What do you think on buying 50k homes

13 Replies

Hey @Dajuan Taylor , first of all congrats on getting started in REI. What type of investment strategy are you wanting to do with 50k homes? You're asking a pretty broad question, so my initial answer is that whether it's a 50k home or a 500k home, just make sure all the numbers make sense with what you're planning on doing. Buying 50k homes can definitely be a great way to get started!

@ Dajuan is it a $50k house that's ready to rent in a neighborhood of other similarly priced houses or is it a $50k house that's in bad condition and is going to need a lot of work? I ask because a $50k that's ready to rent or doesn't need too much is probably going to be an easier way to get started in real estate investing.

@Ricardo Paredes

I was looking in augusta georgia they have a lot of 50k homes down there some go a little higher the ones I've seen they do need work maybe 10k to 15k is what I was thinking to put in the home would really like your feedback on the ideal thanks in advance

Congrats on getting started! Just a couple of things to watch out for. At the $50,000 threshold, assuming that's the ARV, you won't be able to get conventional financing. The minimum loan amount on conventional loans is $50k. If the numbers work out and you're getting cash flow, it can still be fine, but just keep in mind that for the most part, given similar property types, the maintenance/CapEx costs on a $50,000 house vs a $500,000 house are the same (you won't get a discount on the roof on the $50k house), so there's some value scaling to also keep in mind.

@Dajuan Taylor I'm not familiar with the Augusta market, but if the rent justifies the purchase price and cost of repairs I think it could be a good entry into investing. As other people have mentioned getting a loan for properties under $50k can be challenging, if the $10-15k worth of work you're anticipating is able to improve the value of the property by $25-30k then you could cash out refinance to get some of your money back and have access to more loan options since 70% of $75-80k would be over $50k. 

@Ricardo Paredes - The pool of lenders that will finance a property under $100K in value is much smaller than properties valued above $100K. While $50K properties seem attractive you need to go into it with a game plan on how you're going to get that money back out if you buy it with cash or hard money. Seller financing? A private lender that doesn't charge crazy high rates? HELOC that you pay back with your cashflow?

Congratulations on getting started! To echo what several have a stated, there are multiple variables that go into whether or not a $50K home is a good deal. I understand wanting to "Get your feet wet", and a lower price point probably seems less intimidating but just because it's cheap doesn't mean it's good. How much needs to be put into it for repairs? What is your ARV? What's fair market rent? What is your exit? Do you plan on using lending (Which may be difficult to secure if Rehab costs are significant on a low PP home) or cash? It may be that you could use the same amount of cash but with hard money buy a higher PP home that actually has less risk and a bigger upside. Don't misunderstand me, I just tied up a property in Tucson for $21,500, so I'm not discouraging you from staying away from small price points, but just suggesting that don't use that as your determining factor in picking an investment property.

@Dajuan Taylor

Thank you all some much on the feedback I will take all your words of wisdom and apply it. This is what I got so far the 50k homes are in a good location less then a mile from the University of Augusta one way and a little over a mile the the major hospital. Given that there are a few ways to get tenants. Mortgage rates are $300.00 a month and the rent in the area is 600 to 624 what are your thoughts thank you in advance

Originally posted by @Wilson Pun :

Congrats on getting started! Just a couple of things to watch out for. At the $50,000 threshold, assuming that's the ARV, you won't be able to get conventional financing. The minimum loan amount on conventional loans is $50k. If the numbers work out and you're getting cash flow, it can still be fine, but just keep in mind that for the most part, given similar property types, the maintenance/CapEx costs on a $50,000 house vs a $500,000 house are the same (you won't get a discount on the roof on the $50k house), so there's some value scaling to also keep in mind.

I am seeing some lenders bump that $50,000 minimum loan amount to $75,000. 

 

@Dajuan Taylor . When we were discussing what kind of real estate we would like to get into, one of the thoughts with our real estate agent was $60k buy and hold houses. Quite frankly, we decided we did not have the stomach for such low priced buy and holds. With low price homes, we decided come low quality/low income tenants, and more headaches. It may be different in other areas, but we simply decided it wasn't for us, as we self manage our rentals. Instead, we went with $250,000+ duplexes, with rents in the $1,300-1,500 range. It has worked out well for us.