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!
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.
Real Estate Broker · Cypress, TX · Member since 2013 · 822 posts · 468 votes
12y
I can see why in this price range you might have to submit an offer through the listing agent, but I 100% agree with you @Lisa Phillips about it being more of a last resort. Listing agents have a contractual obligation to the seller first via the listing agreement, and while there's certain ethical obligations they have to a buyer under a dual agency scenario, I've seen too many times (I used to be a realtor) where those lines get muddy, and the buyer is usually the one to get the lesser representation.
You wouldn't want the prosecutor representing you at trial, would you? That is effectively what you are doing when you have the listing agent represent you. Not raining on your parade @Pyrrha Rivers but do proceed with caution.
Investor · Yokosuka, Japan · Member since 2014 · 631 posts · 184 votes
12y
Thanks everyone for your words of wisdom. @Lisa Phillips I will certainly be on the look out for what you described and @Sharon Tzib your analogy makes complete sense so I will proceed with caution and will not be surprised or disappointed it that is the case. I will continue to keep my eyes open for that agent with the $10K listing that Lisa found to be helpful.
In my market, the agents are paid a fixed commission for these low priced properties, so getting the price to go up doesn't get them any more money. It's in their best interest to get the deal done and bank the commission check from both sides.
Another huge benefit for me working directly with listing agents in the beginning was that I was networking with more agents and more agents knew that I was looking for investment properties. Even after I found a buyer's agent that I work with now, I still get calls from the listing agents that I had worked with in the past telling me about their pocket listings. In fact, I am negotiating one deal right now where the listing agent called me about a new property he was going to list and I got an opportunity to look at it before any other investor.
@Pyrrha Rivers
However, each local market varies a lot, so see what works best in your market and take those steps. Not all listing agents or buyer's agents are going to be alike, so you might go through a lot of agents before you find a good one that works for you.
@Aaron Yates thanks for the mention, you mention buying in Texas, I am trying to think where that is? Is that in southern Wyoming? hehe The property is located in Indiana, and it was really hard to bring myself to buy it. I had 3 separate folks tell me about the neighborhood, I had it inspected, watched a few videos of it, and look at it on Zillow and google earth. We will see how it turns out. I bought it through a management outfit, there contract is horrible, but will probably try it for a year. Has had same tenant who is very handy for at least 5 years. It makes the 2% rule. Wish me luck.
Sorry Jerry. I dont know why I typed Texas...
So far then it has been working? Im not ready to make a long distance investment like that. I hope the management company works out. That seems to be the biggest issue with investing out of your own state.
@Pyrrha Rivers This is a good question and issue. I did not go Sharad's route because I thought the real estate agents where playing both sides and trying to raise the price. However, I did find a R.E. Agent in this price range by going with the local lister who had a 10k property. I did a vlog on it, going over what the attitudes were and how I got around them that has more detail:
http://www.affordablerealestateinvestments.com/0013-finding-a-real-estate-agent/ I also have this post on my biggerpockets vlog. This may help, but its something thats a bit intimidating, understanding their motivations and how to navigate them will help you to not be discouraged. I would say that Aaron's advice on not taking no for an answer has been the key for both of us. You realize that you just run into someone elses limitations, not your own, so you just go around that person.
@aaron yates - not a born diplomat, are you ;-)
It depends on the situation really. Since people on here cant actually here my voice, nor me theirs, things can get misunderstood at times. As with any written communication really.
Investor · Philadelphia, PA · Member since 2014 · 27 posts · 7 votes
12y
Definitely in on the 30k! I'm in the Philly area, and there are many deals out there. One challenge is the recent increase in property taxes. If the property appraises for 75k to 80k, property taxes are in the $900 range.
Real Estate Broker · Cypress, TX · Member since 2013 · 822 posts · 468 votes
12y
Not to sound like a smart aleck @Rhonda Jones but $900/pa taxes on a $80K property is a problem a lot of we investors would love to have. In Texas we pay 2.7-3% in property taxes.
What kind of rents do you get in Philly? $75/month for prop taxes doesn't seem like a challenge unless your rents are really low.
Investor · Philadelphia, PA · Member since 2014 · 27 posts · 7 votes
12y
@Sharon Tzib rents have been low in C class neighborhoods ($500 for a 3/1 SF). Believe it or not, property taxes were under valued for years ($300 a year or less in many of these areas!) There are opportunities to get these properties at a deep discount now because owners who rented them for years don't want to put in the money to rennovate them to receive a higher rent.
Buffalo, NY · Member since 2014 · 82 posts · 75 votes
12y
@Rhonda Jones Here in Buffalo we have an abundance of sub30k duplexes in urban poor areas. Taxes are under $300/yr. rents are going around $500/month/unit.
We are hoping to buy into this niche market and run clean and safe homes focused on the section8 market. My only concern is that Buffalo isn't a growing area. Yet, I still believe that there will always be a need for the product we hope to provide.
Investor · Philadelphia, PA · Member since 2014 · 27 posts · 7 votes
12y
Hi @Douglas B. I have one Section 8 tenant and I have to say that I like the fact that I get paid on time each month, and have a 2-year lease term. Even though you may not be in growing market, there will always be a need for affordable housing, I agree!
Market rents are increasing in many areas of Philly (along with the property taxes), but there are still surrounding low income neighborhoods where 30k houses are abundant. I specifically am interested in duplexes because the cashflow is greater, and will help offset the property tax increases (which are coming).
If you know Buffalo neighborhoods, like I know Philadelphia, you will be able to concentrate on those specific areas.
In Buffalo, do you target neighborhoods near Universities and public or charter schools? In what areas do you see signs of regentrification?
Involved In Real Estate · Harsens Island, MI · Member since 2011 · 36 posts · 17 votes
12y
I have been buying in that price range (Warren, hazel Park, Eastpointe, MI) for the last 7 years and I can tell you yes there is a little more B.S. You have to put up with. But the returns are a lot better than when I buy in Royal Oak, Clawson etc. "Good" areas.
In December I purchased four houses. Two of the houses were 25k each tenant occupied rent for $700/mo. One was 27k north of 696 in warren(6k repairs) rents for $800. And the last one cost 21k(12k invested) will rent for $925-950.
Last week I picked up a rental for $1500.00 (it came with a harley in the garage) hahah in warren and will put about 12-18k in repairs. it also will rent for around $925-$950.
Now I would have a little more work in these market areas but with over 70+ properties in all different markets around Detroit (north of the city) I would take the returns with a little more bs.
I have had problems with renters in "good" areas and bad but it's a great trade off for me to stay in the below 30-40k markets and have more streams of rental incomes.
All the time I read on here people putting down the lower end of the market saying that there is too many headaches with that area you can't get good returns, your going to get shot. I say good you stay where you are comfortable and my friends and I will enjoy this part of the real estate market.
Sorry for going on for so long I am on vacation and doing a little drinking catching up on some reading on BP. Just my two cents...
Jim
Real Estate Investor · Arlington, VA · Member since 2012 · 302 posts · 277 votes
12y
@James Ross I definitely have to say that I am more on my game when it comes to this price range.I expected grief, so I came prepared. That just makes you a better landlord/negotiator/property manager.
When you KNOW you will have your work cut out for you, you come in a little tougher, a little stronger, but that just makes your game that much more tight!
Now, I am fully confident on my tenant screening abilities, renovating, and all around rental business. But, you only really get that level of toughness from going where no one else has gone before, and deciding no matter what you're going to make it.
Buffalo, NY · Member since 2014 · 82 posts · 75 votes
12y
Alright, well, do you have any advice regarding my plan to buy duplexes for under 30k in inner city areas with high crime and renting to section 8 tenants?
Our vision would be to carefully screen and select quality tenants and then to maintain the property well and provide a higher quality unit than others in the area. Since we down the place outright, we could take the time to select the right tenant.
Our main concern right now is the high crime area. It's a bad section of the city. But the numbers work on the property. It should pay for itself outright in 2 years or so. Appreciation isn't an issue. We figure that even if things go horribly wrong somehow, we could literally walk away, learn our lesson and try again. So I don't really have anything to lose. Still, we'd like to do it right the first time. But the crime makes me wonder if it's the right move.
Cincinnati, OH · Member since 2013 · 292 posts · 81 votes
12y
Douglas, I'd rethink your plan. It isn't that sub-30k properties are undesirable, but looking for them in high crime areas will make your goals very difficult to achieve.
Think of it this way: imagine you're a higher quality housing choice voucher holder. You have a choice between a higher quality unit in a high crime area, or a somewhat lower quality unit in a lower crime area. Which would you choose?
Those people who will rent in high-crime areas are (for the most part) those people who don't have the option to rent elsewhere.
Real Estate Investor · Arlington, VA · Member since 2012 · 302 posts · 277 votes
12y
@Douglas: High Crime is no good. I will do low income, but I have to be safe. Drugs, Prostitution, and Assaults are my no fly zones. I can take theft, because thats everywhere.
Quality tenants aren't really going to stay in areas with high crimes, because they have options. So, I would find another location where you can find lower crime areas.
Alright, well, do you have any advice regarding my plan to buy duplexes for under 30k in inner city areas with high crime and renting to section 8 tenants?
I would also not recommend investing in high crime areas. There are people that do it, but it takes a certain individual to do so. Those that are not afraid to be 'packing heat' and so forth. I'm not that type of person and you have to evaluate if you are.
Douglas, I'd rethink your plan. It isn't that sub-30k properties are undesirable, but looking for them in high crime areas will make your goals very difficult to achieve.
Think of it this way: imagine you're a higher quality housing choice voucher holder. You have a choice between a higher quality unit in a high crime area, or a somewhat lower quality unit in a lower crime area. Which would you choose?
Those people who will rent in high-crime areas are (for the most part) those people who don't have the option to rent elsewhere.
@Douglas B. I agree with Ben and everyone else who has spoken against going into high crime areas. I would add to Ben's comment that the people who will rent in high-crime areas are not only people who don't have a choice but (quite possibly) people who will also engage in criminal activity.
I agree with Lisa who champions for the low income/high quality tenant. The two are not mutually exclusive. There are very hard working, honest people out there who happen to be at a lower income level but they are good solid people. Let's try to find them and give them a quality home they can feel proud of.
Investor · Baltimore, MD · Member since 2014 · 1k+ posts · 688 votes
12y
@Douglas B. you're idea isn't bad, if you can get a section 8 tenant much of your issue is alleviated. the issue being paying the rent. Section 8 will take care of any repairs they cause. Crime is immaterial, as long as you have insurance to cover theft, board up the house when vacant, window bars on windows, get rid of copper plumbing and replace with PVC upon purchase, forced air is your friend, boilers are not because radiators make good scrap and can also be stolen....proceed accordingly
Memphis, TN · Member since 2013 · 969 posts · 524 votes
12y
@Douglas B.
GREAT TOPIC!!! Count me in!! That's the area I currently invest in.. Actually it is the area/areas I grew up in here in Memphis TN...I started with a $10k credit card and a $10k 401k loan... My cash flow is AWESOME from the properties I have purchased under $30k!!
Don't forget Different Strokes for Different Folks!!!