do you prefer cheaper, or more expensive properties?

Question

in our area, there seems to be a good amount of "cheaper" (75-90k) houses that are nice and new.  Is this a more desirable price range for you all to buy then hold in order to rent?  Or do you like to go with the 200k+ mostly?

David Albertson · Answer

$1000 / 2 = $500 <------ Have to figure your expenses.

$500 - $100 = $400 <------- Subtract your cashflow.

$60,200 for 30 yrs @ 7% = $400.51  <----- The most you could pay for a property that rents for $1000.

Somebody feel free to correct me if I'm wrong.

Bartstop

Mr Tau · Answer

I always prefer cheaper property, cheap maintenance, steady return, i.e. Purchase at 60k with 10% down, rent at 500 <-> 550 .

Michael Rossi · Answer

Post the numbers and I'll show you why!

Mike

Michael Rossi · Answer

Wheatie already explained why that is a loser in the other post.

Mike

Jason Schmidt · Answer

really?? why not???  when i say new, i mean newer than 2000 :)

Jason Schmidt · Answer

numbers of price of the house and such?  Well, lets say the house (the one I was looking at) is 75k and i say i can rent for 1000.  Or am I missing something?

Michael Rossi · Answer

New properties will almost NEVER cash flow - NOT EVEN CLOSE!

Mike

Jason Schmidt · Answer

these are actually new, which is what intrigues me so much :)

Frank Adams · Answer

You have to strike a balance between the better financial returns of lower priced houses, versus the more intensive management they require. To an investor this is the "risk/reward" ratio.

I always went with "lower" priced properties. Not ghetto, but lower middle classs, working class if you prefer. You can reduce your risks by being selective in your tenant choice and (something that really helped me) requiring a minimum two year lease. People that are stable enough to commit to two years will be way less trouble than those who won't.

all cash

Michael Shadow · Answer

Personally I prefer the older cheaper houses.  If your going to hold them as rentals they cash flow much better, however there usually are more maintenance and repair cost associated with them.  In our area the difference in rent is only about 15-20% vs a 100-150% difference in purchase price.  If you buy that older home in the right area and do a little work to it you can usually close the gap on the rent difference by another 5-10%.

On the older houses though you need to know what you are looking at as far as the structure of the building and the mechanics (plumbing, electrical, heat).  If you miss something then it can end up costing you big time.

-Michael