Anyone out there specializing in under 30k properties?

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Anyone out there specializing in under 30k properties?

Douglas B.
Buffalo, NY · Member since 2014 · 82 posts · 75 votes

I'm looking to form a networking group of people who specialize in under 30k properties for cash flow. I propose we share ideas to help each other maximize our success!

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Elizabeth S.
Real Estate Investor · Fort Wayne, IN · Member since 2013 · 168 posts · 78 votes
12y

I buy houses in the $18,000-$23,000 range, typically put $3,000-$5,000 in them and then rent them for $650 a month. @Matt R. is right about the roof and furnace, they are profit delayers.

The key is to know the area or work with someone who does.

There is more to investing in any house than just working the numbers ahead of time to see if it will have positive cash flow and those are the factors that will kill you.

1. Contractors that you can trust, that do the job correctly and go above and beyond for you since you're not around.

2. A property manager who can rent the house to good people and make sure they are holding up their end of the contract.

People who buy expensive houses have the same issues, their tenants just drive nicer cars. It's all a process, just jump in and learn the lessons good and bad.

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  • Richelle T.
    Rental Property Investor · Columbus, OH · Member since 2014 · 340 posts · 111 votes
    11y

    Great question @Gary Dezoysa 

    I'm working with my first private investor and the smaller sum) was actually in line with what he wants. It's his first time lending also so he didn't want to tie up too much money. I think the smaller sums could be attractive to more people. 

    I have not refinanced yet but I have a few small credit unions that have verbally been willing to refinance at 75-80% LTV

    0Reply
  • Sheryl Griffin
    Investor · AZ · Member since 2014 · 130 posts · 64 votes
    11y
    @Gary Dezoysa:

    1. Are banks typically willing to refinance $30,000 homes? What LTV can be reasonably expected?

    2. Who's been successful attracting private money? Are the investors happy to loan the smaller amounts we're working with, or does it create objections?

    I've had best luck with small credit unions, too, on small loans, refi's.  Depending where the $30K home is and condition, it should not be a problem, ie:  homes where $25K - $40K is a typical purchase price like some areas of the midwest.  

    Attracting Private Money can be done in a number of ways by attending local REIA's and networking. If you've done a deal before or have a partner who can share the deal they've done as your "example" of past work, put it together and present to the potential investor showing them what they stand to get out of the deal. What's in it for them? 

    0Reply
  • Dawn AnastasiPro Member
    Rental Property Investor · Milwaukee, WI · Member since 2013 · 6k+ posts · 4k+ votes
    11y
    Originally posted by @Sheryl G.:

     The most important things in it for them:

    1. They don't have to invest a lot of money.

    2. They can get a return on their investment.

    3. If you've done deals before, and have a proven track record, it's a safer bet than someone who's new to the game and doesn't know what they are doing.

    Podcast Guest on Show #29
    1Reply
  • Ben Stout
    Real Estate Investor · Pensacola, FL · Member since 2012 · 136 posts · 83 votes
    11y

    Hey dudes, 

    I've enjoyed reading all 15 pages of this convo! I think I represent a group that hasn't been heard from yet: 

    I started in properties around the $100k mark... and gravitated toward this market... and these are the only type of properties I'm super interested in anymore. I guess that runs completely contrary to what a lot of people feel. Let me discuss why: 

    1.) The properties I go for tend to have awesome features like Art Deco style built-in bookshelves, hardwood floors which are very cheap to maintain and keep looking good, higher grade building materials, and overall better craftsmanship. My first house was a cookie-cutter track home and it has had numerous problems despite my paying entirely too much. Older homes often times have more character and are in neighborhoods with other cool, older homes. Call me crazy, but I just think claw-foot bathtubs and high ceilings are awesome. Fortunately many tenants agree. 

    2.) Bang for the buck. @David Beard Yes, I've been doing this for well over 5 years. The ROI is insane when compared to my more expensive properties. Proper tenant screening and regular maintenance alleviate 99% of my problems.

