Central Illinois BRRR

[Scott Anderson]

I purchased my first SF rental in the spring of 2019. It was a foreclosure in a town of around 15,000 people. The home was a 3 bed 2 bath with a hole in the roof, missing flooring, and general neglect. They were asking for $28,000 and I was able to negotiate the price down to $24,000. Using a local bank to obtain a construction loan I was able to get a loan for $34,000 at 5.5% to finance the purchase and have $10k afterward to preform the rehab. The total cost to fix up the house was around $13k, which means I spent around $3k out of pocket when the home was finished. 

I was able to get $675 a month in rent for the property on a 12-month lease.

Mortgage- $246 per month

Insurance- $60 per month

Taxes $1600 per year ($133 per month)

I am not sure if investing in downstate IL is the ideal investment because property taxes are high, the state is losing population, and there is very little appreciation. I decided to invest here because its where I grew up and I know the local real estate market and I was able to get my first deal with low money down. I currently have 2 rentals in my hometown. 

I want to get advice for my next step. Should I continue to invest in my hometown given that the numbers work for cash flow, I have established connections, and I know the market? Or do you recommend that I look to invest out of state in areas with population growth and better appreciation?

Please let me know what you would do in my situation?

[Scott Dixon]

Hey @Scott Anderson

Good work on taking action and getting the first 2 rentals under your belt.  I feel your pain and often think through a similar scenario of continuing to invest in Illinois or focusing on areas outside of Illinois with net population growth, lower property taxes, and possibly a little less of a winter.  I personally value investing in properties close to where I live.  This is primarily because I still do the property management and about 50% of the maintenance.  

Couple question to get a little more information on your situation:

1)  Do you still live in your hometown or at least close?  

2)  Are you managing these properties yourself?  

3)  Do you already have a network of professionals in the area (Plumber, Electrician, Carpenter, Roofer, etc.)?

4) Is the MLS the only source of your hometown deals?

Let me know the answers to the questions above and I will give my 2 cents on next steps.

All the best,

Scott