Anyone out there specializing in under 30k properties?
Buffalo, NY · Member since 2014 · 82 posts · 75 votes
Anyone out there specializing in under 30k properties?
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Real Estate Investor · Fort Wayne, IN · Member since 2013 · 168 posts · 78 votes
12yI 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.
540 Replies
- Real Estate Investor · StL, MO · Member since 2008 · 294 posts · 152 votes12y
Higher turnover? Currently, 5 out of my last 6 tenants that could have, have stayed longer than a year (9 properties total-3 purchased in the last year). I didn't renew number 6's lease after a year even though they wanted to stay because even though they paid, they were a pain in my butt and were 'schemers' having different charities pay their rent because he didn't want to get a job but still wanted to get high every day. He also told me he was an Army veteran and when I pressed him about what he did in the Army, admitted he never made it through boot camp! So I didn't like dealing with them and they couldn't look me in the eye so I told them I wouldn't renew their lease and would take my chance with somebody new. That somebody new will make it 6 out of the last 7 this weekend. Everybody in 5.5 years has stayed at least a year paying the whole time except for one case, (6 months) which was a unique situation and was not their fault-there was an issue with the house that has since be remedied.
Apparently I am talking about a whole different universe of investing than the detractors on this post. For up to 40k all in, mainly $25k-$40k all in, I can find lots of great working class places to buy. These are houses that working people paid $60k-$80k (or more in the bubble) to buy previously that are now foreclosed on. No need to go Section 8 with these properties as there are lots of people with good jobs wanting these houses. I could/would buy lesser/cheaper properties if I wanted to go Sect 8.
I could give you my 3 preferred zip codes and there are currently 70 properties on the MLS for $35k or less in the city of St. Louis. BUT. You would need to know which of those are in decent areas and which are not. On one street that I own a property, on the north end of the zip code, it is good. Then for about 4 blocks it becomes bad, and then becomes a great area after that. Then further south it turns into near junk housing (unsightly neighbors but not necessarily a 'bad' neighborhood) near an industrial area but a few blocks south of that it turns into a rebounding neighborhood with lots of good rehabbing being done. All with the same street name. That is why I highly suggest NOT buying this type of property out of state and not knowing the area. I have signed up with a half dozen + "wholesalers" in town that offer $30k MLS houses for $59k stating that with just $10k of rehab it would be worth $80k and a cap rate of 15%+. Seems to me they want to make a $30k-$40k score per "wholesale" while the buyers are left holding the bag. They can throw out good comps but the 4500 block can be a completely different world than the 4800 block. Makes me wonder if wholesalers or turn-key providers in other areas may not be above board, but I can't speak to that.
You can go to other zip codes in the city and county and you can find tons more properties for sub $30k, but those are more along the line of what people are thinking of for sub $30k investing: section 8 only and war zones.
- Real Estate Investor · Arlington, VA · Member since 2012 · 300 posts · 277 votes12y
@Bob Hines I was nodding my head the whole time you were talking. I think you made excellent moves with number 6 - there are others.
And yes, many of these properties are foreclosures in these neighborhoods.
I also liked what you said about knowing the neighborhood. This is VITAL!!! They're NOT all the same neighborhoods. I came up with a system that CLEARLY analyzes key factors before going in (the information is available on the internet NOW, as it wasn't in the past, so that has helped me even though I am investing long distance). I use a Leveraged Analysis Technique to minimize the likelihood of a lemon. . This has worked 100% for me so far. My main three metrics in this technique is Crime, Photo counts, and Rents :-) You can tell alot about a WCN from those key metrics alone - like if its a warzone or not.
- Developer · Decatur, GA · Member since 2011 · 1k+ posts · 1k+ votes12y
How are you finding your under $30k deals? Word of mouth has been the best way. Once folks have learned my particular interest in a small area ... especially people in the n'hood, I've been getting word of mouth leads.
My under $30k deals have come from:
2 from wholesalers/word of mouth
1 short sale on MLS
1 FSBO/Word of mouth
My finding these deals has more to do with my focus on the specific blocks I want as @Bob Hines and @Lisa Phillips noting than the source itself.
However, I'm thinking direct mail might be my next push. What are you doing to find more under $30k?
Rick
- Real Estate Investor · Arlington, VA · Member since 2012 · 300 posts · 277 votes12y
Hi @Rick Baggenstoss I love your name, by the way!
Personally, I've created a system of searching for these I call the Leveraged Analysis Technique. You're leveraging freely available resources, but you have to do it by the crucial three metrics of CPR (Crime, Photo-count, Rents) -- It just saves you time, money, and that hassle. You can read about it hear, or pm me for more info. Its worked in the 3 states i've purchased in, and from feedback from my vlog, its working for people all over the country!
