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.
Investor · Columbus , OH · Member since 2013 · 24 posts · 14 votes
12y
I love this topic. Ill share my experience in columbus Ohio. I bought two duplexes last year 100% occupied. One for $15,500 the other for $16k. One rents for $800 and the other for $700. Both needed some work, mostly on the exterior. I left the tenants in place and started using a portion of their rent to upgrade the exteriors, new roof, new faux stone front, paint stucco, repair gutters, paint trim, and cut down over grown bushes and trees. So far this has worked great! The tenants pay for the upgrades with their rent and Im improving the property while cash flowing. I still have all the original tenants and they really seem to appreciate me putting time and money into making these properties have some curb appeal.
I know you don't go putting granite countertops into $20k properties but my theory is, if i upgrade the exterior and give a lot of curb appeal then the tenant is more likely to take pride in the property, take better care of their unit, and stay longer. These type of upgrades can not be ruined easily by a bad tenant. And when the tenant moves out it will be easier to rent out again.
When people say areas can vary street by street or hood by hood, they are right on the money. Ive found a small area in Columbus that fits this type of description where i purchased my duplexes. Its a low income working class area with no more that 5% vacant houses on the street or surrounding streets. But just 10-15 blocks over I would not touch. The way i did it was, I looked at some cheap properties in absolutely terrible neighborhoods where 50%-70% of the houses were vacant. That gave me a reference of what kind of properties I didn't want to invest in, so when i saw a property in a better neighborhood i felt confident in my purchase. When I drive down a street and i think to myself would these houses be easy to break into because of the lack of neighbors? If the answer is yes, then that area is a no go.
Involved In Real Estate · Sicklerville, NJ · Member since 2014 · 4 posts · 5 votes
12y
This topic is awesome,
We purchase 20-40k properties in NJ and expect to put 10-15k in improvements (furnace, water heater, flooring, drains, paint). These properties rent for $900/mo 2B, and $1,150/mo 3B. Taxes here are sky high but we get good returns with this factored in.
Our properties are in an African America section of town that some investors are afraid of. My husband is from a similar area in California and his older relatives were "life long renters". So we decided to market to hard working individuals that want a nice place and may be moving from the Camden war zone to achieve this. We are very selective in the tenant selection process and are willing to go tenantless over getting a bad one. The negative is our tenants call weekly about little stuff and like money pits like dishwashers.
Before we purchased, we drove the area every day at various times of day and looked for our #1 sign of a bad neighborhood .... People hanging out during business hours on a week day. We found an older area (1970's) sandwiched between new construction as our "sweet spot". We were also encouraged by new big business added to the area within the past 5 years (Lowes, Target, Starbucks, BW3's and Chipotle). I am sure they did their Market research and I will follow their lead. We also have a 220k property close to an air force base that cash flows but every one of our 20-40k properties out perform it!
Real Estate Investor · Arlington, VA · Member since 2012 · 302 posts · 277 votes
12y
@Jake Kilfian Exactly Jake! There ARE neighborhoods that simply dont offer the returns, its not your fault, its just the reality on the ground. But OF COURSE the sweet spot is to find the block that offers low stress, high returns, long term renters! But, you have to know which ones to say no to. I absolutely wont go for a 50-75 vacancy rate (unless its in a revitalization zone with a lot of money going into the area), which is also known as a distressed area. 10% vacancy I found is doable, and usually other investors will come in after you once they see its working for someone else. Great comment!
Rental Property Investor · Atlanta GA · Member since 2013 · 122 posts · 83 votes
12y
I've studied Lisa Phillips and thank God for her. I learned so much from her. I just purchased my first investment property, (well, I don't close till Thursday) for 10K. The area is up and coming and I couldn't be more excited, (yet scared to death) at the same time. I'm thinking about video taping the entire process of the rehab, maybe even the closing:)
Investor · Roseville, CA · Member since 2009 · 1k+ posts · 583 votes
12y
I am buying and selling in the st Louis area homes that are under 30k and rent for 600 to 700 per month. You just need to find hardworking tenants who want a decent place to live. I purchased a home for 11k and now the tenants want to buy it from me for 30k with seller financing. I don't have to fix anything and will receive monthly income for 15 years.
