Too good to be true?

Shawnee Mission, KS · Member since 2015 · 15 posts · 7 votes

So I am looking to purchase my first rental property. I know that typically deals are not found on MLS or Craigslist as these are the "deals" that have made it past all the savvy investors. My question is this though: I have found a house for sale in a solid C or C+ neighborhood that is listed for sale for 48K. Long term tenant already in place. Paying 725 a month. This would easily cash flow around 200$ per month. Market rent in the area for comparable SFH is 800-950 a month. So my question is, should I look into it? Why hasnt this already been gobbled up? Is it too good to be true?

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Brian Adzadi

Allentown, PA · Member since 2016 · 515 posts · 404 votes

@KJ Miller

While you are sitting there pondering if this is too good to be true, some hungry investor is already checking google maps and dialing up contacts to find more info about this property. You have to be in it to win it buddy. Sitting and pondering won't make that property yours. If its too good to be true, then its too good to be true, you move on. Do your due diligence and your questions will be answered.

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Brian Adzadi
Allentown, PA · Member since 2016 · 515 posts · 404 votes
8y
@KJ Miller
While you are sitting there pondering if this is too good to be true, some hungry investor is already checking google maps and dialing up contacts to find more info about this property. You have to be in it to win it buddy. Sitting and pondering won't make that property yours. If its too good to be true, then its too good to be true, you move on. Do your due diligence and your questions will be answered.
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Josh C.Pro Member
Property Manager · Indianapolis, IN · Member since 2010 · 1k+ posts · 1k+ votes
8y
Area could be bad. In Indianapolis you could find those numbers pretty easily in some areas. But on the MLS doesn’t mean a bad deal. My best three deal ever came from the MLS. I’ve bought from wholesalers and they do have some good deals something, but off market isn’t the holy grail.
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Ryan BlakePro Member
Lender · TX · Member since 2018 · 936 posts · 713 votes
8y
@KJ Miller It could still be a good deal. There are investors everywhere but not every deal gets snagged right away. Things that I would look for are:
1 Condition of the house
2 Ask for receipts of payment of rent, if the LL says they were cash I would be highly suspect that you have an eviction on your hands which can be profitable for you if you negotiate down the price
3 Make sure there is clean title
Those are the bigger issues I could see causing investors to stay away.
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Jonathan Holmes
Investor · Warren, OH · Member since 2015 · 168 posts · 188 votes
8y
Probably yes but what else are you doing at the moment? If you have no other deals on the line go and check it out for the learning experience. Try to figure out what is wrong with the place. My money would be on it needing major work. Maybe updates to the roof, electric, plumbing or hvac. Things that can cost a ton but be passed over in a picture. You can have a wonderful looking rental unit that has knob and tube wiring, asbestos siding and other things that will cost a ton down the road. You never know though you may just have got lucky!
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Allan Anderton
Magna, UT · Member since 2018 · 25 posts · 4 votes
8y
I am a total noob but I have heard mentioned on several podcasts that getting it under contract would be the logical step ATLEAST it secures it for you... IF it is a bad deal then put in contract a stipulation that would give you a exist such as DD but atleast that would get your foot in the door so to speak that is what I would do secure it then look it over do your DD and re run your numbers gl let us know how it goes
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Caleb Heimsoth
Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes
8y
KJ Miller that 800-950 is a wide range I’d narrow that down to 50 bucks range. Having bought several properties like you just mentioned it’s likely either A) in a bad area, B) overpriced or C) trashed on the inside
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KJ Miller
OP
Shawnee Mission, KS · Member since 2015 · 15 posts · 7 votes
8y
@Caleb Heimsoth
I came up with that range using zillow, craigslist and rentometer. It is actually an even larger range. I know the area pretty well. Its a solid blue collar neighborhood. With lots of rentals in the area. This is the area where a lot of investors are buying and holding. Housing prices are not high in this area. Homes in the neighborhood are selling for 40-65k depending on finishes. I guess I will have to get with my agent and have a look at it so I can see in the inside better and look for any obvious warning signs.
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Mike D'ArrigoPro Member
Turn key provider · San Jose, CA · Member since 2010 · 4k+ posts · 3k+ votes
8y
@KJ Miller The only way to know if it's too good to be true is to do your duel diligence and find out. You don't give enough information for anyone on here to be able to say one way or another. Solid C or C+ houses with tenants in place don't sell for $48K in Kansas City so there is a reason it's priced that low if it is truly a C/C+.
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KJ Miller
OP
Shawnee Mission, KS · Member since 2015 · 15 posts · 7 votes
8y
@Mike D'Arrigo As I said in my first post. I am just trying to make sure I am thinking of things right. I am new to the real estate investment game. Mostly looking through properties, practicing evaluating them to make sure when the funds come available I am ready. I have seen that you have some pretty good knowledge of the KC market. Would you not consider 64134 (Ruskin Heights area) a C neighborhood?
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Mike D'ArrigoPro Member
Turn key provider · San Jose, CA · Member since 2010 · 4k+ posts · 3k+ votes
8y
@KJ Miller I would not consider Ruskin Heights a C class area. That is one of the areas in Kansas City that we stay away from. It's a rough and seedy area in my opinion.
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KJ Miller
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Shawnee Mission, KS · Member since 2015 · 15 posts · 7 votes
8y
Thanks @Mike D'Arrigo I am still trying to learn the market. So your insight is great. I don't have the capital to invest around where I live, but am actively looking at trying to get into the game. Just trying to make sure I cover all my bases.
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Mike D'ArrigoPro Member
Turn key provider · San Jose, CA · Member since 2010 · 4k+ posts · 3k+ votes
8y
Originally posted by @KJ Miller:
Thanks @Mike D'Arrigo I am still trying to learn the market. So your insight is great. I don't have the capital to invest around where I live, but am actively looking at trying to get into the game. Just trying to make sure I cover all my bases.
KJ, you don't have to invest in Shawnee Mission to be successful. I would just recommend staying out of the lower end, rougher neighborhoods which I consider Rusking Heights to be.
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Gordon CuffePro Member
Investor · Roseville, CA · Member since 2009 · 1k+ posts · 583 votes
8y
@KJ Milleri would also bet that the house not rent for 900 per month in Ruskin heights. You might want to network with a property manager to get their opinions on rental amounts when evaluating properties . I rented a remodeled 3br in Ruskin heights earlier this year for 800 per month and it took some time. If you look on Zillow rentals , you will see how much homes in a particular zip code rent for .
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KJ Miller
OP
Shawnee Mission, KS · Member since 2015 · 15 posts · 7 votes
8y
@Mike D'Arrigo @Gordon Cuffe Thanks for the advice gentlemen. This site really is awesome.
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Joe SplitrockPro Member
Moderator
Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
8y
@KJ Miller one of the problems with cheap houses like this is CAPEX can be a killer. You are saying it will cash flow $200 per month, which is $2400 a year. If the property is in bad condition, there could easily be $20K or more worth of work needed. The property may not be worth $68K after putting $20K into it. Also if you did put $20K into the property, it would consume 8 years worth of cash flow. Tenants in these types of properties can be very hard on things, so you may find higher than normal repairs to be the norm.
There is no harm in looking at the property. Just make careful note of the condition and decide if future expenses will get in the way of cash flow.

