How would you invest $25K for your 2nd deal?

Question

I'm in the DFW area and am about to sell off some acreage that will net me about $25K.  I'm trying to decide how to reinvest this.  This will be my second deal.   Obviously I want it all, equity appreciation/capture and cash flow.  I tend to like land deals, but given the economy, new development just doesn't make sense to me now.  I think prices and rents will tend to go lower over the next year.  Do you agree with this?

If I go SF rental, I could easily buy a typical fixer upper.

I've thought about MH's too.  I've read a lot about MH's and like the idea of a small investment per unit allowing me to own multiple units for diversification.

I appreciate any and all input!

Thanks,

Tod

Tod R. · Answer

Thanks Paul.  I'll give the site a look!

Paul C. · Answer

This is my 2 cents, but I would try to purchase a $100k - $120 home (value as is) for $80k and given 20% down 16k + estimated 3-4k closing costs for 20k investment. Once the offer is accepted (30 day closing), I would advertise the place to rent it out and secure a new tenant prior to closing. Of course you'd have to let the prospective tenant know you're in the process of buying the home, show him proof of the executed offer with understanding you will refund his/her deposits if the purchase doesn't go through and lastly to make sure the current tenant or owner will move out prior to closing otherwise they become your responsibility in moving them out. I would also check the local area to find out as much as i can in terms of the average rent in the area and just calculate all your costs so you can be at least $200/month cash flow positive after all expenses including insurance, water & sewer bill, etc.  [WEB SITE REVIEW REQUEST REMOVED] Thanks and happy investing!

Jeff Wilson · Answer

What does MH stand for?

Tod R. · Answer

Will, you are right.  I am definitely in one of the strongest markets in the US.  Even in a down market that is a large as the Metroplex, no doubt there is opportunities to be found. I was thinking of buying and holding but you have a good point about building up equity quicker by flipping rather than hold and rent.

Jeff & Scott-you make good points about the types of renters.  I will understand what type of rental market I'm getting into before I buy.

I also agree with everyone on how the answer depends on which market, and type of market, one invests in.  As they say-All RE is local.  Asking how the real estate market is doing is like asking what the temperature is in the US!

Jeff Warner · Answer

That being said, the same home in my description above may rent for $1200-1300 month. Situations just like this are taking place all over the country and I don't think this will cause a decrease in rental prices. In fact, more renters could cause an increase in rent for nicer homes. That's just simple supply and demand, assuming that there are jobs in or near the area your investing.

I do think that high unemployment as well as lack of motivation for people to get off their a** and find a job will have an effect. Again, every market is different. Do your research and be smart with your investments, leaving your money in the bank for a few months while you figure out where to invest won't hurt (assuming this is not a 1031 exchange).

Jeff

Scott M. · Answer

As others have said it really depends on the market.

Market by market - for sure.  As for Sec. 8 tenants I would suspect those rates will continue to fall across the country as more people are signed up for those programs - as for traditional renters really depends on what is going on on the ground.

Jeff Warner · Answer

Every market is different. I think Will gave great advice (as usual) but it depends on what you feel comfortable with doing. Does that advice fit into your goals?

Jeff

Tod R. · Answer

I think the unemployment rate will continue to worsen, foreclosures continue to rise.  While both will force more renters into the market, these new renters will be forced to cut costs and may not be able to afford as much.  As I understand, in times like these, people tend to consolidate their housing.  I think there will be more SF rentals as well as apartment rentals coming onto the market, also depressing rents.

How do you see the rental market for the next year or so?

Josh Green · Answer

what leads you to believe that rents will go lower? while i agree prices may, i don't think rent will.

also, personally, i'm not a fan of mh's. financing is impossible here in my area of FL and the lot rents are expensive. tough to market that especially when you can get a sf for 30k. there are a few posters here that are heavy into them and they will be able to assist you.