Today I got to speak to my good friend @Shawn Holsapple regarding an investment opportunity with great ROI numbers but VERY low income area. Home has been reviewed and literally needs little to no repairs.
The cap rate is 30%. I would like more feedback if you've had a similar situation arise then what would be your take on this situation. My original goal was to purchase the prop and lease option it to a tenant with the terms stating that the tenant is responsible for all repairs.
@Ronald Hunt 30% CAP? Yes. If it needed repairs I would say no. I don't like doing repairs in a run down area...the repairs have a tendency to "walk away" while I'm doing the rehab. With no repairs needed, if you have a tenant lined up, then....you said a 30 CAP.
yes sir @Joe Villeneuve 30%. But again keep in mind the area is very low income which is most likely why the home is being sold so cheap.
@Ronald Hunt Not sure what "low income" means in this case since the term is relative to your location. Applying it to my area, I wouldn't do it, but that's because my M.O. is not that type of property. I have friends that would grab that deal in a heartbeat and retire off of them.
It comes down to comfort level. The fact that you are asking this question tells me you're not that comfortable with this. This could end up being nothing more than a "shiny object of distraction"...where in the long (and short) run you regret later.
I would tend to agree with @Joe Villeneuve The owners of an appliance store I just developed a relationship with offered me two of their occupied properties at a killer price... guaranteed cash flow. After five minutes of research, I determined these were not the type of investment that I ever want to be associated with because of the location and quality of tenant...so why even start. They way I see real estate is that it is not a race, but an alternative lifestyle. Hopefully everything works out for you if you pursue this one. It is truly all relative.
great advice, thanks gentlemen I appreciate your input.
Ronald, not sure how your are leaning, but I'm guessing it will be difficult to lease option in a low income area. People who can qualify probably don't want to live in that neighborhood.
I focus on buy and hold in a low income area and fight to keep 10 CAP, but it is tighter on the west coast. It's very time intensive, a lot of repairing and replacing the same things over and over. Study up on low income landlording to be able to make an informed decision.
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