    3.) Depreciation recapture. If you're going to 1031 exchange your properties later on down the road, it's easy to point towards depreciation as a major part of your strategy. If you are buying lower-end houses, you may find that you prefer to not have as much depreciation recapture to deal with at a later point. Higher end financed houses with a lot of depreciation I consider to be almost doubly leveraged. 

    4.) Carrying costs. I love not having to fret about vacancies in my low-tax, low-cost insurance, high-demand rental market. 

    5.) Free money. The more astute BPers get into hard-money loans, big dollar deals, etc. I do a lot of small deals. For example, I bought a house for $25k with an ARV of $60k. The bathroom floor had fallen through. I had it up and running for $30k, refinanced it for $40k, took the $10k tax/interest free and the house still cash flows $460 a month plus prinicipal of $50/month (increasing month to month of course.) I like these kinds of setups.

    6.) Despite being able to sometimes work deals like #5, I hate dealing with financing.  

    Ben

    3Reply
  • Account Closed
    Denver, CO · Member since 2014 · 7 posts · 5 votes
    11y

    @Ben Stout 

    Like you, I've finally made my way to the last page of this great thread.  Unlike you I'm at the start of my real estate journey.  I have been looking at properties in Florida but all I can find under $30K are either in inner city war zones or depressed rural areas with high vacancy rates.  What areas are you finding your deals?  Perhaps more importantly how do you find areas in which to look?  Thanks in advance.

    1Reply
  • Ricardo S.
    Investor · Charlotte, NC · Member since 2014 · 117 posts · 32 votes
    11y

    have you checked econohomes or ********** ?

    they have all kinds of deals

    1Reply
  • Edward Briley
    None · Virginia Beach, VA · Member since 2014 · 126 posts · 50 votes
    11y
    Originally posted by @Account Closed:

    @Ben Stout 

    Like you, I've finally made my way to the last page of this great thread.  Unlike you I'm at the start of my real estate journey.  I have been looking at properties in Florida but all I can find under $30K are either in inner city war zones or depressed rural areas with high vacancy rates.  What areas are you finding your deals?  Perhaps more importantly how do you find areas in which to look?  Thanks in advance.

     The truth is that sub $30,000 properties are found all over, and even in your own backyard.  The thing is that many that are looking for these properties think that they can buy one in million dollar, or upscale neighborhoods.   This is not likely to happen.  The "Dirt, Lot, Land" or whatever you want to call it, is worth much more than $30,000 in these neighborhoods.  You describe many of the neighborhoods is "war zones" or "depressed rural areas".   Believe this or not, either may be a good investment.  Furthermore, if you are investor, who is going to clean up these areas?  Who is going to bring an economic future to these areas?   Investors, that is who does it.  So, when you see these distressed properties, you have to think, "What can I do to make this area better?"  And of course, how much would it cost me, and how much time will it take?  Check out the comparables, and the assessment values of these properties.   You have to know everything.  You may be surprised that many want to live in these communities, and are looking for a good home deal.   The worst thing an investor can do is put lipstick on a pig.  When I buy a distressed, single family, I expect to put at least another $30,000 into the property to make it desirable to a buyer.   $30,000 profit for a $60,000 investment is a good return.  Matter of fact, $30,000 profit is even great for $100,000 investment if you can do it in within a years time.  Time is money.  If you expect to double your money on a real estate  investment, it is not likely to happen in a short length of time.  How do I flip a property?   I pay cash for the property and use Visa, M/C, Lowes and Home Depot credit to get the job done.  Many smaller businesses give me a credit line up to $10,000 for 90 days, at which time I pay off with a major credit card.  (Hint: It saves on credit card interest).  It helps them and helps me also.  If I sell the property before the 90 days I pay them off in cash. 

    2Reply
  • Jared K.
    Real Estate Investor · Somerset, KY · Member since 2011 · 211 posts · 64 votes
    11y

    I have dealt with quite a few of these properties myself over the years. There are some areas these homes are very lucrative and well worth picking up and some not so much. As long as a person has the right people in place to manage them you can make a lot of money with them and they can make excellent rentals. Just expect that most of your buyers, if you wholesale them, are going to need to be cash buyers b/c banks do not like financing under $50K homes. I would be interested in networking as well.

