Will there be 100k properties in 10 years?

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Will there be 100k properties in 10 years?

Darius White
New to Real Estate · Detroit, MI · Member since 2019 · 41 posts · 21 votes

New to investing and trying to fully create a 10 year vision or business plan. Currently I plan to save 2k a month. To increase the amount of units I can purchase and cash flow I want to stick with property under 100k. My question is do you think we will continue to have these sort of properties 6-10 years from now or should I start off assuming a higher amount?

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Joe SplitrockPro Member
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Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
6y

@Darius White nobody is giving you the right answer, which is "why does it matter?" Houses could cost $8000 or they could cost $500,000 and that alone doesn't mean they are a good investment. What makes one investment better than another is the cash return. Think of it as if you spend $1 today, how many dollars will that return in future years? The more dollars it returns, the better. Home value appreciation in a given market is mostly determined by supply and demand. The leading factor in demand is jobs, not only quantity but average pay of jobs. Supply is often driven by demand, but supply can run into barriers. For example if you live on an island, there is limited supply of land which drives values higher even if demand is average. 

I hope that makes sense. My point is look for a good investment, not a cheap property. Look for markets that have stable and growing employment, because those are the markets that will have steady rental opportunity.

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  • Adam E.
    Fairfield, CA · Member since 2019 · 74 posts · 31 votes
    6y

    @Darius White

    Yeah no problem! Stay healthy out there✌

    0Reply
  • Henry Lazerow
    Real Estate Agent · Chicago, IL · Member since 2017 · 2k+ posts · 2k+ votes
    6y

    The areas with sub $100k properties tend to not appreciate so I don't see any reason they wouldn't be around the same price in 10 years. 

    4Reply
  • John Patterson
    Contractor · Canton, GA · Member since 2015 · 107 posts · 81 votes
    6y

    @Darius White

    If you are serious about finding $100k homes, go “sub to” . These deals are not market deals as much as they are relationship deals.

    Given in 3 months, many people will not be able to afford their homes, they may be glad to have you take over their mortgage payments. Their mortgage may be below 100k on a 150k house. Its an opportunity to save them from pre-foreclosure or bankruptcy. Be fair and do your homework.

    1Reply
  • Darius White
    OP
    New to Real Estate · Detroit, MI · Member since 2019 · 41 posts · 21 votes
    6y

    @John Patterson thanks John. I never really thought about doing that

    0Reply
  • Drew SygitBusiness Member
    Property Manager · Royal Oak, MI · Member since 2012 · 12k+ posts · 9k+ votes
    6y

    @Darius White

    Everyone's given good advice, so hopefully you're figuring out that you take what everyone tells you and what you read and determine what works for you and your goals.

    Your profile states "Michigan", so where in Michigan are you?

    If in Metro Detroit, the following amy help you better understand what everyone on this thread is advising you:

    Under $100k, 3-bed areas:
    Wayne: Detroit, Harper Woods, Inkster, downriver.
    Macomb: Eastpointe, south Warren, Mt Clemens, maybe Fraser & Roseville.
    Oakland: Oak Park, maybe Hazel Park & Madison Hts, Pontiac

    Which of these areas do you think will offer stable rents & tenants? Consistent appreciation?

    Do you think you will spend more time managing white-collar, blue-collar or no-collar tenants?

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    0Reply
  • Jordan Murrell
    Las Vegas, NV · Member since 2020 · 162 posts · 113 votes
    6y

    @Michael H.

    Josh is always mentioning Detroit haha

    0Reply
  • Darius White
    OP
    New to Real Estate · Detroit, MI · Member since 2019 · 41 posts · 21 votes
    6y

    @Drew Sygit born and raise in Detroit so I know the metro area quite well.. starting out I want to avoid Detroit.. there are good areas here but not within the price range I’m looking at..starting I prefer the suburbs. Will send you a message

    2Reply
  • Evan Bradley
    Member since 2018 · 8 posts · 4 votes
    6y

    @Darius White Really great question. I hope so. 100k properties is where I got my start, and your plan sounds very good. It reminded me of the 5 and 10 year plans @Jason Hartman teaches on his podcast. It's an excellent resource for guidance and inspiration. 

    2Reply
  • Darius White
    OP
    New to Real Estate · Detroit, MI · Member since 2019 · 41 posts · 21 votes
    6y

    @Evan Bradley thank you Evan.. appreciate the reference

    0Reply
  • Darius White
    OP
    New to Real Estate · Detroit, MI · Member since 2019 · 41 posts · 21 votes
    6y

    @Evan Bradley what area did you start in?

    0Reply
  • Evan Moffic
    Member since 2020 · 1 post · 4 votes
    6y

    @Darius White starters in Memphis. I disagree with the folks saying sub 100k properties don’t appreciate. They can and do. All of my Memphis properties have appreciated nicely over the last 4 years.

