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

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

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........

36 Reply

1,315 views

Most Popular Reply

Ashley Hamilton

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

Originally posted by @Account Closed:

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

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

See this reply in the discussion

316 Replies

Jump to latestLatest

Sort by

Dan H.Pro Member
Investor · Poway, CA · Member since 2015 · 7k+ posts · 8k+ votes
7y
Originally posted by @Account Closed:

@Dan H. it goes without saying that I also purchase everything with value add. Or just no value add, and buy it in market condition at well below market value (our business has a big deal hunting engine so it's easy to access these properties for my personal portfolio).
50% rule is not an accurate measure if you have actual numbers for expenses. Why not use actual taxes/utilities/insurance data and just use a rule of thumb vacancy and cap ex reserve? My property tax bill/water bill/and insurance bill are a much lower percent of my gross monthly rents than most properties with this rental price.
The 600$ mortgage was a hypothetical number. I don't have a mortgage, but someone who buys this for 120k with 20% down is going to have a 500$ or so mortgage per my lenders numbers.
Appreciation is a great play in p1/p2 of the market. It's a losing play today and I am a very active investor- I'm not buying holds in volatile markets right now, because property values are likely going a different direction in the next 5 years. I'll buy CA property again when markets are in a different place, and make near no cash flow for an astronomical initial investment but sell them to a less astute investor during the subsequent peak market & make that type of profit then.
This thing with actual operating expenses + a 25% vacancy and maintenance reserve is still a 30% cash on cash return for an investor purchasing it with 20% down on a 120k sale price. It's a winner. I picked up 26 units in a similar neighborhood last year for 305k with debt (mkt val closer to 1M), invested 50k in rehab, and my gross rents are 18850/mo with similar operating expense ratios currently.
Some of the more sophisticated MFR investors on BP have mentioned their best performers in 08-10 were smaller buildings in rust belt economies, while their CA assets struggled. There are short term strategies layered into the long term strategy, of course.
I have two primary take aways from reading your profile. One is 6 years experience. Two is that you are closer to a turnkey provider than a buy and hold investor. The combination of these two is interesting.
Item #1 means that you have never held a property from good condition (new or rehabbed) to where the big items failed due to end of life. Asphalt shingle roof average lifespan is maybe 20 years. Even a hot mop is more than 10 years. Tile roofs at least 30 years. Kitchens should last a lot more than 6 years. Foundations a lot more than 6 years. hardscape, plumbing, and electrical are a lot more than 6 years. I do not know how you can claim an actual for cap expense without having owned for a full lifecycle of the RE.
Item #2 is that you likely find selling these RE to others to be more profitable than keeping them for yourself. If not, why would you be selling them to others? I suspect that there is a reason you sell them. It is my opinion you have already pivoted away from being a buy n hold investor on these RE. Furthermore that everyone who is OOS and passive will pivot away from the $35K RE in less than 15 years and probably less than 10 years and in your case less than 6 years.
$700/month rentals will have a 50% rule that will consume at least $400 of the rent (probably over $450) for the RE lifespan for a passive investor because the 50% rule is not enough for these lower value, low unit count rentals. 50% rule will seem fine until one of these larger cost cap expenses becomes necessary.
0 Reply
Randy E.
Rental Property Investor · Durham, NC · Member since 2014 · 1k+ posts · 1k+ votes
7y

Originally posted by : @Jay Hinrichs

Hi Jay. I can't speak for other locations, but for everywhere I've looked within 150 miles of me, most of the properties I look at come from elderly family members passing away and leaving behind a house with a good bit of deferred maintenance.

The kids or grandkids who inherit the houses either don't live in the area or they live in the area and don't want to (or can't afford) to repair the houses, and mostly they just want to sell and get enough to take the family on a cruise.

Sometimes, the sellers are the widows of the investor who actually managed the properties and the elderly women have no interest in trying to be a landlord -- it's easier for them to sell the 10, 20, or 30 houses their husbands acquired and live off those proceeds.

I almost never see a current active landlord selling his/her stock in my area.
1 Reply
Ashley Hamilton
Rental Property Investor · Detroit, MI · Member since 2015 · 82 posts · 548 votes
7y
Originally posted by @Spencer Cornelia:

@Ashley Hamilton congrats on your success, you've earned a very solid monthly income taking on properties I'm sure others would have passed on.

Regarding condos in Vegas: what entices you about the condos out here? Any specific area? I just lived in one in Las Vegas Country Club which is a great option in this city.
Hello, Thanks! I love Vegas and travel there 4 or more times a year. It just feels like home to me. But I want a condo to Airbnb most of the time and live in other times and within the next 5 years I will make it my home. I saw summerlin which seems nice but would love to stay by old vegas or with in 5 mins from the strip.
1 Reply
Ashley Hamilton
Rental Property Investor · Detroit, MI · Member since 2015 · 82 posts · 548 votes
7y
Hello,
Sorry everyone who is trying to reach out to me or ask questions, I see mentions but can't find them to replay. So if you have a question you can ask me directly by inboxing me or sending a request. Thanks!
I will gladly answer any questions and prove there's money to be made here in Detroit and anywhere for that matter.
2 Reply
Marisa R.
Developer · Atlanta and Detroit · Member since 2018 · 601 posts · 821 votes
7y
Originally posted by @Ashley Hamilton:

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.
You go girl, you are impressive
You just proved many people wrong
There are many ways to skin a cat
I am out of State and buying in Detroit and I am cashflowing very nicely. Of course it takes a great team in the ground
1 Reply
Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
7y
Originally posted by @Randy E.:

Originally posted by : @Jay Hinrichs
Hi Jay. I can't speak for other locations, but for everywhere I've looked within 150 miles of me, most of the properties I look at come from elderly family members passing away and leaving behind a house with a good bit of deferred maintenance.