I will go more into it, but those are main criterias I use because they are the most pertinent for this demographic.
- 12ySharad M.Pro MemberCarlsbad, CA · Member since 2010 · 1k+ posts · 1k+ votes
I agree with @Rick Baggenstoss that word of mouth is one of the best way to get deals done.
Last year I bought 2 houses for $2k each that a local bank was selling. The listing agent who knew I buy a lot of properties in the area called me and asked me if I would be interested in them and I liked them both.
I bought at least 10 houses last year that were going to hit MLS, but I got to look at them first and see if I wanted to buy them.
- Real Estate Investor · Abu Dhabi, UAE · Member since 2010 · 48 posts · 16 votes12y
Lot's of great recommendations for successfully investing in Sub$30k properties! Where were all you guys a few years ago?
When I first started picking these up a few years ago, it was more an experiment than anything else. I was working overseas and knew I would not get back to the US very often. I did not have any W-2 income so I knew conventional loans were out and my own market back in Colorado was much to expensive to buy with cash and the ROI was less than stellar even if I did. So, I started to look for markets where I could buy outright for under 20k and that met the 2% rule.
I eventually picked up, rehabbed, and rented a bunch that I have to this day. All of them are managed by PM's so I have little active participation. Overall, they are definitely a lot more work than my more expensive rentals (at least they are for the PM) but the returns more than make up for it. In fact, several of the properties have already paid back the initial purchase and rehab cost and most will be that way in the next year or two. In addition, I was very,very conservative with my estimates i.e. doubling usual amount for repairs, 16% vacancy, eviction cost every year (luckily only a few hundred dollars), etc.
Looking back, I got some things right and many things wrong. I probably would have had an even better return with many less issues if I had just sent all my money to @Lisa Phillips and had her find me the best locations and values (is that still an option?)
If I could do it over, I would follow the great recommendations in this forum as well as definitely find a local partner who knows the area and the neighborhoods.
Oh, and hire some of my ex-Green Beret buddies to manage the properties and collect the rent...
- Real Estate Investor · Lansdowne, PA · Member since 2013 · 1k+ posts · 656 votes12y
@Douglas Brundin
Ok so we have $30K and under properties in various markets. Plenty hungry customers and much availability. Mostly residual income purchases. Great topic by the way. I'm interested in learning the plan of action here.
Do you take a consensus of the various markets or, for example, most popular 5 markets landlords/owners are looking to buy these properties in and exchange leads to close on them? Is it a barter (fee to be paid for leads that close) or is it an investors pool exchanging leads as favors only? Just wondering where if anywhere is this post actually heading.
Kudos,
Mary
- 12yEngelo RumoraBusiness MemberInvestor · Toledo, OH · Member since 2013 · 4k+ posts · 2k+ votes
Oh, and hire some of my ex-Green Beret buddies to manage the properties and collect the rent...
haha cruising around downtown in a Humvee
Thanks
- Real Estate Investor · Arlington, VA · Member since 2012 · 300 posts · 277 votes12y
@Warren Foster Yes! Email me ;-)
I have to say my lessons learned follow the same pattern (although no need for Green Berets to collect the rent)
@Mary B There is enough room for an organizer to take the lead. Let's make money, ya'll! But the point is to start a discussion on a subject that makes excellent ROI sense, but that people have been hung up on the thought that these were the worst investment ever because of the headaches . I think through our experiences we have now shaped a story that you shouldn't be so quick to discount this highly profitable market, and now more discussions and strategies can be had going around vetting WCNs, which is a lot more helpful than blanket statements of "stay away from THAT neighborhood."
- Investor · Kansas City, MO · Member since 2014 · 52 posts · 9 votes12y
- Cincinnati, OH · Member since 2013 · 292 posts · 81 votes12y
Something to think about in regards to property taxes: fight for revaluation. If the taxes are based on a valuation from bubble times, and you can have them revalued to your purchase price, you've done yourself a great service.
I ended up getting a nice refund check on my first property in that manner, and hope to do the same on the current rehab.
- Residential Real Estate Agent · Cookeville, TN · Member since 2013 · 1k+ posts · 948 votes12y
I wouldn't say that I "specialize" in this price range, but I do have 4 or 5 in this range. The ones that are fixed up pretty well do very good for me, especially when I don't load them up with too much debt. I have one that is a real junker, and it doesn't do so well.
- Investor · Kansas City, MO · Member since 2014 · 52 posts · 9 votes12y
Originally posted by @Ben Skove:
Something to think about in regards to property taxes: fight for revaluation. If the taxes are based on a valuation from bubble times, and you can have them revalued to your purchase price, you've done yourself a great service.
I ended up getting a nice refund check on my first property in that manner, and hope to do the same on the current rehab.Ben, you got a property revalued to your purchase price? Fantastic!
I assume they had to reinspect the property, as well, correct? Did the reassessor come look at the inside? If so, before or after repair?
- Cincinnati, OH · Member since 2013 · 292 posts · 81 votes12y
Originally posted by @William Sumnicht:
Originally posted by @Ben Skove:
Something to think about in regards to property taxes: fight for revaluation. If the taxes are based on a valuation from bubble times, and you can have them revalued to your purchase price, you've done yourself a great service.
I ended up getting a nice refund check on my first property in that manner, and hope to do the same on the current rehab.Ben, you got a property revalued to your purchase price? Fantastic!
I assume they had to reinspect the property, as well, correct? Did the reassessor come look at the inside? If so, before or after repair?
Actually, it was an extremely simple process - just a matter of filling out the paperwork. Others can correct me if I'm mistaken, but I've been told that the auditor here in Hamilton county generally recognizes arm's-length transactions (such as ones listed on the MLS) to be considered an appropriate valuation of the property. However, I'm sure the appraisal will jump a bit on the next go around.
In fact, I just got an offer in the mail recently from a "Tax Appeal Service" regarding my most recent purchase (off-MLS). They're offering to do the tax appeal in return for half of the first year's savings. I'm trying to find out if I'm better off with representation or not in a situation where the property wasn't listed.
- Real Estate Investor · Arlington, VA · Member since 2012 · 300 posts · 277 votes12y
I also just wanted to say i hope the conversation changes. When a new investor asks if there is a 23k house, why is it priced so low when the rents are so high, instead of investors jumping on them for wanting good cash flow, they need to start asking, "What's the crime rate like? What are the rents? What do the photos show, if there is only 1 it may be a dump, but if there are a lot of photos, it could be a gold mine, so hurry up.
THAT is a completely different conversation we were not having here on this site, and that's why I think the discussion should start, its in the nuances. Of course, there are other crucial metrics I use, but those are the major 3.
- Real Estate Investor · Henderson, NV · Member since 2011 · 87 posts · 22 votes12y
Originally posted by @Ben Skove:
Something to think about in regards to property taxes: fight for revaluation. If the taxes are based on a valuation from bubble times, and you can have them revalued to your purchase price, you've done yourself a great service.
I ended up getting a nice refund check on my first property in that manner, and hope to do the same on the current rehab.Amen to that. In Marion County Indiana I did that. The challenge there was the huge backlog of processing the reassessments. Mine took about 2 years but it wasn't so bad considering I got the overpaid amount with 10% interest. The lady at the county just asked me about what I purchased it for, what it was renting for etc that was it. I didn't like the whole rental question thought it should be based upon the value of the property only.
- Investor · Macomb, MI · Member since 2013 · 654 posts · 115 votes12y
Originally posted by @Matt R.:
I would like to add pre screening tenants before closing. Or even before offer. I run test ads first. This will let you know quickly the demand and rental rates and more importantly what type of tenants will be paying your bills. You could also check the PMs which you are going trust but verify.
I definitely want something special or unique with the property from a renters perspective. Cool location, walkable, views, large lot, corner lot, schools etc...something that a renter can't find so easily.
So you essentially lie to people about owning a house to see if it will rent or not? Strange way to invest.
Maybe not intentionally, but its almost like that gives you an excuse to not move forward for fear of failure.
One thing interesting about BP is reading all the different ways people use to decide whether to buy a property or not.
Mine has always been pretty simple. No percentage rules. I have specific property details... 3 bd, 1 bath, garage and/or basement, no warzone, and a total cost of under $30K. Originally the budget wasnt even a consideration because my market was so cheap.
- Investor · Macomb, MI · Member since 2013 · 654 posts · 115 votes12y
Originally posted by @Pyrrha Rivers:
@Elizabeth S. and @David Lee I am trying to get this specific strategy going in DeKalb County, Georgia. I keep hearing from brokers, Realtors and PMs that $30K or under may not be feasible. Well, in addition to my lack of experience, I have yet another hurdle which is extreme long distance. I'm in Japan! I just found out that in addition to not being able to see and touch my prospective holdings, getting money will not be easy. I contacted a lender about getting a HELOC on my personal property which is paid off and although the property is there, I'm a federal government employee with good credit, the answer was that because I am not there they can't help me. I will keep working on that but for now I have to work with what I have which is the $30K and below entry point. Like Elizabet says, I'm jumping in and will learn as I go. Any tips? Can I join this group although I have a great big nothing right now? Willingness to work and learn...I have that! :)Hi Pyrrha. First let me say welcome to starti g your investing venture. The first tip I will give you is to take everything you are hear with a grain of salt and dont take 'No' for an answer.
