Newbie investor interested in sub 30k markets

Steve Kordish

Flipper · Holiday, Florida (FL) · Member since 2015 · 94 posts · 24 votes

10y

Welcome Jeff! The $30K niche can pay off, and since you mentioned you're a contractor (GC?) you could take on many of those projects some don't want to tackle! Go for it man.

Dmitriy Fomichenko

Solo 401k Expert · Anaheim Hills, CA · Member since 2012 · 18k+ posts · 6k+ votes

10y

@Jeff Parkin

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Scott England

Rental Property Investor · OK · Member since 2015 · 316 posts · 216 votes

10y

Jeff

Not that you couldn't make good money in that segment, but it's not necessarily an easy one. Turnover is typically very high and so will the management fees (relative to rent rate). I live, and invest, in one of the least expensive markets in the country (oklahoma) and even here 30k doesn't get you much.

28k in capital isn't a bad place to start. Have you considered using the 30k as down payments on, say, two 60k properties? Just a thought.

2 Reply

James Wise

Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes

10y

@Jeff Parkin

Welcome to the site.

If you can swing it I would recommend taking the 28k and use it as down payments for a couple properties.

Principal paydown is one of the most overlooked benefits of owning rental property.

2 Reply

Rhett TullisBusiness Member

Property Manager · Oklahoma City, OK · Member since 2013 · 1k+ posts · 617 votes

10y

i cash flow every month in the sub 30k market. All of my rentals (except one) are in that price range and I really prefer that part of the market. Tenants really appreciate even the little things you do and if you make your place the nicest one on the block they will stay a looonnnggg time. I have never had any issues turning a profit on my low end properties but it is certainly not for everyone.

Integrity Oklahoma

Jeff ParkinPro Member

OP

Laguna Niguel, CA · Member since 2015 · 38 posts · 19 votes

10y

@Marci Wilson Thank you, I'm pumped to get started! And good luck to you as well!

@Steve Kordish Nope, not a GC. Boy would that come in handy though! I'm currently an independent contractor (Uber Driver). I mentioned being a contractor because as I understand it, it's difficult to procure traditional financing when you file taxes using 1099's.

Jeff ParkinPro Member

OP

Laguna Niguel, CA · Member since 2015 · 38 posts · 19 votes

10y

Originally posted by @Scott England:

28k in capital isn't a bad place to start. Have you considered using the 30k as down payments on, say, two 60k properties? Just a thought.

I'm not opposed to that idea at all. I still need to do some research on financing methods though to see what my options are. I currently work as an independent contractor, and write off just about everything as business expenses, which leaves my adjusted gross income at next to nothing, making it hard to qualify for traditional financing. On top of that, I had to close a business as a result of the recession and it has left my credit in poor condition. I figured in order to get into the game i'd have to be a cash buyer, or look at creative financing options (ie. seller financing, etc.) I'm all ears however, if you have suggestions!

Brian Lacey

Rental Property Investor · Hailey, ID · Member since 2015 · 218 posts · 143 votes

10y

http://justaskbenwhy.com/2015/10/05/how-to-make-mo...

Just read this today from Ben Leybovich. Ought to give you a slight insight into one way to go about handling that class.

You'll find that the 30k props are either a love 'em or hate 'em discussion.

Jeff ParkinPro Member

OP

Laguna Niguel, CA · Member since 2015 · 38 posts · 19 votes

10y

Originally posted by @James Wise:

@Jeff Parkin

If you can swing it I would recommend taking the 28k and use it as down payments for a couple properties.

Principal paydown is one of the most overlooked benefits of owning rental property.

I'd love to, but as I mentioned above to Scott... I'm not sure I'd be able to pull that off because my credit isn't so great and I currently work as an independent contractor therefore my adj. gross is extremely low after taking all the deductions allowed by the tax code. I'll have to do more research on my financing options to see if it's a viable option.

Marci Wilson

Investor · Oxnard, CA · Member since 2015 · 17 posts · 2 votes

10y

You could also partner with another investor & Use private money as long as you both have something to bring to the table to make it happen. It's a place to start. You have some money, credit isn't necessary and they are doing rehab loans in California. Just a thought.

Anthony Alexander

Agent/Investor · Baltimore, MD · Member since 2015 · 26 posts · 3 votes

10y

Greetings Jeff, If you have good property management there are plenty opportunities in Baltimore city. It may be hard being though your all the way in Cali managing the contractors.

Jeff ParkinPro Member

OP

Laguna Niguel, CA · Member since 2015 · 38 posts · 19 votes

10y

Originally posted by @Rhett Tullis:

i cash flow every month in the sub 30k market. All of my rentals (except one) are in that price range and I really prefer that part of the market. Tenants really appreciate even the little things you do and if you make your place the nicest one on the block they will stay a looonnnggg time. I have never had any issues turning a profit on my low end properties but it is certainly not for everyone.

Great advice Rhett, thank you! I may hit you up in the future if you don't mind as I'm defintely leaning toward going the sub 30k route!

Jeff ParkinPro Member

OP

Laguna Niguel, CA · Member since 2015 · 38 posts · 19 votes

10y

Originally posted by @Brian Lacey:

http://justaskbenwhy.com/2015/10/05/how-to-make-mo...

Just read this today from Ben Leybovich. Ought to give you a slight insight into one way to go about handling that class.

You'll find that the 30k props are either a love 'em or hate 'em discussion.

Thanks Brian, that was a good read! As rental prices have gone up the past several years I think those with section 8 vouchers take them more seriously now and don't want to jeopardize losing access to the program. And yeah, as I've searched around on here I've definitely seen the love vs. hate on sub 30k properties. They don't scare me though. I actually like the idea of being part of improving a community one property at a time.

2 Reply

Brian Lacey

Rental Property Investor · Hailey, ID · Member since 2015 · 218 posts · 143 votes

10y

Originally posted by @Jeff Parkin:

Originally posted by @Brian Lacey:

http://justaskbenwhy.com/2015/10/05/how-to-make-mo...

Just read this today from Ben Leybovich. Ought to give you a slight insight into one way to go about handling that class.

You'll find that the 30k props are either a love 'em or hate 'em discussion.

Thanks Brian, that was a good read! As rental prices have gone up the past several years I think those with section 8 vouchers take them more seriously now and don't want to jeopardize losing access to the program. And yeah, as I've searched around on here I've definitely seen the love vs. hate on sub 30k properties. They don't scare me though. I actually like the idea of being part of improving a community one property at a time.

Happy to help. I'm in the same boat as you, I like the idea of investing in that class. I think that with the proper expectations, maintenance reserve, and approach, that sub 30k market can be a real great asset.

Jeff ParkinPro Member

OP

Laguna Niguel, CA · Member since 2015 · 38 posts · 19 votes

10y

Originally posted by @Marci Wilson:

You could also partner with another investor & Use private money as long as you both have something to bring to the table to make it happen. It's a place to start. You have some money, credit isn't necessary and they are doing rehab loans in California. Just a thought.

The partner thing intrigues me as well as scares me a little, but I think thats because I'm still a newbie. To clarify, when you say that "credit isn't necessary" do you mean the potential partner bringing their good credit to the table? Or are the rehab loans you mention more forgiving when it comes to credit?

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Jay HinrichsBusiness Member

Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes

10y

@Jeff Parkin are you going to relocate to those markets? then invest

or are you going to try to stay in Socal and buy these and be a cross country landlord.?

sub 30k can work for those that live there and stay on top of them like a hawk

the feel good part is fine in theory until your unit gets trashed.

So depends on where your going ot live... you do this from across the country and you stand at least a 50% chance of losing money and significant money.. 30k rentals homes if that's what your paying for them rent ready.. trade as pre rehab about 3 to 5k per house. that's what your property will be worth if you are unlucky and get a tenant that trash's it.

so your savings is gone and never coming back.

Personally buying non appreciating tough to manage assets is the last thing I think someone in your position should do.. you don't make a enough money at it to make it even remotely worth the risk in my mind..

As for alternatives. I would put time and energy into learning about notes. I would follow some of the crowd funding portals that will start to allow non accrediteds and then be choosy as to who you invest with.. I would look at more of fix and flip type transactions to get you nest egg built up..

buying low end rentals can be good I have clients that I fund in this space that own hundreds of them.. But that's the operative word hundreds of them.. to only own one or two in my mind is as the end of the day going to bust your RE bubble.

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3 Reply

Marci Wilson

Investor · Oxnard, CA · Member since 2015 · 17 posts · 2 votes

10y

Rehab loans are equity loans. The ARV is the qualifier. The problem most new investors have is money to get into a deal. That's not a problem for you.

Jeff ParkinPro Member

OP

Laguna Niguel, CA · Member since 2015 · 38 posts · 19 votes

10y

Originally posted by @Anthony Alexander:

Greetings Jeff, If you have good property management there are plenty opportunities in Baltimore city. It may be hard being though your all the way in Cali managing the contractors.

Thanks Anthony! Being an out of state investor will definitely have its challenges I'm sure! Assembling a great team, including PM will be a must! I've been looking at Baltimore City a lot! I'm drawn to the row houses for some reason, haha! And from what I've heard, the payouts can be great if it's the right property. With the flexibility of my current job, I would try to time it right so i could be there during the rehab.

Logan Hicks

Business Owner/Investor · Millersville, MD · Member since 2015 · 191 posts · 71 votes

10y

@Jeff ParkinIm actually in the Baltimore area Jeff, and its one of my primary purchasing areas. Im more than happy to work with other investors to purchase properties, especially since there are so many to buy. Baltimore is practically drowning in opportunity, if you live in the area, and know it well enough.

As for detroit, its not worth the propane Id use to torch the houses to the ground. Definitely avoid it in my opinion.

Jeff ParkinPro Member

OP

Laguna Niguel, CA · Member since 2015 · 38 posts · 19 votes

10y

Originally posted by @Jay Hinrichs:

@Jeff Parkin are you going to relocate to those markets? then invest

or are you going to try to stay in Socal and buy these and be a cross country landlord.?

sub 30k can work for those that live there and stay on top of them like a hawk

the feel good part is fine in theory until your unit gets trashed.

So depends on where your going ot live... you do this from across the country and you stand at least a 50% chance of losing money and significant money.. 30k rentals homes if that's what your paying for them rent ready.. trade as pre rehab about 3 to 5k per house. that's what your property will be worth if you are unlucky and get a tenant that trash's it.

so your savings is gone and never coming back.

Personally buying non appreciating tough to manage assets is the last thing I think someone in your position should do.. you don't make a enough money at it to make it even remotely worth the risk in my mind..

As for alternatives. I would put time and energy into learning about notes. I would follow some of the crowd funding portals that will start to allow non accrediteds and then be choosy as to who you invest with.. I would look at more of fix and flip type transactions to get you nest egg built up..

buying low end rentals can be good I have clients that I fund in this space that own hundreds of them.. But that's the operative word hundreds of them.. to only own one or two in my mind is as the end of the day going to bust your RE bubble.

Thanks for your comments, Jay! No, not relocating. But my current job does allow me the flexibility of being able to take spontaneous and/or longer planned trips. If I do go the sub 30k route, I wouldn't just be doing a couple properties. I'd be going all in and expanding my portfolio each year with as many properties as possible. Regarding note buying, I'll admit that I don't know a lot about that business model, but I'll definitely look into it as a possibility. At this point I'm not going to close my mind to the possibility of anything and after weighing all my options will make the choice that suits me best. Not to say that if I don't do something now, that I may not do it later. But I will try making the most informed decisions possible and appreciate your comments and concerns! Much appreciated!

Aaron Mazzrillo

Investor · Riverside, CA · Member since 2011 · 2k+ posts · 3k+ votes

10y

Originally posted by @Jeff Parkin:

From what I’ve gathered thus far, the sub 30k market looks to be the best place for me, and since those properties don’t exist in California, I’ll be looking to invest out of state in places like Baltimore, Atlanta, Detroit, etc.

Sounds like death by 1,000 paper cuts. I'd rather do one $100K deal than five $20K house deals. There just ain't no profit in a house worth less than a car.

Instead of wasting your time walking on the beach, walk through some neighborhoods. Find a dump (they are every where, you just aren't looking) knock on the door / mail them a letter, don't quit connecting with them until they either die or sell the house to someone else or yourself, then assign the contract or bring in a money partner to flip it. You'll make more money and have a more fulfilling career in real estate than buying some dump 1,500 miles away that won't make you enough money to pay your rent for one month down there in South OC.

Account Closed

Investor · Singapore · Member since 2013 · 1k+ posts · 3k+ votes

10y

@Jeff Parkin Out of state investing is for people with significant cash but limited time. Sub 30 K is for very local investors with no money but lots of time. You dont seem to fall into either of the two buckets. I suggest another plan..

[email protected]405-283-6522

Rhett TullisBusiness Member

Property Manager · Oklahoma City, OK · Member since 2013 · 1k+ posts · 617 votes

10y

Sub 30k properties owned out of state and well managed are clearly profitable. If they are poorly managed (as with any price class) they will of course lose money. You are all right in that the amount of rent collected per unit is less than in 100k plus properties but if you are looking at cash on cash return or reaching the 2% rule the best way to do it is sub 30k properties. I meet with folks weekly that are leveraged in 100k plus properties and only clear $100 per month per unit and folks that own 30k properties and clear $300 plus per month. If done correctly you can/will turn a better profit in sub 30k properties (unless you are investing for appreciation then you need to look at another model/plan or maybe consider some powerball tickets :O) )

Integrity Oklahoma

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4 Reply

Jay HinrichsBusiness Member

Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes

10y

@Rhett Tullis all well and good and since that is your space were you earn money I can see your bais.. but how does someone I LA SCALE this.. were are loans for these. Do you also have lenders that will do 70 to 80% LTV or LTC on sub 30k purchases.? and or will do them for someone with NO track record.. just starting out who has limited capital.

this is were newer undercapitalized investors get sucked into this vortex.. I have seen it hundreds of times... the desire for some reason to do real estate then buy the most challenging asset there is ..

unless your in a market like So cal or west coast were you have a chance at apprecaitation then buying rentals is a fools errand.. UNLESS you can scale it big time by big time I mean 10 to start with a goal of 100 plus units.. the 300 a month you talk about over time in reality is never that.. but lets say its 150 which could be realistic once you have cycled through mechanicals and other things that pop up... 10 houses gets you a whopping 1500 a month.. most folks blow that before they even know they made it... one needs a method to get to something in the 10 to 30k a month cash flow game..and in 30k rentals with no leverage ( normally maybe you have this magic lender) that requires a boat load of cash. and with that amount of cash there are far better things to invest in than 30k rentals out of state.

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