The kids or grandkids who inherit the houses either don't live in the area or they live in the area and don't want to (or can't afford) to repair the houses, and mostly they just want to sell and get enough to take the family on a cruise.

Sometimes, the sellers are the widows of the investor who actually managed the properties and the elderly women have no interest in trying to be a landlord -- it's easier for them to sell the 10, 20, or 30 houses their husbands acquired and live off those proceeds.

I almost never see a current active landlord selling his/her stock in my area.
I get it little bergs in the country and the houses have limited market value to a owner occ.. fully understand what your talking about..
more houses than peeps to live in them in a lot of these areas and since it makes no sense to build new construction IE does not pencil or as existing if a fraction of replacement.. these homes have one purpose left in their life and that is for folks like you to scoop em up and re purpose them as rentals. I totally get it..
Urban core though burnt out failed landord is a huge swath of the inventory.. look at what that Rock Star Clayton Morris did to 400 plus investors thats a classic case of a ton of low value homes coming back on market and someone losing a lot of money. even if they did rehab them .. half of those OOS would be failing or selling within 60 months.
Podcast Guest on Show #222
JLH Capital Partners51 Review
Website View Page
0 Reply
Randy E.
Rental Property Investor · Durham, NC · Member since 2014 · 1k+ posts · 1k+ votes
7y
Originally posted by @Jay Hinrichs:
I get it little bergs in the country and the houses have limited market value to a owner occ.. fully understand what your talking about..
more houses than peeps to live in them in a lot of these areas and since it makes no sense to build new construction IE does not pencil or as existing if a fraction of replacement.. these homes have one purpose left in their life and that is for folks like you to scoop em up and re purpose them as rentals. I totally get it..
Urban core though burnt out failed landord is a huge swath of the inventory.. look at what that Rock Star Clayton Morris did to 400 plus investors thats a classic case of a ton of low value homes coming back on market and someone losing a lot of money. even if they did rehab them .. half of those OOS would be failing or selling within 60 months.
It's actually both. I invest in the Triangle and Triad areas of NC. Both are MSAs over 1M people. Not NYC or LA, but not little burgs. I also have interests in a small burg, but that's not my primary area. Durham is red hot in population growth and the realty and rental markets. The market is probably a little like where you invest in SC.
These areas are different than both the large blue collar cities that never appreciate (Cleveland, Milwaukee, Midwest areas) or the small town places with stagnant populations.
I understand your point about companies like Morris. While I hate that people got scammed, I have to admit that most of them bear some responsibility. It sounds like a lot of people were looking for something for nothing. In a sense, they remind me of all the people who took out second mortgages to inflate their lifestyles before the great recession. Here are too many people looking to park serious money in some passive investment scheme that promises incredibly high returns, but that requires no knowledge, no effort, and nothing at all. Just write a check and sit back and wait for all your profits to roll in. It sounds so unrealistic that it makes the Nigerian Prince scam seem like a reasonable scheme.
Cheers
0 Reply
Marisa R.
Developer · Atlanta and Detroit · Member since 2018 · 601 posts · 821 votes
7y
Originally posted by @Randy E.:

Originally posted by @Jay Hinrichs:

I get it little bergs in the country and the houses have limited market value to a owner occ.. fully understand what your talking about..
more houses than peeps to live in them in a lot of these areas and since it makes no sense to build new construction IE does not pencil or as existing if a fraction of replacement.. these homes have one purpose left in their life and that is for folks like you to scoop em up and re purpose them as rentals. I totally get it..
Urban core though burnt out failed landord is a huge swath of the inventory.. look at what that Rock Star Clayton Morris did to 400 plus investors thats a classic case of a ton of low value homes coming back on market and someone losing a lot of money. even if they did rehab them .. half of those OOS would be failing or selling within 60 months.
It's actually both. I invest in the Triangle and Triad areas of NC. Both are MSAs over 1M people. Not NYC or LA, but not little burgs. I also have interests in a small burg, but that's not my primary area. Durham is red hot in population growth and the realty and rental markets. The market is probably a little like where you invest in SC.
These areas are different than both the large blue collar cities that never appreciate (Cleveland, Milwaukee, Midwest areas) or the small town places with stagnant populations.
I understand your point about companies like Morris. While I hate that people got scammed, I have to admit that most of them bear some responsibility. It sounds like a lot of people were looking for something for nothing. In a sense, they remind me of all the people who took out second mortgages to inflate their lifestyles before the great recession. Here are too many people looking to park serious money in some passive investment scheme that promises incredibly high returns, but that requires no knowledge, no effort, and nothing at all. Just write a check and sit back and wait for all your profits to roll in. It sounds so unrealistic that it makes the Nigerian Prince scam seem like a reasonable scheme.
Cheers
I got someone contact me with a property they purchased through this company, address etc
My first thought was this investor paid through the nose for this property
I have reads some posts on BP on this company....... what can I say...... buyer beware
0 Reply
Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
7y
Originally posted by @Randy E.:

Originally posted by @Jay Hinrichs:

I get it little bergs in the country and the houses have limited market value to a owner occ.. fully understand what your talking about..
more houses than peeps to live in them in a lot of these areas and since it makes no sense to build new construction IE does not pencil or as existing if a fraction of replacement.. these homes have one purpose left in their life and that is for folks like you to scoop em up and re purpose them as rentals. I totally get it..
Urban core though burnt out failed landord is a huge swath of the inventory.. look at what that Rock Star Clayton Morris did to 400 plus investors thats a classic case of a ton of low value homes coming back on market and someone losing a lot of money. even if they did rehab them .. half of those OOS would be failing or selling within 60 months.
It's actually both. I invest in the Triangle and Triad areas of NC. Both are MSAs over 1M people. Not NYC or LA, but not little burgs. I also have interests in a small burg, but that's not my primary area. Durham is red hot in population growth and the realty and rental markets. The market is probably a little like where you invest in SC.
These areas are different than both the large blue collar cities that never appreciate (Cleveland, Milwaukee, Midwest areas) or the small town places with stagnant populations.
I understand your point about companies like Morris. While I hate that people got scammed, I have to admit that most of them bear some responsibility. It sounds like a lot of people were looking for something for nothing. In a sense, they remind me of all the people who took out second mortgages to inflate their lifestyles before the great recession. Here are too many people looking to park serious money in some passive investment scheme that promises incredibly high returns, but that requires no knowledge, no effort, and nothing at all. Just write a check and sit back and wait for all your profits to roll in. It sounds so unrealistic that it makes the Nigerian Prince scam seem like a reasonable scheme.
Cheers
I did not realize in Durham proper you can find 30k homes.. I know in Charleston were I am investing. there were a few little spots between N. Charleston and Charleston were you could buy some really rough stuff 5 years or so ago.. but not sure any more.. Like I said I routinely pay 100 to 200k for lots alone. But I did sell a rental last year.. full gut on a Charleston old house with the side porchs and built a new 4 bed home behind it and I got just under 1.3 mil for those. rent to studetns at 1000 a room and there was 10 rooms.. it was a 1031 investor out of NYC 23 Amherst if anyone wants to see what a rental in that area looks like
Podcast Guest on Show #222
JLH Capital Partners51 Review
Website View Page
1 Reply
Bill B.
Investor · Las Vegas, NV · Member since 2013 · 8k+ posts · 10k+ votes
7y
@Ashley Hamilton
Be careful Ashley. They are close to zero legal air bnb Las Vegas condos. They actually pay government employees to scan Airbnb and send out the violations. Because of the distance requirements between each Airbnb there is usually one legal condo per building. And they’re trying to get rid of those.
Google Airbnb Las Vegas fine. The first one for $73k is the one that made the news. The rest are just $1,000/day type fines.
2 Reply
Ashley Hamilton
Rental Property Investor · Detroit, MI · Member since 2015 · 82 posts · 548 votes
7y
hello, thank you I would definitely look into that. Regardless if I use it for Airbnb or just a regular rental I did just want to get over rental property there and because I do plan on moving there and then there future. Thanks for your advice.
0 Reply
James Wise
Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 31k+ posts · 20k+ 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........
I've dealt with 1,000's of these properties & the people who live in them over the years. I've made millions buying, selling, renting, brokering, managing, renovating, insuring, filming & anything else you can do in these suckers.
Biggest take aways from my experiences are that you can make a ton of money with them. I'm proof of that. You can also loose money, lol I've done that a few times as well. Some win, some loose. If you grind it out your wins will outweigh your losses.
The investors who are focused on the minute details can't handle these. The tenants are regularly savage as all hell & they will break you down if you are a person who thinks about every dollar & questions why people like this do what they do. If you can remove emotion & let things roll off of you while only keeping your eye on the big prize it's a pretty sweet business.
2 Reply
Jim K.
Handyman · Pittsburgh, PA · Member since 2018 · 5k+ posts · 13k+ votes
7y
All right, it's 11 pm at night and I got through the nine pages of the thread to review. Here's my first takeaway.

Some of the people here are known quantities to me and I've been following them for quite some time. I know @Dennis M. pretty well here on BiggerPockets.com and follow him carefully, so what he's contributed hasn't been much of a surprise. Likewise with @Linda S., one of the best people for renovation advice here on the site. I know @Jill F. in Akron and her multifamily business model. @Matt P.'s work in Columbus is the same kind of thing. I believe all of these people are self-managing local investors running rentals in their neck of the woods, quietly working away on their growing portfolios. Most, especially Matt and Linda, do almost all of their own work, as I do, unless I'm mistaken. Dennis and Jill are primarily in multifamily.
I've seen some of @Randy E.'s posts in the past, but his contributions here have been a real eye-opener. I've been missing out. I would also say the same about @Jonathan R.

