Yes, it is.
There are still markets in the United States that allow either the beginner investor, or the seasoned expert to invest at low price points in B class neighborhoods.
As real estate prices have generally recovered since the financial crisis, there are still pockets that remain, where if you know what you are doing you can purchase a home for between $60,000 - $100,000 in a solid B class area with infrastructure supporting a tenant and home owner demand (Just ask all of the Midwest folks)
These homes range from 2 bedroom, 1 bathroom all the way up to 4 bedroom, 2 bathroom and even duplexes.
Price sensitivity is important for many reasons. It allows you to diversify into a portfolio of homes as opposed to putting all of your proverbial eggs in one basket.
Be cautious tho as over the years I have witnessed countless investors buying properties in crappy areas, for more than they are worth and being passed on to crappy property management that nickel and dimes them to death (I guess all of those 15% "awesome" paper cap rates and promises of financial freedom aren't that awesome after all...)
This is not just true for real estate deals but life in general (Your "piece of paper" degree does't necessarily dictate success in your chosen profession or your business)
Real life experience is different to what any "piece of paper" says.
In all reality guys it takes time to build financial freedom, and the more you can diversify your risk across multiple properties in your portfolio the less risk you bear in the long run.
I may not be the smartest Aussie you have ever met, however I do understand a few basic rules that I follow on every acquisition I make.
Strength in numbers, cash only, patience, and discipline.
Let's talk about Strength first.
Price point plays a big part of "strength in numbers" as it is safer to acquire 5 homes for a total of $350,000 as opposed to one for $350,000.
What happens if "that one" property goes untenanted for 5 months?
I've seen it happen in some of the best areas and if you think that it won't happen to you, you're wrong.
Real estate is a rollercoaster of a ride and if you're in it long enough, you will see it all.
If you diversify your revenue stream with 5 properties making up your ROI as opposed to just in one, now all of a sudden "that one" vacant property has a far less significance on your bottomline.
I always tell me investors that the party starts after property #7 as that is when you start replacing the national income average through cashflow generated by your portfolio.
Why cash only?
Easy- As interest rates rise the cost to borrow becomes more expensive. Therefore your overall rate of return spread becomes far less. Is it really worth the hassle to borrow at 6% and net out 9% on your turnkey/investment property? I think there are far easier opportunities in the market (non real estate related) that can get me a measly 3% net rate of return (You might as well leave the money in the bank or buy a treasury bond which is much less risker and hassle free than owning real estate)
Lastly Patience & Discipline
Purchasing your first property, or even adding to your portfolio only happens when its right for you and nobody else. Understanding your end goal and building a plan to achieving it is far more important than the idea or thought of just buying one property.
I suggest finding the right people and putting together a long term plan of attack.
There isn’t one magical property, or investment that will not have its ups or downs.
Safety comes in numbers and every property you buy needs to get you a step closer to achieving your end goal.
- Focus on the fundamentals of the deals and the numbers within them
- Under estimate your income and over estimate your expenses
- Forget about capital appreciation
Thanks for your attention and I"m looking forward to hearing your thoughts
Your favorite Aussie