    4Reply
  • Karl B.
    Rental Property Investor · Erie, PA · Member since 2015 · 1k+ posts · 2k+ votes
    6y

    2K a month is great. Look into getting a FHA loan (only 3.5% down payment) and buying a 2-4 unit. That way you can get started owning real estate sooner rather than later.

    If you bought a 4-unit in Detroit and lived in one of the units (a FHA loan requirement is that you live in the property for a full year) you could cash flow from the other three units (meaning rent from the other three units covers your mortgage/taxes/insurance and you've still got some money left over to add to your savings). So you're essentially living for free, making money doing so and paying off your property.

    0Reply
  • Barb Asay
    Rental Property Investor · Member since 2018 · 64 posts · 40 votes
    6y

    Short answer: yes

    But as others have mentioned: price is sort of irrelevant if it’s a bad deal.  

    I live in an area now where house prices seem to be fairly stable.  Unless you are doing major renovations to a complete dump (which is what I do lol) you shouldn’t count on rapid appreciation.   And there are tons of properties under $100k   And they are nice!

    I can pick up a 4 bed 2 bath house for under $40k, do a $20k renovation and ARV is around $100k. With a 60% loan to value I am able to finance the entire deal, have zero cash in and rent that beautiful home for $800+ per month. And than use left over equity to buy the next one!

    I do that over and over and over...and all with houses under $100k.  And I don’t see it changing  

    All depends on the area you want to invest in and what you’re looking to buy.  

    1Reply
  • Ian Stack
    Member since 2020 · 6 posts · 3 votes
    6y

    There will be in Detroit in 10 years in my opinion. No appreciation but great cash flow. Probably the best bang for your buck for cash flow

    0Reply
  • Gualter Amarelo
    Investor · Fall River, MA · Member since 2014 · 399 posts · 300 votes
    6y

    @Darius White there will always be $100k properties.

    I just bought 24 condos in Fall River, MA for $35k each and am flipping them for $100k each.

    Investors are able to find deals like this in every market all around the country, and yes it is getting harder, but that is just a part of the real estate cycle.

    Naturally as inflation continues to surge thanks to the monetary practices of our federal government there is a good chance that ALL properties will be going up in price much faster than what we have seen.

    I hope this gives you some insights. Instead of a 10 year plan, there is a very good chance you can reach your financial freedom in 5 years or less.

    Cheers to your success!

    2Reply
  • Todd Dexheimer
    Rental Property Investor · St. Paul, MN · Member since 2016 · 3k+ posts · 3k+ votes
    6y

    In small towns, cheaper priced larger cities and D class areas for sure. Maybe some highly distressed assets in some cities as well. 

    You're from Detroit, so I would say there is a very good chance. 

    1Reply
  • Gary L Wallman
    Rental Property Investor · Beavercreek OH · Member since 2018 · 422 posts · 970 votes
    6y
    Originally posted by @Darius White:

    New to investing and trying to fully create a 10 year vision or business plan. Currently I plan to save 2k a month. To increase the amount of units I can purchase and cash flow I want to stick with property under 100k. My question is do you think we will continue to have these sort of properties 6-10 years from now or should I start off assuming a higher amount?

     Darius,

    Assume a higher amount. While there will always be property for sale on the cheap it's not the kind you'll likely want to invest in. You can't have a country spend 2 trillion more then it takes in simply by printing money and not create price inflation over the long term.

    The 2 percent inflation the government reports is nonsense. 5 percent historically is closer to the real number. With our out of control spending we are likely to see way more.

    This happened to me in 2001 as I was trying to buy my personal home. The houses in my price range (around 160k) went up faster then I could save money. I'd save 2 grand the homes in the area would appreciate 5 grand. Finally just had to jump in.

    Even though we are in a low volatility and appreciation area (SW Ohio) the house is now worth about 270k. I kept it as a rental.

    Good luck to you,

    Gary

    0Reply
  • Gary L Wallman
    Rental Property Investor · Beavercreek OH · Member since 2018 · 422 posts · 970 votes
    6y
    Originally posted by @Barb Asay:

    Short answer: yes

    But as others have mentioned: price is sort of irrelevant if it’s a bad deal.  

    I live in an area now where house prices seem to be fairly stable.  Unless you are doing major renovations to a complete dump (which is what I do lol) you shouldn’t count on rapid appreciation.   And there are tons of properties under $100k   And they are nice!

    I can pick up a 4 bed 2 bath house for under $40k, do a $20k renovation and ARV is around $100k. With a 60% loan to value I am able to finance the entire deal, have zero cash in and rent that beautiful home for $800+ per month. And than use left over equity to buy the next one!

    I do that over and over and over...and all with houses under $100k.  And I don’t see it changing  

    All depends on the area you want to invest in and what you’re looking to buy.  

     Barb,

    Where are you doing these deals?

    I used to do the exact same thing as you. In our area (SW Ohio) now the dumps are 85k when they used to be 40k. I'm buying more post renovation homes now. I can't fix them for the small spread between dumps and a finished product.

    Gary

    0Reply
  • Rassan Sampson
    Westminster, CA · Member since 2017 · 43 posts · 39 votes
    6y

    I think it's an excellent idea to put together a 10 year plan but I think it's also important to be flexible. My approach is to make a plan with the facts I can gather today and have contingencies where possible and be ready to pivot as I gain more experience and knowledge. I don't want to spend too much time trying to guess what happens in the future and risk staying idle too long. It's hard to anticipate prices and markets so far in the future.

    1Reply
  • John Chang
    Member since 2020 · 22 posts · 26 votes
    6y

    I'd say yes. 100k properties are typically found in places that most sane people would not want to live in, like the deep south states. 

    0Reply
  • Barb Asay
    Rental Property Investor · Member since 2018 · 64 posts · 40 votes
    6y

    @Gary L Wallman

    I’m in Southeast Iowa.  Feel free to private message me if you’re looking for opportunities.  There are endless homes just as I described.  My husband and I have done 25 deals, mostly buy and holds, but we are looking for do more fix and flips.  

    A deal is a deal if the numbers work.  If they don’t...it doesn’t matter if the house is $6k or $600k.  ( and yes, I bought a house for $6k!). But hard work makes things really tick 

    1Reply
  • Darius White
    OP
    New to Real Estate · Detroit, MI · Member since 2019 · 41 posts · 21 votes
    6y
    Originally posted by @Rassan Sampson:

    I think it's an excellent idea to put together a 10 year plan but I think it's also important to be flexible. My approach is to make a plan with the facts I can gather today and have contingencies where possible and be ready to pivot as I gain more experience and knowledge. I don't want to spend too much time trying to guess what happens in the future and risk staying idle too long. It's hard to anticipate prices and markets so far in the future.

    Yes i know your right. Don't want to sit stagnant. Ready to get my foot in the game.

    1Reply
  • Remington LymanBusiness Member
    Real Estate Agent · Columbus, OH · Member since 2017 · 6k+ posts · 7k+ votes
    6y
    Originally posted by @Darius White:

    New to investing and trying to fully create a 10 year vision or business plan. Currently I plan to save 2k a month. To increase the amount of units I can purchase and cash flow I want to stick with property under 100k. My question is do you think we will continue to have these sort of properties 6-10 years from now or should I start off assuming a higher amount?

     I think there will always be properties under 100k. Whether they would make good investments is another thing.

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  • Joe HammelBusiness Member
    Real Estate Agent · Metro Detroit, MI · Member since 2018 · 612 posts · 666 votes
    6y

    @Darius White

    Hi Darius! Looks like you've gotten a lot of advice. I didn't see this math done anywhere yet, so I figured I would share how I would look at this.

    A $75,000 house right now. C neighborhood. If appreciates at 3% per year for 10 years (assuming it is just closely correlating with inflation aroun 3%) will be worth about $100,000 in 10 years.

    So one question to ponder:

    Q. Will a location appreciate at faster than inflation?

    A. Possibly. Quite a few suburbs are beating inflation right now, so it's possible the number will be somewhat higher. 

    However, Just a Theory, but if the Metro Detroit are appreciates faster than inflation, it means the area is growing, and becoming more desirable. So that same "C" location mentioned above that was a $75,000, might have appreciated at 5% per year and be worth $122,000 in 10 years. However, if it was that desirable that it beat inflation rate it could now be a "B" location instead of a "C". Meaning previous homes in "D" location that you might not have considered now, could be "C" location and still worth <$100,000. 

    Conclusion:

    I always try to just analyze if its a "deal". While prices will most likely creep higher and higher, even just matching inflation, you will most likely be getting the same "inflation raise" at work (just as a general rule). Rents will also be inflating/appreciating so the same house that you would have gotten $1,000 rent/month now might get $1,300/month in 10 years. 

    Another question...is will Metro Detroit ever price itself out of being a good "buy and hold" market, like a lot of areas in California....A whole other conversation - but part of what caused that to happen, I would assume is the insane appreciation the make homes more expensive than good rent.. *Opinion* - While I think Metro Detroit will continue to appreciate, I don't see us being that desirable that prices explode like that. Keeping it a good "Buy and Hold" Market for years to come...

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  • Ian WalshBusiness Member
    Lender · Philadelphia, PA · Member since 2016 · 2k+ posts · 1k+ votes
    6y

    It depends on where you are.  Check out the pricing on Kensington Philadelphia over the last 20 years.

    2Reply
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