There's a pattern that's emerging here of people who work in this space. We have individual, local investors who routinely have issues refinancing. I'm right in there now with portfolio refinancing from my bank (Dollar Bank), which has financed every step of our development from the first rental in 2013 through home equity and personal loans to now. Not many developed comments here by long-distance investors making money in the $30K space. @Account Closed, "deal belly to belly with these people." Much like Dennis, much of my childhood was spent in upstate New York (about 150 miles away from him, I'd guess?) in a $400/mo. rental on food stamps with no health insurance and the phone ringing off the hook by people looking for their money out of my dad. Yeah, we moved the car around to avoid it being repossessed. Yeah, in desperation, my father started a small business in the rental and hid it from the landlord. Yeah, when I was in college, my parents paid for some of their bills with my credit card and didn't tell me. I'm not a stranger to what poverty does to people.
But still, I have some trouble relating to my tenants. I recently got into a discussion with one of my tenants about the sewer payment. Currently, the way it's set up, I pay the sewer on her SFR, and the sewer bill is tied to her water bill. The borough, or rather the service that sends out the bills, has been on me to switch the bill to the tenant as is customary for this area. So that's what I'm going to do, and give the tenant a rent cut so she can pay for it.
I tried to explain this twice to the tenant and never seemed to get anyway. It wasn't until I realized what was wrong and stated what I needed to state firmly and clearly that I finally made headway, "We am not trying to sneak an undercover rent increase by you. This is going to be cost neutral, I can promise you."
The problem here was that I have not lived in a low-cost rental property for many years now, and I couldn't see how she was seeing it, from the perspective of having spent all her life in this kind of housing out here in western PA, where I've seen a lot more crappy landlords than I have crappy tenants. In her world and social circle, any landlord, regardless of any past behavior, can turn on you at any moment, and this is even more true of landlords who live far away and only communicate through a property management company and certified mail. Picking up the phone and calling the landlord and having him show up quickly, let alone show up WITH TOOLS, is an incredible luxury.
My tenants call me when something needs to be taken care of. They call me when they see my investments are in trouble. I am there routinely with furnace filters and batteries for the CO2 detectors and smoke alarms. They know me. They know I'm committed to the area. They know I have the construction knowledge to understand that many minor issues are not their fault, and I'm not always trying to pass the blame and expense to them. Holy smokes, I remember this guy here in the BO forums a few months ago asking about passing the expense to a tenant for replacing a mirror in the bathroom that had been damaged because "the tenant's showers are just too long."
You've got to be able to work with tenants openly and fairly and speak to them in the language they best understand, and local investors can simply do more of that better than long-distance investors, most especially if they can understand where these people are coming from through their own personal backgrounds.
12 Reply
Marisa R.
Developer · Atlanta and Detroit · Member since 2018 · 601 posts · 821 votes
7y
Originally posted by @Jim K.:

All right, it's 11 pm at night and I got through the nine pages of the thread to review. Here's my first takeaway.

Some of the people here are known quantities to me and I've been following them for quite some time. I know @Dennis M. pretty well here on BiggerPockets.com and follow him carefully, so what he's contributed hasn't been much of a surprise. Likewise with @Linda S., one of the best people for renovation advice here on the site. I know @Jill F. in Akron and her multifamily business model. @Matt P.'s work in Columbus is the same kind of thing. I believe all of these people are self-managing local investors running rentals in their neck of the woods, quietly working away on their growing portfolios. Most, especially Matt and Linda, do almost all of their own work, as I do, unless I'm mistaken. Dennis and Jill are primarily in multifamily.
I've seen some of @Randy E.'s posts in the past, but his contributions here have been a real eye-opener. I've been missing out. I would also say the same about @Jonathan R.