    1Reply
  • John Moore
    House Flipper · East Stroudsburg, PA · Member since 2013 · 1k+ posts · 205 votes
    11y

    Include me in your networking group.   We flip houses and enjoy working in this price range .

    0Reply
  • Jerry PadillaBusiness Member
    Lender · Rochester, NY · Member since 2014 · 3k+ posts · 1k+ votes
    11y

    This is a really great thread! I am glad to see so many people have success with sub 50k housing as there is so much negativity sometimes on these price points. I just also wanted to let everyone in this thread know that financing is available for this price point. It can be difficult to obtain, but lenders are out there offering financing. 

    [email protected]585-204-6923
    PrimeLending 4.8583 Reviews
    WebsiteView Page
    2Reply
  • Brandon Barnic
    Flipper/Rehabber · Horseheads, NY · Member since 2014 · 64 posts · 10 votes
    11y

    @adam Austin  check this out

    0Reply
  • Account Closed
    Real Estate Investor · San Antonio, TX · Member since 2014 · 785 posts · 190 votes
    11y

    Our entire business is distressed properties. They WERE all under 50k a year ago, now 55k-60k is about the top end. We have done very well with seller financing distressed, affordable homes in our market. Not only do they make us and our investors good cash flow. They also allow hard working, blue collar families to stop renting and own a home. Most of our buyers fix the houses. We follow Dodd Frank rules in underwriting all loans, FMV is charged to the end buyer and nothing more.

    I love distressed real estate! :)

    0Reply
  • Account Closed
    Real Estate Investor · San Antonio, TX · Member since 2014 · 785 posts · 190 votes
    11y

    Here is a blog post I wrote on BP. A really good success story that resulted in the investor making 12% ROI no maintenance, and the end buyer has a house of his own:

    http://www.biggerpockets.com/blogs/6215/blog_posts/42622-how-we-owner-financed-a-junk--20-000-house---12-cap-rate

    0Reply
  • Crystal James
    Real Estate Investor · Townsend, DE · Member since 2015 · 4 posts · 1 vote
    11y

    I typically search for properties under $30K to try to make quicker cash deals up front to finance on the back end with equity loans if needed for later projects.... In my area it takes about $20K to get them liveable tho... So it keeps me within a 50K range.

    0Reply
  • Rod F.
    Investor · Rosebud, AR · Member since 2014 · 133 posts · 49 votes
    11y

    30k area is where I spend my investment dollars now. currently buying two this month. hoping to invest less than 6 k in each. going to be close on both of them. been doing the no money down for 9 years now. Buy and hold has been my strategy. Started moving IRA moneys last year. May take 3 months to buy a deal, but I wait and jump as soon as I see it.

    1Reply
  • Nikki Robinson
    Investor · Valdosta, GA · Member since 2015 · 187 posts · 112 votes
    11y

    I've thoroughly enjoyed reading this whole thread. I'm located in south Georgia, right above the Florida border. Sub 30k deals (all-in) are to be had all over. My first accepted offer as an investor was actually on a 3bd/2ba, 1466 sqft house in a B neighborhood (clean street, well maintained lawns, less than ten year old cars in driveways, close to above average schools, low crime) - only $8000. That's a lot of room for rehab and still coming in under $30k. A 3bd/2ba easily rents at $650+ in the area. ARV $50+ (closer to $55k+ but I like to keep my numbers conservative - under promise and over deliver).

    I wholesale for now & do a pretty good job of finding these kind of off-market sub30k deals. But I can't wait until I've built up the cash reserves to start buying, rehabbing and holding my own. I'm not shying away from being a long distance landlord either.

    4Reply
  • Account Closed
    Santa Clara, CA · Member since 2015 · 66 posts · 28 votes
    11y

    I am not able to hit 30k in my markets anymore, not where I want to buy anyway! But I think buying affordable homes and making them livable is a good business model that often is good for the community too. 

