Hey guy, as you may know in the past I purchased my first investment property for $32,700. This property is now renting at $750.00 and after expenses, including taxes and a portion for big ticket items, I walk away with $550. My second investment is in contract and about to close in a month. It is a very nice brick home. Infact, both of these properties are brick single families. For the second investment, the seller wanted $30,000, we offered $19000 and they countered offer at $27000. I countered offer again at $21000, they countered at $25,000, I countered at $22000. They didn't change their offer. So I hold out knowing that no one will buy the house because not too many retailers will pay cash as i am doing and more so, investors would not buy it at that price. They will want it cheaper but my reasoning is this: in there years from now, you will never again get that house at that same price. At this point, the house is at a good location and ready for rental. The owers are company affiliated with Pennsylvania State and they take care of people who cant take care of themselves so the state make sure the house is up-to-date. This is a steal. I will never sell these two houses. The second house is ready for rental but need some cleaning up. I will get $725.00 in rent and expenses $221.00 with a profit of $504.00. My object is to appreciate the second property, doing the floors, carpets, and most of the work myself. When i am finish, I will take a mortgage for the 3rd property which i have my eyes on. I will used the 2nd property as collateral for 20% of the down payment. My aim is to all-time have a positive equities in my small portfolio. Also, just to tell you guys, i am learning to install hard wood floors and carpets and sheet rocks and other skills that will appreciate houwr value. I dont have the money for these services so i have to know it asma starter. So that was little successes.
Sounds like you are talking yourself into the 2nd one (and the 3rd one) already! It's hard to argue with good cashflow, even if you are buying at market value. I don't know anything about your market, possible appreciation or forcing equity by rehabbing in your area.
There are areas within an hour of me where I can buy old, ugly houses for 40K, but the 20-30K in work needed to raise the value would not be a good investment because ARV is only 75K at best, and the types of tenants I could attract in those neighborhoods are not the kind I want to manage. Also, this area has not seen appreciation that even keeps up with inflation over the last 30 years.
If you have an area where you can invest 25K, minimal repairs and then cashflow an honest $500 per month, you have a nice little goldmine! Appreciation on top of that is a bonus! With 20 of those (well-managed) you'll be retired and living on a carribbean island in no time!
Congratulations! We gutted our first house and did it ourself because we were young and poor. It was an awesome experience and my husband learned some great skills. We are hoping to use those skills for a couple of high end properties that we hope to use as vacation rentals. So once you learn those skills they will pay off for years to come :)
@Zaheer Jabbar be careful about doing too much work to the rentals. Not all work adds value. As to doing the work yourself UTube is your friend. you can get how to do it movies on almost everything. Good luck.
Hey Guys, thanks for you input, however, I like to tell you that every zipcode is different when it comes to buying cheap properties. For example, there are some investment residential properties in Ohio that are in wonderful conditions, where you don't have to do too much work but if you compare where i am investing in Mercer county pennsylvania (oh shucks I let out my Goldmine) with Ohio, some parts in Pennsylvania are more advantageous for small investing, why? There is an ongoing effort by the state to revitalized communities and incentives for companies to bring jobs to these distressed communities. So the niche is finding the areas which are recovering or sustaining some degree of recovery.
Hey Guys, my first investment, i am get $750, a month and taking away 525 a month after expenses. I did nothing on this house except cleaning the sewer.
i paid $32,700. Its not bad at all. The school is just behind tne house, and within quarter mile you get dollar general and and all the marts
I know a lot of rental investor in my area, as I am not one myself. If you are truly doubling your money on a rental property you hit the jackpot! However rental investments are intended to be safe, so if that was my area I do not believe I would put up one property to obtain loosing both. I understand the risk may be slim and returns always look appetizing. I flip foreclosures and build spec houses from the ground up. My profits average around 23% and in that sector of the industry I would encourage you to whatever you have to to get the deal closed. However, from a rental prospective I would never force anything as I would be looking at that as more guaranteed. If you are wanting to risk a little more in order to receive more I would suggest you delve into other aspects of real estate. As I stated earlier my average profit is 40% and it generally takes me 90 days to build a house which gives me a 92% return on $180k(average) annually. My risk are higher that rental investors and I would never argue that, but it seems to me you are interested in taking some of those risk yourself in order to achieve the greater returns. Just something to think about.
Hey Dexter, thanks for the input, and I can see where you are coming from. I wish I had you skills of building, however, taken into consideration my financial position, especially after the closing of the second property, i will have no choice to use a 20% as a down payment from the second property and have the portfolio lender lend me a mortgage of 80% for the 3rd property. I have no other choice for the purchasing of the 3rd property. I prefer the old fashion way, for now until i get better. Please note only 20% will be borrowed from the second house.
I have faith it will work out.. i am not worried at all. The only problem i have is that the local agents increased the house prices 1% in 6 months and my fear is in years to come these houses will get too expensive to buy according to my pocket.
I'm curious how you found out about the properties? I can't imagine getting one for so cheap!
Did you use a realtor or crawl the MLS yourself?
Also, 1% increase in 6 months is less than inflation - so you shouldn't be too worried yet.
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