There's a pattern that's emerging here of people who work in this space. We have individual, local investors who routinely have issues refinancing. I'm right in there now with portfolio refinancing from my bank (Dollar Bank), which has financed every step of our development from the first rental in 2013 through home equity and personal loans to now. Not many developed comments here by long-distance investors making money in the $30K space. @Account Closed, "deal belly to belly with these people." Much like Dennis, much of my childhood was spent in upstate New York (about 150 miles away from him, I'd guess?) in a $400/mo. rental on food stamps with no health insurance and the phone ringing off the hook by people looking for their money out of my dad. Yeah, we moved the car around to avoid it being repossessed. Yeah, in desperation, my father started a small business in the rental and hid it from the landlord. Yeah, when I was in college, my parents paid for some of their bills with my credit card and didn't tell me. I'm not a stranger to what poverty does to people.
But still, I have some trouble relating to my tenants. I recently got into a discussion with one of my tenants about the sewer payment. Currently, the way it's set up, I pay the sewer on her SFR, and the sewer bill is tied to her water bill. The borough, or rather the service that sends out the bills, has been on me to switch the bill to the tenant as is customary for this area. So that's what I'm going to do, and give the tenant a rent cut so she can pay for it.
I tried to explain this twice to the tenant and never seemed to get anyway. It wasn't until I realized what was wrong and stated what I needed to state firmly and clearly that I finally made headway, "We am not trying to sneak an undercover rent increase by you. This is going to be cost neutral, I can promise you."
The problem here was that I have not lived in a low-cost rental property for many years now, and I couldn't see how she was seeing it, from the perspective of having spent all her life in this kind of housing out here in western PA, where I've seen a lot more crappy landlords than I have crappy tenants. In her world and social circle, any landlord, regardless of any past behavior, can turn on you at any moment, and this is even more true of landlords who live far away and only communicate through a property management company and certified mail. Picking up the phone and calling the landlord and having him show up quickly, let alone show up WITH TOOLS, is an incredible luxury.
My tenants call me when something needs to be taken care of. They call me when they see my investments are in trouble. I am there routinely with furnace filters and batteries for the CO2 detectors and smoke alarms. They know me. They know I'm committed to the area. They know I have the construction knowledge to understand that many minor issues are not their fault, and I'm not always trying to pass the blame and expense to them. Holy smokes, I remember this guy here in the BO forums a few months ago asking about passing the expense to a tenant for replacing a mirror in the bathroom that had been damaged because "the tenant's showers are just too long."
You've got to be able to work with tenants openly and fairly and speak to them in the language they best understand, and local investors can simply do more of that better than long-distance investors, most especially if they can understand where these people are coming from through their own personal backgrounds.
Sounds like you got yourself a day job....
2 Reply
Jim K.
Handyman · Pittsburgh, PA · Member since 2018 · 5k+ posts · 13k+ votes
7y
@Marisa R.
Yes, I do have a real estate JOB, as I have repeatedly said. This is not passive investment for me.
While I still work in what I used to teach in, adult ESL, I have mostly traded in one dead-end poorly-paid job, teaching, for a much better-paid one, rehabbing property acquisitions into rentals (which I spend a lot of time on), and managing rentals, EXACTLY as @Jay Hinrichs said, EXACTLY as I said in my first post in this thread.
As @Randy E. pointed out, I too usually spend less than an hour per rental per month on average managing them. Significantly more time is spent maintaining these rentals until I've got them properly dialed in, but that drops off once they're in shape and I've got my preventative maintenance schedule and inspection visits properly set up. Once in a while, there's something that has to be taken care of immediately and it takes a lot of time and effort that has to be devoted to it immediately. That sucks.
These realities are why, once again, I wouldn't have gone into $30K rentals if I had already been making six figures in a job instead of drawing down a teacher's salary. I do what I do because in my area, a $25K vacant acquisition can get turned into a $45K occupied rental with the tenant paying down the refinance for me, while I take my cash and get me another acquisition that can be turned into another little money-printing machine for me. With enough little money-printing machines in place, I can sell them all, put the money into something that produces a guaranteed return with no effort on my part, and spend my days doing what I like instead of doing what I do to build wealth.
So do you have a better way to actually make money in the $30K market? Because you've been extremely short on specifics so far in every post I've ever seen you write anywhere on BiggerPockets. In this thread, we've learned you have "a great team on the ground," nothing more. Is that all you have to contribute to this discussion?
5 Reply
Marisa R.
Developer · Atlanta and Detroit · Member since 2018 · 601 posts · 821 votes
7y
Originally posted by @Jim K.:

@Marisa R.
Yes, I do have a real estate JOB, as I have repeatedly said. This is not passive investment for me.
While I still work in what I used to teach in, adult ESL, I have mostly traded in one dead-end poorly-paid job, teaching, for a much better-paid one, rehabbing property acquisitions into rentals (which I spend a lot of time on), and managing rentals, EXACTLY as @Jay Hinrichs said, EXACTLY as I said in my first post in this thread.
As @Randy E. pointed out, I too usually spend less than an hour per rental per month on average managing them. Significantly more time is spent maintaining these rentals until I've got them properly dialed in, but that drops off once they're in shape and I've got my preventative maintenance schedule and inspection visits properly set up. Once in a while, there's something that has to be taken care of immediately and it takes a lot of time and effort that has to be devoted to it immediately. That sucks.
These realities are why, once again, I wouldn't have gone into $30K rentals if I had already been making six figures in a job instead of drawing down a teacher's salary. I do what I do because in my area, a $25K vacant acquisition can get turned into a $45K occupied rental with the tenant paying down the refinance for me, while I take my cash and get me another acquisition that can be turned into another little money-printing machine for me. With enough little money-printing machines in place, I can sell them all, put the money into something that produces a guaranteed return with no effort on my part, and spend my days doing what I like instead of doing what I do to build wealth.
So do you have a better way to actually make money in the $30K market? Because you've been extremely short on specifics so far in every post I've ever seen you write anywhere on BiggerPockets. In this thread, we've learned you have "a great team on the ground," nothing more. Is that all you have to contribute to this discussion?
Well done Jim congrats, you have commitment and passion, can see why you have a successful model
All the best
0 Reply
Jon Behlke
Accountant · Hopwood, PA · Member since 2015 · 125 posts · 92 votes
7y
Originally posted by @Jim K.:

But still, I have some trouble relating to my tenants. I recently got into a discussion with one of my tenants about the sewer payment. Currently, the way it's set up, I pay the sewer on her SFR, and the sewer bill is tied to her water bill. The borough, or rather the service that sends out the bills, has been on me to switch the bill to the tenant as is customary for this area. So that's what I'm going to do, and give the tenant a rent cut so she can pay for it.
I tried to explain this twice to the tenant and never seemed to get anyway. It wasn't until I realized what was wrong and stated what I needed to state firmly and clearly that I finally made headway, "We am not trying to sneak an undercover rent increase by you. This is going to be cost neutral, I can promise you."
The problem here was that I have not lived in a low-cost rental property for many years now, and I couldn't see how she was seeing it, from the perspective of having spent all her life in this kind of housing out here in western PA, where I've seen a lot more crappy landlords than I have crappy tenants. In her world and social circle, any landlord, regardless of any past behavior, can turn on you at any moment, and this is even more true of landlords who live far away and only communicate through a property management company and certified mail. Picking up the phone and calling the landlord and having him show up quickly, let alone show up WITH TOOLS, is an incredible luxury.
Thanks for sharing, I'm glad you triggered my keywords as my wife is inheriting some of these low cost rentals down here in Fayette County. Lots of old coal mining company houses here.
I did want to point out one thing with your story about lowering rent to allow to pay for sewage. I understand why she's upset. If she was already responsible for ANY other utility, then she was getting the standard utility deduction for her food stamps. So by cutting her rent but giving her another utility, you've actually reduced her food stamp budget. For example: If she used to pay $500 + electric, her housing costs as calculated by DHS would be $1088. If you change it to $400 + electric and sewage, her housing cost drops to $988, which reduces her food stamps by about $30/mo. So what you see as cost neutral is probably not so much for her. These are considerations that have to be made at this income level that aren't typically necessary at higher valued properties.
4 Reply
Randy E.
Rental Property Investor · Durham, NC · Member since 2014 · 1k+ posts · 1k+ votes
7y
Originally posted by @Jay Hinrichs:

Unfortunately, not any more. There's nothing in the Triangle for $30K. But there are $30K homes in the Triad and that is also a 1.5M+ MSA. Admittedly, fewer and fewer.
And there is a decent supply of $30K homes in the surrounding areas of the Triangle, which can be more like the burgs you describe.
0 Reply
Joseph A.
New Rochelle, NY · Member since 2018 · 235 posts · 151 votes
7y
Originally posted by @Lisa Phillips:

@Ashley Hamilton congrats to your success!! Doesn't it feel great?
@Account Closed you are spot on in your analogy. If you are talking about mustang's, and people are coming on the the thread who have never had a Mustang or tried it, why are they commenting on this thread?? This is a niche subject.
I dont spend much time on these forums because when I started talking about this 6 years ago on here, I only heard negative. When I would ask the (obvious) question "Have you actually invested in these areas" I would get the "No, but..." -- how the heck are you adding anything important to this discussion if you have absolutely no experience in this area and a ton of stereotypes, privilege, and assumptions - what's your agenda? More on that later, because its not always a bad agenda, but we need to start with the fundamentals assumptions....
I pretty much stop trying to argue with people on here for the following reasons 1) if they think so negatively of this demographic and the "headaches" that go along with it - the tenants don't need landlords like that in their neighborhoods and I don't need to spend time convincing them 2) I have a online platform of 47,000 between my sub30k mastermind facebook group and my YouTube channels and learn from people actually DOING THIS everyday (including myself through my lives) and 3) I don't need to try to learn or convince people who are diametrically opposed to how great this is. It's easier to follow where your tribe is than try to convince other people to your tribe. This niche is very foreign to the investors here for a multitude of reason - class, race, socio-economic familiarity, culturally, etc.
And I don't think they are necessarily wrong for that!! Some mistakes have been made in that demographic where - for that person - it WAS a bad mistake. Now, I help clients build these portfolios all over the united states successfully because i have EXPERIENCE in THIS NICHE- so, yes, you can mess up and will learn from trial and error if you don't know how to take those nuances into account (and these are investing nuances, as well as for this niche in what to expect and how to talk and work with people - you simply can not do it the same as you do other price points).
So, the people who actually have experience aren't wrong, and the people who think it cant work aren't wrong either (and I'm glad, right? Because these tenants deserve someone who comes at it with the energy for "of course this will work+," not the energy of "Well it's cheap! We will "make do" because this is what i can afford - it's a completely different energy and intent you're bringing, so why try to convince people with the latter to go into these neighborhoods - that's not what's needed). And anyways, you need a portfolio you are proud of - Not something you're ashamed to talk about around your dinner table. Everyone does better.
TL;DR - I have personally helped over 600 investors build their portfolios in the last 6 years all over country (although mostly people from NY, DC, VA, MD, TX, CA, and FL), and have inspired 1000s who are CONSISTENTLY posting in our mastermind group their progress, questions, and pictures. This place is not, and will never be, a place where they are going to cheerlead this. Look back at all the forum posts - its blatantly about 5 to 1 again - so, this isn't the place for this discussion- and THAT'S OKAY! That's okay, that's okay! It's not for them. Why try to convince someone with such hesitations about it? Everyone should build a portfolio they love (as I have, and my clients have), but if that's not for you - you don't need to focus on that then, right? But don't go in there because its cheap, because if you're uncomfortable, the tenants will pick up on it- and that doesn't end well. ever. Where as I would not bat an eye in that same neighborhood because I grew up (and out ) of the environment and its extremely familiar with me. What investors SHOULD say is that "Im not into this price range, but you should learn from people who are doing it successfully" and that level of thoughtfulness doesn't come through when I read these comments.
Well said
1 Reply
Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
7y
Originally posted by @Account Closed:
@Chrisitne Mata . I'm private Money lender and Investor,(removed for advertising) Our interest rate is 5% per annum. Interested in getting your project funding.
Caution everyone don't sent money up front for any kind of adds that read like this on social media.. NO UP FRONT FEES
Podcast Guest on Show #222
JLH Capital Partners51 Review
Website View Page
2 Reply
Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
7y
Originally posted by @Marisa R.:

Originally posted by @Jim K.:
@Marisa R.
Yes, I do have a real estate JOB, as I have repeatedly said. This is not passive investment for me.
While I still work in what I used to teach in, adult ESL, I have mostly traded in one dead-end poorly-paid job, teaching, for a much better-paid one, rehabbing property acquisitions into rentals (which I spend a lot of time on), and managing rentals, EXACTLY as @Jay Hinrichs said, EXACTLY as I said in my first post in this thread.
As @Randy E. pointed out, I too usually spend less than an hour per rental per month on average managing them. Significantly more time is spent maintaining these rentals until I've got them properly dialed in, but that drops off once they're in shape and I've got my preventative maintenance schedule and inspection visits properly set up. Once in a while, there's something that has to be taken care of immediately and it takes a lot of time and effort that has to be devoted to it immediately. That sucks.
These realities are why, once again, I wouldn't have gone into $30K rentals if I had already been making six figures in a job instead of drawing down a teacher's salary. I do what I do because in my area, a $25K vacant acquisition can get turned into a $45K occupied rental with the tenant paying down the refinance for me, while I take my cash and get me another acquisition that can be turned into another little money-printing machine for me. With enough little money-printing machines in place, I can sell them all, put the money into something that produces a guaranteed return with no effort on my part, and spend my days doing what I like instead of doing what I do to build wealth.
So do you have a better way to actually make money in the $30K market? Because you've been extremely short on specifics so far in every post I've ever seen you write anywhere on BiggerPockets. In this thread, we've learned you have "a great team on the ground," nothing more. Is that all you have to contribute to this discussion?
Well done Jim congrats, you have commitment and passion, can see why you have a successful model
All the best
Marisa ( my Daughters name by the way) it will be interesting to watch your business.. You hit Atl in the Perfect Storm.. ( hey I wrote book Called Perfect storm for Aussie investors LOL) That was one of the best buying opps of all time in the US.. along with parts of Vegas PHX and FLA.. reason I say that is not only were you able to snag those 30 to 50k homes that were just 4 years earlier selling for 120 to 150.. but they cash flowed like you see in these other markets .. the main thing and though is they doubled in value or tripled in Value. And much of that was done by the Big Hedge funds coming in and creating that rise in value.. I bought 54 homes in Atl when you did.. We sold to a hedge fund within 18 months and doubled our money COC as that's the business I am in IE value add find the gems around the country and sell as quick as I can for biggest profits we can.
What is propping up some of these areas of very flat appreciation or they actually as Jim stated above have had deprecation over the decades is the Mom and pop , the foreign ( you) and the out of area we call OOS coming into an area and buying these homes creating a market that if it was left to organic local investing would be what it is it reverts to the mean and only what a local will pay for a given cash flow.
I know we can have refi appraisals that make us think we have some sort of equity .. But unless you can sell to a homeowner your equity is only the difference between basis and what another investor will pay for your cash flow. And the bottom line is America is the land of small business and running a stable of rentals no matter if your lucky and you don't have to put much time into it or your working it full time .. its a small business.. these are not investments that you just click a mouse and all goes well. Those as you we see on this site that live in the community have their ears to the grindstone know what locals are thinking and doing have a distinct advantage.
Where the Out of Area investor has advantage is usually in Capital. And that capital has been generated by high wages and Appreciation were they live.. You take out the out of area investor ( your one) out of the buying equation and as I stated the values of these assets ( when there are no homeowners buying them ) are based on cash flow only.
Jim its one thing I admire and I am with U one reason I loved Detroit and was lending there in 2001 those little brick bungalows are bullet proof .. they were built by first generation European craftsmen. And exactly my point they are economically obsolete you would spend 5 to 7 times as much rebuilding them from ground up as you can buy them for standing there.
Where the big dollars will be made is the path of progress like I mention what we are doing in Charleston.. same 30k neighborhood 10 years ago is now 450k to 750k is there any older parts of where you live where you think that duplex would rise to 500k ?? the one you mention.. ?? and why would that happen.. there has to be a major shift where the homeowners want to be..
Back to Atl Marisa we saw that with all the heavy remodel and scrappers you see in the Bellhaven area.. a lot of folks got tired of community in from Henry county in that bad traffic and started to come back into the semi urban Core.. I looked at a lot of projects there were we buy a 250k house and scrap it build 3k new and sell for 850k.. that's right there in ATL..
When I was in Detroit last summer I saw this starting to happen and was SCHOCKED and excited to see.. If I could build a team there like I have in the other 3 markets I build in I would seriously be looking at that.. there is real money to be made in new construction infill in the Right Detroit areas.. price points at exit were 150 to 175 a foot and lots if you know how to get them can be quite cheap.. its exciting.
Will the existing housing stock do what happened in ATL.. Not so much is my thought too much of it.. and to many social challenges. but these other areas were the new buyer of new homes ( the Millennials ) You get ahead of them and that's were some decent money can be made..
Podcast Guest on Show #222
JLH Capital Partners51 Review
Website View Page
1 Reply
James Wise
Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 31k+ posts · 20k+ votes
7y
I still haven't gotten through all 10 pages of this sucker but have been browsing through them. Lots of fire going back & fourth. The low end model has standing but it ain't for everyone. As I said earlier if you are the wrong type of person it will break you down.
Is anyone on this thread an Engineer or someone who has worked as a property manager for an Engineer? Engineers should not join the $30k club. The short term variances in performance are too much for them. Any swing in performance takes those types of thinkers to the edge of the cliff. It's kinda wild how consistent their personalities & reactions are to one another.
Who's got thoughts on this?
3 Reply
Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
7y
Originally posted by @James Wise:

I still haven't gotten through all 10 pages of this sucker but have been browsing through them. Lots of fire going back & fourth. The low end model has standing but it ain't for everyone. As I said earlier if you are the wrong type of person it will break you down.
Is anyone on this thread an Engineer or someone who has worked as a property manager for an Engineer? Engineers should not join the $30k club. The short term variances in performance are too much for them. Any swing in performance takes those types of thinkers to the edge of the cliff. It's kinda wild how consistent their personalities & reactions are to one another.
Who's got thoughts on this?
Not to diss on engineers but they are some of the only people I have ever seen that read every line of a 40 page mortgage LOL if they do a closing in person it can takes hours.. But economically they are a force to be recon with no doubt..
I think from what I see with this thread. Is really what we see every time this subject is brought up.. the Locals love it make it work and god bless them.. the OOS folks want to in the worse way.. but many just dont know what they dont know.. they dont live there they never lived in those environments.. and well once they get knee deep in them have a hard time with them vis a vi turn over people like you post pictures of that live in horrid conditions and non payment of rent. For locals I dig it .. great way to have your own business.
Podcast Guest on Show #222
JLH Capital Partners51 Review
Website View Page
2 Reply
James Wise
Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 31k+ posts · 20k+ votes
7y
Originally posted by @Jay Hinrichs:
Originally posted by @James Wise:

I still haven't gotten through all 10 pages of this sucker but have been browsing through them. Lots of fire going back & fourth. The low end model has standing but it ain't for everyone. As I said earlier if you are the wrong type of person it will break you down.
Is anyone on this thread an Engineer or someone who has worked as a property manager for an Engineer? Engineers should not join the $30k club. The short term variances in performance are too much for them. Any swing in performance takes those types of thinkers to the edge of the cliff. It's kinda wild how consistent their personalities & reactions are to one another.
Who's got thoughts on this?
Not to diss on engineers but they are some of the only people I have ever seen that read every line of a 40 page mortgage LOL if they do a closing in person it can takes hours.. But economically they are a force to be recon with no doubt..
I think from what I see with this thread. Is really what we see every time this subject is brought up.. the Locals love it make it work and god bless them.. the OOS folks want to in the worse way.. but many just dont know what they dont know.. they dont live there they never lived in those environments.. and well once they get knee deep in them have a hard time with them vis a vi turn over people like you post pictures of that live in horrid conditions and non payment of rent. For locals I dig it .. great way to have your own business.
The 40 page line is so true. lol.
Low end rentals are about perspective & preparing yourself for what's ahead. If someone goes into it expecting it to be this super consistent income stream it's not a good fit. Some folks read the pro forma that says the avg repair cost per month is gonna be $80 or whatever amount is on there. They then expect 12 equal $80 repairs to come up in the next year. Doesn't work that way. It's gonna be like $0, $0, $0, $0, $0, $194, $0, $0, $0, $2,000, $0 & $100 or something.
Scale really helps with this. I think owning 1 or 2 low end rentals is pointless for anyone. It's not worth the additional hassle & income swings. If you've got like 40 though the swings start to even out. You start to see a much more consistent income & expense throughout the portfolio as a whole. That's the thing with low end rentals. If you've got 40 of them at all times at least one of them is going to be going through some type of chaos as that's the game dude. That's the deal with poor people, just how they live. No matter how "Rock Solid" your Property Manager is you can't change the behavior of the people who live in these properties.
So if you've got this super small sample size of 1 or 2 you only see 1 extreme or the other. Either your entire portfolio is running food or your entire portfolio is running like hell. If you've got one running good you think you've hit the jackpot with this never ending low income money train & wonder why everyone else isn't smart enough to gobble these up. If you've got one going bad you think you've been scammed by some slimy operator or that you've got a bad Property Manager. The reality of this business falls somewhere in the middle. Hence the need for scale to balance it all out. You can't win on all of them all the time. You just got to make sure the wins outweigh the losses.
1 Reply
Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
7y
@James Wise I always say if one does not have the ability to scale to 10 of these post haste.. its exactly like you said.
why ???? far better investments out there with much less stress and risk. you get that sweet spot like your talking about and again its a nice cottage or private owner operated business..
Podcast Guest on Show #222
JLH Capital Partners51 Review
Website View Page
2 Reply

Join the conversationCreate a free account to reply, vote on answers and follow this thread.