Investor · Arlington, VA · Member since 2012 · 1k+ posts · 491 votes
12y
This is such a great thread. I'm hoping to mix the strategy of buying purely for cash flow (sub 30k properties) with some higher end properties (100 - 200k) for diversification purposes. I feel like the higher end properties will be more stable in the long run while the lower end properties can be cash cows. We'll see how it works out.
Investor · Yokosuka, Japan · Member since 2014 · 631 posts · 184 votes
12y
Hello all,
I have missed interacting in this thread and BP in general as I was swamped with my first acquisition process but that’s done and I will share my experience in another thread. Yes, Lisa Phillips rocks! She is such an inspiration.
Congratulations on your first deal! Can you post an update of what is going on? I totally understand the scared to death feeling as I just experienced it myself but you’re a bit ahead of me so I’d love to hear how it’s all going.
Rental Property Investor · Atlanta GA · Member since 2013 · 122 posts · 83 votes
12y
Hi Pyrrha, thanks for the mention! I closed on the 31st and all went well with that. Since then I"ve been working from the bottom up starting with the electrical. The home had been vacant for a over a year and because of that, the city had to come out and inspect the electrical and they charged me 50 bucks to come out. It failed of course with minor issues. I had the issues fixed and then had to pay the city 100 bucks to come back out and reinspect. What a scam. If I had known how they work it, I would have had an electrician take care of those minor issues BEFORE calling the city to come out. This is what I get for buying in another state. I'll know next time. The basement, that had two bedrooms and a full bath, were covered in mold from the floor to the ceiling. I believe when someone snatched the water meter, water was flowing and who knows how long it sat before the bank took over and winterized the property. I've had the basement gutted and now I'm working on the plumbing, an electrical short, the boiler and mold remediation. For the mold left on and in the joists, I've purchased Foster products. One that disinfects and one that encapsulates. For the cinder blocked walls I purchased Hydro-Seal 75. Once all that has been done I'll work on down spouts and hope that will solve the minor water problems in the basement. I'll be so glad when all the mechanicals are done. About 3 weeks to go. I met with the contractor today whose gonna do the main level which is 980 sq ft. The kitchen isn't too bad. It is full of cabinets thank goodness that I don't have to replace. The walls, floors and counter top need work. The bathroom will pretty much be a gut job except for the tub that is staying. This is a lotta work but the fear is waning. I'm only able to get to the property on the weekends, but I have a lock box on the door so contractors can get in during the week. So far, the hardest part has been finding dependable and licensed contractors with prices I will agree to, lol. So, that's where I am now, I'll post again later if you'd like. I can't wait to get to the fun stuff, Decorating! Thanks for asking and all the best to you!
Thank you for the encouraging update! Encouraging because even though you describe things that absolutely petrify me, you are gaining wisdom and confidence and your fear is waning. Good for you! I hope the worst is behind you. How did you purchase this property? Was in an auction site unseen that you didn't know about the mold or did you know and had a plan of action for it? I ask because I’m planning on going the tax sales route and with those you often can’t access the property until you win the bid. Scary stuff!!
Rental Property Investor · Atlanta GA · Member since 2013 · 122 posts · 83 votes
12y
So my rei club advised to never buy site unseen as a newbie. It took me almost two years to decide on the area to invest in. I was looking for a lower tax base, and a landlord friendly state. Luckily, I found that within less than two hours from my home. Once I did, I drove the area for hours looking for blocks that were quiet and well kept. The house is all brick, built in 1924 with an open concept. Yes, the mold was a concern but I researched how to care for it, and figured it could be managed. The homes in the area sell for about 30K fixed up, which is why I hope to not exceed that amount with renovations, and with a starting price of 10K, I think it's doable.
Investor · Yokosuka, Japan · Member since 2014 · 631 posts · 184 votes
12y
Well @Angelique F. Much respect to you for being brave enough to tackle such a challenge on your first deal. That courage will certainly set you apart and ahead of many. Knowledge is powerful and you armed yourself well with knowledge of the area and knowledge of how to address the mold issue at hand. I hope your rehab does not put you above the limit you set but you did buy with a lot of margin so it should work out fine.
And here I am nervous about my rehab that requires interior paint, flooring and two appliances. I have to be brave like you! :)
It can be super scary doing these rehabs! The place I got has an all fixed up, printing ARV od $50-60k. The neighborhood is fine but go 3 streets over and I wouldn't touch it. I tend to be a bit conservative on neighborhood. I thinking is that I have to feel comfortable if I get caught painting in the house after sundown.
But in terms of scary fix ups. I did offer on it sight unseen so I was super nervous on the initial walk through. I would say to budget for absolute worst case scenario and anything that isn't so bad is a savings. This place had no plumbing, electrical that shorted out on many of the breakers, broken seals on the windows... and a raccoon in the attic!! That part makes for a good story. We just try to be conservative with or numbers and take action. I think that's the most important part of all.
Rental Property Investor · Atlanta GA · Member since 2013 · 122 posts · 83 votes
12y
Well here's a few more reasons to appreciate your lipstick rehab :). I've got buckled and damaged hardwoods from the moisture in the basement, 8 of the windows are as old as Methuselah, and worst yet, the 2 car garage has what appears to be the beginnings of a sinkhole on one side. The structural integrity of the land behind the home has yet to be determined and I don't even know who to call to have it thoroughly investigated. I wish I were standing in your shoes right now :).
Rental Property Investor · Columbus, OH · Member since 2014 · 340 posts · 111 votes
12y
@Angelique F. Did you have an inspection? I think the land integrity is the biggest issue of what you are saying. I have no idea who to call on that one either. Maybe someone at the city that permits for structures??
Flooring and windows can be replaced and a garage is (detached??) is not really essential to the function of the house. I got flooring on 12 months interest free financing from lumbar liquidators (helps with cash management) and Window world has windows for $189/window installed.
Investor · Yokosuka, Japan · Member since 2014 · 631 posts · 184 votes
12y
@Angelique F. and @Richelle T. You are some very brave ladies indeed! My situation is a bit different as I live in Japan and purchased in Georgia. I'm a school teacher and spent my entire summer break trying to find a property to simply take action on my goal of purchasing two this year. It was two days before having to return to Japan when I found it but fortunately my 26-year-old daughter became motivated to participate through watching me and especially due to attending a dinner meeting with my mentor and another investor. Needless to say, mold remediation, sinkholes and raccoons are a bit out of the scope of rehab I can tackle from this distance and certainly would not put such on my daughter's shoulders. She's doing a great managing my lipstick on the pig and beginning to market for rent. Of course my purchase came at a very small discount from retail but I'm happy to have the first one purchased.
I'll be taking notes from you, learning and applying some of your techniques in my future acquisitions. I plan to venture into the Tax liens and deeds arena which is scary.
Rental Property Investor · Atlanta GA · Member since 2013 · 122 posts · 83 votes
12y
Hi Richelle, I personally don't believe in home inspectors. I know I probably should but in my experience while buying my own homes over the years, they were jacks of all trades and masters of nothing. They can't see behind walls or under the ground any better than I can. I did however walk through this home with someone who works for the city as a home inspector, who my Realtor knew personally but, the (detached) garage had a padlock and I never got to see the inside of the garage until closing day. I was like, what the hell is that? Beneath the cracked cement, the ground is receded by about 6 inches. The area is sandy and there is no actual hole, but I'm so scared its the beginnings of a sinkhole. I doubt my insurance covers sinkholes so I'm screwed if it is one. I've had two cement companies tell me it's not a sink hole but I don't believe them. They just want the work, but no work will be done to the garage until I have the ground tested because I might have to lose the entire garage which would be a shame. Thanks very much for the tip on the flooring and windows. That sounds like a plan.
Rental Property Investor · Atlanta GA · Member since 2013 · 122 posts · 83 votes
12y
Oh wow Pyrrah, you live in Japan! Well it's great you have your daughter to handle things on the ground for you in Georgia. I looked into tax sales a while back, and I'm sure you've researched them. There is a guru here on BP who is extremely detailed on his strategies. I can't remember his name, sorry, but he buys mainly in Arizona if I remember correctly.
By the way I lived in Tokyo for about 6 months in the late 80's. I was singing in an R&B band at that time believe it or not :).
Rental Property Investor · Atlanta GA · Member since 2013 · 122 posts · 83 votes
12y
Great News. A neighbor who lived on the block who is also an investor with 20 homes in the area just called and told me to stop tripping, lol. He said a sewer line was installed in my garage years ago, and the concrete floor was never repaired afterwards. Whew, no sinkhole after all. That's another wonderful thing, the neighbors on the block are great folks!