Rental Property Investor · SE Michigan · Member since 2014 · 4k+ posts · 6k+ votes
1y
You are buying a turn-key rental which is why the returns look terrible. The house is nicely rehabbed and you are paying full-price because you are competing with owner-occupants.
In contrast, look at a house like this one. It is ugly, and priced low at $150K. Similar sized homes in that area sell in the 250K to $300K range after they are fixed up. That is a gap of $100K to $150K from ugly to beautiful house. If you can rehab the house for less than that, say $50K, you will capture equity doing the rehab and almost certainly have great cashflow.
You are buying a turn-key rental which is why the returns look terrible. The house is nicely rehabbed and you are paying full-price because you are competing with owner-occupants.
In contrast, look at a house like this one. It is ugly, and priced low at $150K. Similar sized homes in that area sell in the 250K to $300K range after they are fixed up. That is a gap of $100K to $150K from ugly to beautiful house. If you can rehab the house for less than that, say $50K, you will capture equity doing the rehab and almost certainly have great cashflow.
Rental Property Investor · Philadelphia, PA · Member since 2021 · 774 posts · 501 votes
1y
@Kate Beers - Completely agree with Greg Scott on this one. By buying the house he suggested and fixing it up, your forcing the appreciation and creating equity (for yourself), rather than buying the equity (at top dollar) from someone else. If you want to take his suggestion to the next step I would tour the home he suggested with 1-2 contractors (you may have to pay them a bit) to see what type of estimate they would provide for renovations. You can also do some more research on your own on the cost of renovation projects. And "oldie but a goodie" on this topic is a book by Bigger Pockets: