I have 50k to invest looking for common mistakes you ya e made

8 Replies

So I’ve been reading/researching/and looking at investing 50k into rental properties. So far tho I’ve looked at 4 houses all around the price range of 25-45k and major issues are always keeping me from pulling the trigger (failed foundation, sketchy seller who didn’t inform me about plumbing issue but knew bout it, houses in 10 times worse state then mentioned). I am in the military stationed in NJ but looking to invest in the Midwest. Any pointers would be great.

I'd suggest you check out Cleveland, thats where I invest, live, and practice the ancient art of real estate :)  I am sure you can find a home around 50k here no problem. I am here if you have any more questions. 

For me I took what my inspector said to heart.  In the next 6 months I had some major expenses hit that cost me over 3k.   If I had to do it all over I would have set more money aside for repairs.  Now I need to spend another 7k on a roof.  I also wish I had consulted an expert to see how much things would cost to replace instead of my own estimates.  I probably could have had the seller lower the price even more.  My advice is have a contractor walk the property with you and give you a quote on repairs.  Then add another 10 percent to that for unknowns that could pop up.  And that could possibly give you leverage when putting in your offer.

On the plus side I bought a tiny bit undervalue because the property was ugly.  No trees or shrubs trimmed in over 5 years, weeds everywhere.  The owner was a younger guy that did absolutely nothing with it.  Found out shortly after his parents paid someone to mow the lawn once a month for him.  The property has gained significant value since then and the rental market turned out to be better than I expected.

@Jason Boritz well as of right now my credit is not too great due to a past divorce. It is sitting around 640 and I applied for a loan and was denied even after putting down up to 25%. Thought maybe I should try a different source but also do t want anymore hard inquiries either because trying to rebuild credit.

@Bennie Hall West side of Cleveland, stay away from east side of Cleveland. Some suburbs on the east side that are good for rentals- S. Euclid, Garfield Hts, Maple Hts (lower grade neighborhoods but great rentals) Some of these cities you have to watch out for POS. 


I think you have a good grasp on my suggestion: Don't get excited about buying trash. Be proud that you said 'no' four times. A lot of deals look good and you have to bail because you have to. Or, ask for a credit from the seller to repair the issue.

If you go with Cleveland (An excellent market, btw), check out https://www.biggerpockets.com/member-blogs/4704/42419-cleveland-neighborhood-grades by James Wise.

Also consider checking out Jame's youtube channel. 

I would also recommend leaving a cushion for unexpected expenses. My first property had a bad roof leak that was a surprise and required a new roof. 

Were you dead set on SFR or are you ok with 1-4 MFH? 5+ apartments? Some lenders will go 15% down on SFR non-owner occupied investment property where as a 1-4 MFH investment needs 25% down. Going with SFR will get you better cash-on-cash returns, they have less turn over. Some of the house prices you mentioned seem kind of low and may not get the best tennants -- if you can get section 8 and a PM firm that knows how to screen section 8 tenants well, then you can make good money.

Originally posted by @Michael Kay :

I think you have a good grasp on my suggestion: Don't get excited about buying trash. Be proud that you said 'no' four times. A lot of deals look good and you have to bail because you have to. Or, ask for a credit from the seller to repair the issue.

If you go with Cleveland (An excellent market, btw), check out https://www.biggerpockets.com/member-blogs/4704/42419-cleveland-neighborhood-grades by James Wise.

Also consider checking out Jame's youtube channel. 

I would also recommend leaving a cushion for unexpected expenses. My first property had a bad roof leak that was a surprise and required a new roof. 

Were you dead set on SFR or are you ok with 1-4 MFH? 5+ apartments? Some lenders will go 15% down on SFR non-owner occupied investment property where as a 1-4 MFH investment needs 25% down. Going with SFR will get you better cash-on-cash returns, they have less turn over. Some of the house prices you mentioned seem kind of low and may not get the best tennants -- if you can get section 8 and a PM firm that knows how to screen section 8 tenants well, then you can make good money.

 Note, if you enjoyed the Ultimate Guide for Cleveland we've also put together one for Birmingham, Alabama.

 The Ultimate Guide to Grading Birmingham Alabama Neighborhoods