Or more simply put, don;t buy a money pit.
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Dennis M.
Rental Property Investor · Erie, PA · Member since 2018 · 6k+ posts · 9k+ votes
8y
Must be a tough market where you invest because making 800$ a month in a c class area on 50 grand doesnt sound very exciting or lucrative to me .
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Rich Kniss
Rental Property Investor · Kansas City, MO · Member since 2016 · 132 posts · 91 votes
8y
@KJ Miller, I agree with @Mike D'Arrigo that Ruskin Heights is worth staying away from, in particular the "curvey" streets, as I call them. However, I think there are other areas just outside of Ruskin Heights that have some potential, based on my recent tour of the area, but it is street by street. Look at Trulia crime maps and stay in the lighter crime areas if that is the kind of neighborhood you need to start in.
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Andrew SyriosPro Member
Moderator
Residential Real Estate Investor · Kansas City, MO · Member since 2014 · 10k+ posts · 5k+ votes
8y
It could very well be depending on it's location and condition. Some "C" houses, even when occupied) need so much to get up to date (once the tenant leaves) you'll rehab out the equity. What general area is it in?
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Matt Pritchard
Rental Property Investor · Overland Park, KS · Member since 2016 · 205 posts · 85 votes
8y
@KJ Miller congrats on finding that house! Tough luck it might not be "the one"
I'd be happy to bounce numbers around with you. Shoot me a note and we can chat more about some of the numbers you run into with a typical rental and then some county/city specifics.
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Rachel H.
San Antonio, TX · Member since 2009 · 3k+ posts · 1k+ votes
8y
@KJ Miller Before buying, I'd look into the neighborhood and the type of clientele it attracts. That could be one reason the property hasn't sold yet. When it comes to buying properties, it's best to work in communities you feel comfortable with and attracts the type of clientele that work with your personality. Hope that helps!
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Kim Tucker
Flipper/Rehabber · Kansas City, MO · Member since 2011 · 2k+ posts · 712 votes
8y
So an out of state investor who bought a Rukin Heights house back in the day for $110k called us 2 weeks ago. He and his partner are ready to stop managing rentals in KC as this seems to be their only property. He said it needed a bit of work and he wanted to get $40k out of it.
We went to look. It was horrible and I have been in 100's of houses. This one was worth about $10k. He was going to clean it up and dust it off and try to sell it in the upper $40k.
There were 4 or 5 vacant houses on the 3 blocks we drove from the main road to the house.
Renovated and rented houses in Ruskin are selling in the $60k to $80k range, but those sellers are buying them for $10k vacant and repairing with a Band Aid. Not an area we will buy in much either.
64134 is a decent south KC zip code to buy in, but there are a couple of subdivisions to be careful in - Ruskin Heights is one of those.
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Matt Pritchard
Rental Property Investor · Overland Park, KS · Member since 2016 · 205 posts · 85 votes
8y
What @Kim Tucker said. A lot of companies will try to dish out turnkey properties in areas that might have pretty good returns on paper. Or Realtors will push a listing you have no business buying. But you will have a NIGHTMARE of a time trying to offload that to anyone else. Your exit strategy HAS to be part of your evaluation. Your only hope is to find another out of state investor you can turnkey it to.
There are very few people locally who find the headaches involved are worth the return. We know there are areas where you can find returns that are 85%-90% as good with 85%-90% fewer headaches.
If you are looking to buy in KC, and you are not from KC, or even if you are a local who doesn't know a certain pocket inside and out - I highly encourage you to get a 3rd party to help you evaluate the "deals" you are about to marry yourself to.
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James Wise
Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes
8y
Originally posted by @KJ Miller:

So I am looking to purchase my first rental property. I know that typically deals are not found on MLS or Craigslist as these are the "deals" that have made it past all the savvy investors. My question is this though: I have found a house for sale in a solid C or C+ neighborhood that is listed for sale for 48K. Long term tenant already in place. Paying 725 a month. This would easily cash flow around 200$ per month. Market rent in the area for comparable SFH is 800-950 a month. So my question is, should I look into it? Why hasnt this already been gobbled up? Is it too good to be true?
Don't listen to a lot of the "noise" out there. Whoever says that the MLS is just all the deals that savvy investors didn't gobble up is either an idiot or someone trying to sell you something. Almost 90% of all houses that are sold in the US are sold on the MLS. If you want to buy a home you want to go where homes are sold.
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Matthew Irish-JonesBusiness Member
Real Estate Agent · Buffalo, NY · Member since 2017 · 2k+ posts · 2k+ votes
8y
@KJ Miller I have been investing since 2011. I have found both deals on the MLS and off. Some of the best deals I have found have been on the MLS.
They are properties that other investors either overlooked, didn't see the value add, or I was the first to find them and put in a good offer.
There are TONS of deals to be found on the MLS. A good agent will help you sift through them. It wasn't until I was established with a network of people in the industry that I started finding off market deals and having them brought to me.
The key is in the due diligence or value add. If you know the rental market as well as anyone, and you can predict what a place will rent for, you know what you can afford to pay for a house. Many times all of those numbers work out even after a property has been listed on the MLS.
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Rickey Ear
San Jose, CA · Member since 2017 · 7 posts · 1 vote
8y
how do you guys feel about properties just outside of the Ruskin Heights area? For example, the Hickman mills south, just north of 107th?
@Kim Tucker @Matt Pritchard @Rich Kniss @Mike D'Arrigo
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