Sub30k rental purchase... should i stay or should i go now?

7 Replies

Good morning everyone,

Looking for some opinions here.  My wife and I currently own a 4 unit Multi-Family(20% down pmt), and are cash flowing about $750.00 per month, give or take a tad.  We are excited and are ready to start preparing ourselves for purchase number two.  

I have read  dozens of posts (for/against) buying lower valued "pigs."  There are dozens of properties that we could buy in our area from 30-50k.  We live in the midwest, 20 minutes from St. Louis, Missouri, on the Illinois side of the river.  These homes are in safe area(i have lived here all 33 years of my life), mainly class B and C.  If I am cautious about the big ticket capex items(roof, heat/air), what is the harm in purchasing these types of property?  

Just as an fyi-i googled(not the most accurate-just quick) the average home price in my area, compared to Lima, Ohio.  Lima has an average listing price of $122,790.00.  The median home price in my area is $71,500.00.  Homes are just cheaper than a lot of other areas here where we live at(so are the salaries... #sadface).  So we can get fairly nice properties at 30-50k here because that is just the way the market is.  We could get between 600-750 in rent out of these properties.  Obviously if i were to buy one, i would try and make a few updates...laminate flooring, new paint, new plumbing fixtures/toilets(all work i can do myself at a pretty cheap price).  @Ben Leybovich ...i would love to hear your opinion.  i respect all that you have accomplished, and would like to hear your thoughts on this.  I know you are against the cheap houses...but what if all houses are relatively cheap?  

I would like to hear from other people as well...not just Ben.  I just wanted to "askbenwhy."  Thanks to all, and sorry for the long post.  Have a great Labor Day Weekend!

DJ

My 02 cents: Buying a $30k pig is fine if you live 20 mins away. You understand the area and can deal with most issues quickly, efficiently and in person. If you can get a 2/1 or 3/2 in decent shape in a decent/safe area that rents for 1.5-2% then go for it. Living in CA or NY and investing in a $50k pig (aka a $30k pig with some turnkey lipstick) and relying on somebody else to watch after it in a structure where their profit motives (in house repairs and lease ups) do not align with yours... is a terrible idea.
Originally posted by NA Cummins:

Good morning everyone,

Looking for some opinions here.  My wife and I currently own a 4 unit Multi-Family(20% down pmt), and are cash flowing about $750.00 per month, give or take a tad.  We are excited and are ready to start preparing ourselves for purchase number two.  

I have read  dozens of posts (for/against) buying lower valued "pigs."  There are dozens of properties that we could buy in our area from 30-50k.  We live in the midwest, 20 minutes from St. Louis, Missouri, on the Illinois side of the river.  These homes are in safe area(i have lived here all 33 years of my life), mainly class B and C.  If I am cautious about the big ticket capex items(roof, heat/air), what is the harm in purchasing these types of property?  

Just as an fyi-i googled(not the most accurate-just quick) the average home price in my area, compared to Lima, Ohio.  Lima has an average listing price of $122,790.00.  The median home price in my area is $71,500.00.  Homes are just cheaper than a lot of other areas here where we live at(so are the salaries... #sadface).  So we can get fairly nice properties at 30-50k here because that is just the way the market is.  We could get between 600-750 in rent out of these properties.  Obviously if i were to buy one, i would try and make a few updates...laminate flooring, new paint, new plumbing fixtures/toilets(all work i can do myself at a pretty cheap price).  @Ben Leybovich...i would love to hear your opinion.  i respect all that you have accomplished, and would like to hear your thoughts on this.  I know you are against the cheap houses...but what if all houses are relatively cheap?  

I would like to hear from other people as well...not just Ben.  I just wanted to "askbenwhy."  Thanks to all, and sorry for the long post.  Have a great Labor Day Weekend!

DJ

 You've just given me the topic for the next blog post :)

In your case - perhaps. There are a lot of caveats, but perhaps yes.

@Joe Bertolino - i will be looking forward to your blog post...always enjoy them.  I am just excited to see that you said "perhaps."  Maybe i am not as crazy after all.  ha-ha.  

Originally posted by NA Cummins:

@Joe Bertolino - i will be looking forward to your blog post...always enjoy them.  I am just excited to see that you said "perhaps."  Maybe i am not as crazy after all.  ha-ha.  

 Oh - you are nuts! Flat out! But, still may be :)

Started writing as we speak. Will be out on Tue I imagine...

DJ, this may be too specific for almost everyone but right now there's a glut of investor-owned 2/1s in North County in St. Louis County. A lot of the housing stock there (even in better areas like Florissant) has only one bathroom so that's OK but definitely stay away from the 2/1s as they're hard to rent right now. 

Overall rental demand in North County is quite good if you have decent product. We have a little over 200 SFRs there now and no trouble keeping them rented (YMMV).

I believe 30k properties can work if bought right.  It is all dependent on the market.  However, @Ben Leybovich , and many other investors, have talked in breadth as to why it may not be a good idea to buy these types of properties.  I have 3 multiplexes in STL that are pigs, and they are doing ok, but I'm already seeing a lot of the problems others have described.  So, though I will hold on to the properties I own for now, I will not be purchasing anymore.  Wishing you the best of luck!

It's all about how you manage the property and what money you sink into it. When you are in this price range you have to get creative. Please feel free to reach out to me to discuss how I make my properties work.

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