it.

And for the guy who said people like me are naysayers because we don't want the competition? Plueeze. I would love nothing more than to see the thousands of distressed homes in Milwaukee and Detroit and Gary and everywhere descended on by a swarm of investors who were interested in fixing them up and improving the communities. There is plenty for everyone and really, there aren't enough investors out there to get the job done.

Sigh.

In a somewhat related vein, I can't figure out why people always say they want 20 doors. That just seems so dumb to me. Why not have 1 door that is 20 times as valuable? My strategy is to start where I must, and then when I have the cash flow that suits me, begin to trade up and out of bad areas to better, from more units to less. Of course that can only be taken so far, but I just wonder why nobody ever seems to talk about doing it.

My uncle is pretty loaded. He has one rental property. It's a million dollar condo on the coast of Florida he rents for $300-400 a day. I hardly think it's the most profitable rental property out there, but it sure is easy. The best part is, I can stay for free. I sure am glad he doesn't own 50 ghetto houses instead.

K. I've said my peace/piece.

Nice fair and balanced post..  I think that most folks that come from out of state to invest in these areas have good intentions and are not of the mind set hey I am going to be a slumlord.. quite the opposite.. thats why turnkey companies exist.. Where it all falls down for many is the expectations that are in proformas they they run either on the BP calc or someone has given them rarely line up with reality of running those assets and managing that tenant base.  They get defeated in a few years.. get tired of dumping money into a home only to have the tenant trash it once again.. and then they dump them to the local wholesaler and the cycle continues.. thats the reality.

Now I like your thought about pride of ownership.. and where i See that is on some blocks in south side chicago.. and we know that can be a rough and tumble area.. but you will see big signs at the corner of the block announcing a homeowner or resident association and those blocks are very nice.. it takes the residents themselves to lift up the area. 

You have all sorts of obsolescence in real estate And you look at Milwaukee with many areas having these beautiful bungalows and tubors etc. and selling for way under 100k when it would cost 500k to rebuild them.  thats the issue.

Now change can happen.. One should take a trip to Charleston SC  you will see  a huge transformation happening just West and north of down town.. this was considered the HOOD as littles as 10 years ago.. there had not been any new builds there for almost 30 years.

I build the 2nd new build in the area in 30 years and have gone on to build another 25 .. and we are doing infill cool moderns etc and they sell for 450 to 750k  right new to a burnt out hood rat.. But its location location location.. walk to cool pubs shops restaurants etc.

What happens in many of these lower value areas is retail leaves banking leaves resturants leave.. not sustainable so no one wants to buy a home to live in.. and it becomes all renter dominated then the values crash to ONLY what a local will pay for a given cash flow.

And most locals in these areas wont look at anything that does not make the 2% rule. so as long as you have that criteria and rents that have been the same or stable for better part of 25 years.. IE 500 to 1000  properties are not worth anymore than the cash flow no matter what where etc.. as long as the neighborhoods dont attract new homeowners. that will pay a premium

"buy a house and become rich."

Where did I, or anyone, claim that ?

$30k properties cost that much for a reason, and it doesn't seem like you're really looking for the $30k-that-needs-a-bit-of-work-to-fit-into-the-$100k-neighborhood homes.

Why wouldnt i ?, surely that would be a way better proposition 

You seem to think that buying any home in Detroit, Cleveland, or Indy will yield massive cash in your pocket.

What have I written to lead you to claim that’s what I seem to think ?

The members who are saying don't do it are trying to help you out. 

There are thousands of posts like yours, we know the risks ok....we know !! 

“I refer the honorable lady to the answer I gave some moments ago.....”

“I won’t buy anything that won’t pay for itself in 2 years.....”

That’s the kind of guy I want to hear from, his experience......

Some of this is evidently lost in translation, but some of this is simply vapid.

Originally posted by @Mindy Jensen :
Originally posted by @Merritt S.:

Let me open with this. If the houses in the hood are so profitable, how is it do you suppose that the locals have not already jumped all over them? Do you think the fly-over states are void of people with capital? Are we all just so incredibly stupid here?

Incurable. It's an appraisal term. It's when the cost of repairing something will not return in value at least the same amount it cost to make the repairs. This is one-part of the simple explanation of why the houses in the ghetto remain houses in the ghetto (the other part is cap-ex in relation to rent). As Joe pointed out, there is a difference between a $30k house that could sell for $100k after repair and a house that will never be worth more than $30K no matter how much you sink into it.

That means, if you want to buy in the hood, it's buy and hold only. That appreciation you think is coming, might take longer than you will live. It might take longer than your kids will live. It might not ever happen. We are not talking about a block or two here, we are talking about thousands of homes on thousands of blocks. 

You gotta see it to believe it folks. Ever been to Gary IN? Heck, Gary is literally next door to Chicago. Part of it even. Closer to downtown than most of the Chicago suburbs. Talk about depressing. (Sorry Gary, you are what you are.) How is it that investors are not scrambling to buy in Gary?

I really liked Joe's post and am going to reiterate it again. The profitable way to buy in the hood is to not make any repairs. And this is truly the part of the story where it gets personal for me and I start to get angry. Slumlords help nobody but themselves and leave destruction in their wake. It is money over respect. Heck, money over humanity. Me, myself and I. Screw the rest of the world.

