Buying $40k rentals in Florida?

30 Replies

I'm tired of barely scraping by and I've decided to give the BRRR thing a go. The most I can afford is a $40k-50k home. I live in Connecticut but the prices here are insane so I decided to try Florida since my grandmother lives down there and she can be my local connection.

I see everyone talking about $100k+ homes in Florida, is it not a good idea to buy $40k rentals in Florida? I also notice there are a lot of houses sub $20k in Florida that seem decent. Are these bad targets? I don't really have any current debt but my earnings are barely enough to get by at the moment. I can't afford much but I'm hoping to use this BRRR strategy to get out of poverty.

Thanks.

You should start by upgrading your job skills and find a higher paying job. You need to be able to save up cash to get started in investing and save up 6 months of reserve funds.

The higher paying job will allow you to get more financing.

You need enough money to cover all your expenses for 6 months in the event you lose your job.

Highly unlikely you will be able to get a mortgage on a 40K property. Banks don't usually provide mortgages on homes valued below 50K.

Get all you finances in order and get your savings in order before you consider owning a home. Home ownership is far more expensive than renting.

Likely they will be in a crappy area. If some guy named Clayton Morris is telling you this is a good idea, run the other eay

When looking at homes in that price range, you really need to know the neighborhoods that they are in. If you aren't familiar with the areas, it would he worth a trip to see what you are getting yourself into.

My grandmother lives in Port saint lucie so I know that area. Lots of retirement communities and lots of shops, malls, restaurants, close to the ocean, etc. That is where I'd prefer to start.

I've seen Jacksonville mentioned a lot so I was looking on zillow up there too. 

In both areas there are tons of sub $40k houses that seem to me to be plenty big enough for renting. I'm trying to figure out the catch.

I take it you got this idea from Morris then.  The problem is you will lose money when your tenant stops paying, you evict them and they trash your house.

That seems to be true of any rental though isn't it? At least this way I'm paying a minimal mortgage.

I have a difficult time believing a local credit union won't allow a sub $50k loan. My credit score is good.

Guys,

I get CRAZY good deals all the time. I mean ALL The Time!!

Area has nothing to do with it. But you know what does have to do with it?

A #1 ranking site. Everywhere there are people that for some reason or an other NEED to sell NOW. EVERYWHERE. You just need to be in front of them when they are looking for a buyer.

And.. I am in front of them

I just closed on a house that is SUCH a good deal I can't post it here...

You just need a ranking website. Seriously.

Originally posted by @Colin C leamy :

Let's assume I have my finances in order. back to the original question. Is there something wrong with buying $40k or less rental homes in florida?

 No, there is nothing wrong with this.

I bought a house for 5K in Waterbury CT.

It is not a great looking house ofcourse, but if you are smart, repairs can be done intelligently.

Rent in that area is about 1000 section 8. Repairs about 15-20 K.

In a few years it will have paid for itself. 

Before:

Then:

NOW:

We found beautiful brick under the plaster. So we are keeping the brick, and not bother doing framing, sheetrock mudding , taping, paint...

Same with the ceiling.

We are going for this look:

No, there is nothing wrong 40K houses. It is all and only about the numbers!

Cash reserves are very important. Plus these $40k houses have bigger issues sometimes (mold remediation, foundation, structural, total rehab) so they seem to have less entry barrier at first.

Here’s some make-shift numbers......consider even if you get financing at 25% down you’ll need $10k down plus $2k closing costs and another $25k in Reno over the short term). So that’s a total of $37k cash all in to do it right for a $65k property value. The great thing is you gained some equity (let’s call it $18k in free equity which can boost your net worth) but you need to have reserved to weather the storm. Also you need to ask yourself if the juice is worth the squeeze......what if you were to just go out and find a $80k house that only needs $5k in cosmetic that you can lock down conventional loan and put $20k +$3k closing and $5k reno.

The answer is there is no answer....it all depends on how you want to go about it and what your goals are. That’s what is fantastic about REI. But in my opinion the single most important thing is that you do the numbers and calculate the difference and can decide for yourself exactly your cut off points and what works for you. Then you know what you’re looking for and it’s that much easier to move quickly when a great deal comes up.....or to have the confidence to low ball bid when you know your threshold and stick with it!!!

Good luck and keep us posted.

Originally posted by @Colin C leamy :

If only I had the knowledge and skill to reno CT houses, alas I'm about as nooby as it gets in these things.

 I was a nobody too, and I faked it till I made it.

Don't let that scare you!

@Colin C leamy the bureau of labor statistics will have that information. A 40k house is fine if it’s in a good area. I have a feeling most of these in Jacksonville are not in a good area.

Originally posted by @Colin C leamy :

How do I calculate the "numbers" exactly? How do I find out the local average wage, whether there is a rise in job opportunities in the area, whether the tenants will be good, ect?

 ....With experience. Lacking that, you use the BP calculator. Below is an example of just one good resource to research your neighborhood. You can check out the best and worst school districts, demographics, livability of the neighborhood. You could check out the livability scores of each neighborhood to find out which are the most desireable and which are the least. Could give you some insight on why your 40k house is located in a non sought after neighborhood of your target city for example... You could also use the rental sites to check out your rental comps and see what the housing stock looks like... It's like detective work, only your on your own to do your research and figure out your own criteria after lots of research. talk to someone local besides your family member. They might know of neighborhoods, but not really know about them. 

http://www.areavibes.com/

Nothing wrong with a house in CT man. I just put an offer in on a house in a local to me area. I won't say my offer as it is not under contract yet but I will say it is a lot less than 40k and this is a two family in a neighborhood that I would actually live in... (the better half not so much). It needs work but that's what you get. 

@Jerryll Noorden is a great guy to watch. He is really a mover and shaker in CT and does things his own way. Don't let anyone tell you there are no deals to be had. I am going to check out one of his properties when my schedule is not so slammed. 


@Jerryll Noorden is a great guy to watch. He is really a mover and shaker in CT and does things his own way. 

You forgot "Handsome beyond comprehension"! 

no no ^_^ seriously.

Thanks brother. What an awesome thing to say man!