You will have your ups and downs and get discouraged but if you truly want this you will figure out a way to make it happen.
So with that said, I only want to touch on one thing in your post. No disrespect to Agents but you will not find many agents who will work with you on cheap properties. Remember they work on commission. 3% minus their broker fees doesnt leave them crap on a cheap house. So dont listen to them when they tell you its not feasable.
As you can see from all these posts, lots of us are investing this way. Ive gone through 7 agents in 2 years and I do all the footwork myself. I use them solely for paperwork and still have issues with finding a good agent.
So dont give up. Hit me up anytime if you have some questions. Ill try to help if i can.
- Investor · Macomb, MI · Member since 2013 · 654 posts · 115 votes12y
Originally posted by @Jerry W.:
I am aiming for this market ATM I will follow this thread and maybe we can help each other out some. I have an accepted offer an a under $30K property I plan to close on next week.Hey Jerry. Do you guys have a market like this in Texas? I love it here in Michigan. My only hold back is not enough capital and now the deals are harder to come by as so many investors discovered our gold mine.
But there are some places that many still wont come to because they domt want the hassle (or so they think there is) so thats a bonus for us locals who love these areas and they are not in Detroit as many will surely think.
- Investor · Macomb, MI · Member since 2013 · 654 posts · 115 votes12y
Originally posted by @David Lee:
I have seen that a lot of you guys post that some of the properties are in the hood. Not all properties under 30,000 have to be in the hood. One of the most recent houses that I have purchased is within a half a mile of a big search engine. Some of you may know what it's called Google. It's not in the hood the house just needed work. That's what I look for when I'm purchasing these homes. I look for homes that need work and most people aren't willing to do. Allio them Lenoir North Carolina it used to be called the furniture capital of the world, in the last 10 years the furniture factories have almost completely went out of business. I think my area is starting to come back up for example we had Google to move in a couple of years ago.This is a fact! Same thing in my market. Seasoned investors who have cash dont want the hassle of a rehab and many dont want to do any work themselves.
I personally look for these properties for two reasons. Most newbies get scared away from the trashed property and the second is what I mentioned above.
- Investor · Macomb, MI · Member since 2013 · 654 posts · 115 votes12y
Originally posted by @Sharad M.:
It's important to network as much as you can. Tell as many people as you can that you are in the market looking for properties. You never know where a deal will come from.
I have had my contractors bring me deals that were not listed and some of the deals have worked out great.
Hey Sharad. Im going to be working in South Chicago for a few months starting the weekend of the 14th. We should try to meet up while im there.
- Investor · Macomb, MI · Member since 2013 · 654 posts · 115 votes12y
Originally posted by @Lisa Phillips:
@David Beard - no, I have been doing this successfully since 2009. Is success or failure a 5 year pass or fail? So, does it matter what has happened in years 1 and 2?? Where did this arbitrary 5 come from? That sounds like more YOUR metric, not necessarily anyone elses. Should I throw my properties away now, or am I still a failure (even though i cash flow mightily and investing is as smooth as a baby's bottoms most days)?
For me, a year or not makes no difference on whether I get tenants: The state that I keep my properties in and the price I charge has more to do with that. Does it mean anything for the rents?? Well, in 4.5 years since its been stable rental income.Here is my view: Im not trying to convince you that 30k properties can be very profitable and successful (they can be). I really just want to deal with people who 1) Believe this investment strategy works and 2) Are willing to find a way to make it work out for them
This isn't for you. And that's fine. But putting your arbitrary 5 year mark out there to tell me or others that what we have done is valid over the last 1, 2, 3, or 4 years? Well, that's a bit out of order to denigrate anyone's hard work because it hasn't passed your muster.
And, have YOU tried properties in this price range? Did you Fail or Succeed? Because, it doesnt take 5 years to know whether you have or not.
I couldnt have said it any better myself! Especially because Im not always the best with words and it can come off as mean, argumentatibe or rude... ha ha ha.
- 12ySharad M.Pro MemberCarlsbad, CA · Member since 2010 · 1k+ posts · 1k+ votes
Originally posted by @Aaron Yates:
Originally posted by @Sharad M.:
It's important to network as much as you can. Tell as many people as you can that you are in the market looking for properties. You never know where a deal will come from.
I have had my contractors bring me deals that were not listed and some of the deals have worked out great.Hey Sharad. Im going to be working in South Chicago for a few months starting the weekend of the 14th. We should try to meet up while im there.
Sounds good. Just message me when you are here and we can meet up. I don't have a day job, so I am flexible to meet either during day or evening.
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