The thing is, the rest of us live in that wake. Human beings. This is the part where everyone can take their self-help crap and stick it where the sun don't shine. The game is, and always has been, rigged. It's not fair. I'm not a commie and I'm not saying the U.S. is not the land of opportunity - not at all. I'm just saying it isn't as even-steven as some dreamers imply. I'll give you one example from my home town, and it's an ugly, ugly thing.

The United States as-founded and has long-been, extremely right-wing (and for goodness sake, learn what right and left actually mean people - omg). However we have also long had many left-wing traditions, one of them being the ideal of upward mobility through equal opportunity, brought by the great equalizer of a quality public education for all our children. The education system in the City Of Milwaukee is so bad, one could say it is a crime against humanity. I have a friend who worked in the system for a time. She was reporting her students grades to her superiors and they were not good. The response from her superiors was, dumb-down the tests so the scores will go up. Wow. That's what I'm talking about. This is also why anybody around here that can afford to live outside of Milwaukee in a better school district does. (And by contrast, the suburbs can boast some of the best school systems in the country.)

If investors want to come to a place like Milwaukee and give it a go, fine. I can't stop you. Don't say I didn't warn you. I might even laugh a little when you step on a landmine. But know this, slumlords are NOT welcome. We have enough systemic and generational problems already, we don't need greedy out-of-towners, who don't care about us, who refer to us as fly-overs, coming in here and sucking the last bits of life out of an already dying community.

That's the nice version. The not-so-nice version is GFY.

I put my heart and soul into each property I buy. I fix it up nice so my tenants have a nice place to live. Some of that is respect, some of that is strategy. Every time I get a new one, I go down the street and pick up all the trash on the entire block, both sides of the street, each and every time I go to the property. Neighbors take notice. Neighbors get friendly. People follow suit. When people start to feel good about where they live, they start to feel good about everything else too. It's absolutely contagious. Things begin to get better. People stop shooting each other. The same is true in the opposite way. Slumlords are the last thing an already distressed city needs. Please go away.

And finally, because the only thing people on here seem to understand is numbers, the second piece of the financial story is cap ex. Dan's post explains this dynamic perfectly. Every house is costing you money in cap ex if it is vacant or rented, no matter the cash flow. Envision a dial that spins continuously and never stops. Most repairs cost the same per sf if you have a ghetto house or a suburban one. Rents to pay for these however, vary greatly. Run the math on that and get back to me.

Now, if you do not intend on being a slumlord, welcome. I mean that. We need the properties fixed up. However, I still suggest you run the math again. I make it work because I self-manage, self-repair, self-books, self-taxes, all of it.

And for the guy who said people like me are naysayers because we don't want the competition? Plueeze. I would love nothing more than to see the thousands of distressed homes in Milwaukee and Detroit and Gary and everywhere descended on by a swarm of investors who were interested in fixing them up and improving the communities. There is plenty for everyone and really, there aren't enough investors out there to get the job done.

Sigh.

In a somewhat related vein, I can't figure out why people always say they want 20 doors. That just seems so dumb to me. Why not have 1 door that is 20 times as valuable? My strategy is to start where I must, and then when I have the cash flow that suits me, begin to trade up and out of bad areas to better, from more units to less. Of course that can only be taken so far, but I just wonder why nobody ever seems to talk about doing it.

My uncle is pretty loaded. He has one rental property. It's a million dollar condo on the coast of Florida he rents for $300-400 a day. I hardly think it's the most profitable rental property out there, but it sure is easy. The best part is, I can stay for free. I sure am glad he doesn't own 50 ghetto houses instead.

K. I've said my peace/piece.

THIS!!! Every single bit of THIS^^^

Merritt, thank you for so eloquently stating the facts. I've been through Gary, and it is not a place I'll ever willingly venture through again. I love love LOVE that you go in and pick up all the trash all the time. Small things make such HUGE differences. The neighbors see that you are taking care of the place, and then they want to help you take care of your place, too. Make friends with the neighbors, because they are there all the time and you are not. 

OP, you seem to be very upset with anyone who is not agreeing with you. You called it negativity. It's not, it's reality. The members of this site are trying to help you see that it isn't just "buy a house and become rich." $30k properties cost that much for a reason, and it doesn't seem like you're really looking for the $30k-that-needs-a-bit-of-work-to-fit-into-the-$100k-neighborhood homes. You seem to think that buying any home in Detroit, Cleveland, or Indy will yield massive cash in your pocket.

There are real issues to consider and plan for so you don't lose your shirt. I don't invest in Detroit, but at one point, as soon as you closed on the home the city started foreclosure proceedings for back taxes because they are broke. Basic services are not being provided. Yes, you can make money in Detroit, but you have to know what you're doing. 

The members who are saying don't do it are trying to help you out. 

Mindy I was pleasantly surprised in Detroit suburbs to see new construction infill alive and well homes selling for 300 to 400k and lots a plenty ..  We all know the 30k house the US  ..   although for the OP he is in Vegas you just go a little north of downtown and east a tad and you can buy the same type of properties just be 100k instead of 30k but same issues.

Originally posted by @Aaron Hunt :
Originally posted by @Stuart Smith:

What did YOU contribute ?, you have nothing to say .....why are you still here ???

My recommended reading for you would be Olde English Witchcraft

Forget the $30k home. Need $30k in punctuation and typing classes. What the what. Your posts up and down this thread are challenging to read. No wonder you can’t get a straight shot answer and keep getting frustrated.

 Aaron I  am glad you don't critique my punctuation  and spelling  LOL  I am not good at all !!  

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