    2Reply
  • RJ CoxPro Member
    Real Estate Broker · Duluth, GA · Member since 2015 · 26 posts · 9 votes
    11y

    @Pyrrha Rivers - your strategy  can work in DeKalb County, Georgia. I have sold many houses in that area. The caveat is the fact that you're distant. While I offer my clients plenty of photos and even video of the property, nothing beats getting your own eyes and ears on a property and neighborhood (trust but verify; just because I think it's a good deal for you doesn't mean that you share my opinion - and it's YOUR money at work). 

    Maybe you can set up a mini-vacation where you can take a tour of some target areas with an agent. Some 30k properties are in decent working-class neighborhoods and others you will prefer to keep driving past ... the comps and Google street view don't tell the whole story.

    2Reply
  • Daniel Mohnkern
    Investor · Titusville, PA · Member since 2015 · 298 posts · 150 votes
    11y

    I would assume that most of us here have under 30,000 properties. That would take a lot of managers.

    0Reply
  • Red Brown
    Real Estate Investor · Pryor, OK · Member since 2015 · 46 posts · 12 votes
    11y

           When I count up what gets to stay in my pocket at the end of the month under 30k works for me,

    All mine are in small towns or rural.

    0Reply
  • Ben Stout
    Real Estate Investor · Pensacola, FL · Member since 2012 · 136 posts · 83 votes
    11y

    There was somebody on here before who asked if there was anyone who had been doing this long term that could comment. After doing my 2014 taxes and looking over all my spreadsheets, etc... I noticed a trend that carried over from last year and the year before: 

    Proforma ROI for these Sub $30k properties is usually around 25%. I usually end up getting around 20%, but with 1 out of every 5 suffering an eviction or other issue that brings its ROI down to 5%. This pulls down the average, but we're still talking 17% for the group of 5 vs around 10-12% for more upscale properties.

    Note: This does not involve leverage. If the higher-valued houses were leveraged, it would of course create a similar return in a good year, but a much worse return in a bad one. I'm also still not convinced that the flaw is with the business model itself and not a property management-related issue.  

    1Reply
  • Priti Donnelly
    Kitchener-Waterloo, Ontario · Member since 2015 · 85 posts · 28 votes
    11y

    I see that pretty much everyone in this discussion is located in the U.S. and likely looking for opportunities in the U.S. However, I thought I would mention that there is a trend right now of buying properties in Japan because of the weak yen against the dollar, ¥123 to US$1. Prices are highly affordable (in the range of the posts in the discussion) with high yield, and a nice monthly cashflow. 

    Might be worth looking into. Here is an article with more information - http://nippontradings.com/japan-real-estate/foreig...

    1Reply
  • George Calbert
    FPO, AP · Member since 2015 · 120 posts · 19 votes
    11y

    where are you at in Japan. I live in Yokosuka area. 

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  • Account Closed
    Professional · Jacksonville, FL · Member since 2015 · 397 posts · 34 votes
    11y
    Originally posted by @Douglas B.:

    I'm looking to form a networking group of people who specialize in under 30k properties for cash flow. I propose we share ideas to help each other maximize our success!

    Clarification.. is the referenced $30,000 total cost (purchase & repair) or just purchase? Trying to respond to some of your questions here (in this section), may be considered a form of deal making. :)

    0Reply
  • Pyrrha Rivers
    Investor · Yokosuka, Japan · Member since 2014 · 631 posts · 184 votes
    11y
    Originally posted by @Priti Donnelly:

    I see that pretty much everyone in this discussion is located in the U.S. and likely looking for opportunities in the U.S. However, I thought I would mention that there is a trend right now of buying properties in Japan because of the weak yen against the dollar, ¥123 to US$1. Prices are highly affordable (in the range of the posts in the discussion) with high yield, and a nice monthly cashflow. 

    Might be worth looking into. Here is an article with more information - http://nippontradings.com/japan-real-estate/foreig...

     Has anyone out there, especially folks currently in Japan done any deals or due diligence on this company? 

    I made some preliminary inquiries, however their properties are in areas of considerable distance for me so I have not yet taken one of their tours or further my personal due diligence but plan on doing so upon my return from the US.

    0Reply
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