All Forum Posts by: Quentin Mitchell

Now I am a little biased because right now this is my niche and my strategy, but this is my pros for investing in lower-priced properties.

1. An easier barrier to getting into the property

2. Lower risk, I mean money is involved but you will not lose as much if things go wrong.

3. Because of the smaller purchase price (and you still do your numbers for rehabs), you should have a greater cash flow each month because it's less debt you're paying back.

4. A greater ability to scale because you can buy more homes because of the pricing.

5. Honestly less competition from experienced investors because the more experienced investors usually go for more appreciation (nothing wrong with that).

6. You have a greater impact on a particular neighboorhood, block, community.

7. Because of some of the challenges be it neighborhood, tenant base, and all other things associated with investing in the "hood" you learn a lot faster (because you hopefully are buying more and because you have to deal with multiple issues, that will help prepare you for the greener pastures of real state.

Cons

1. Properties do not appreciate at the rate of the more expensive counterparts (in less gentrification occurs).

2. If you do not have the personality or find the right management to deal with the people and issues that can occur in those communities you will get eaten alive.

3. Because it's easier to get into more people can get into the business, some of which probably should not be involved in real estate.

Now I know the biggest rebuttal on this is going to be on the wealth-building aspects of appreciating especially over time and those things are true, but if you cash a lot and you reinvest you can create that same wealth with that strategy as well. Also when it comes to appreciating the market is the only variable that will ultimately decide the appreciation and you only realize the value once you take it out through refi, HELOC, borrow against (Collateral) or sell. Otherwise, all that great appreciation is just sitting there.

So lets you have a tenant that pays there rent every month, a little late but pays it every month, but keep the house immaculate and takes really good care of the property. Then you have another tenant that pays early every month like clockwork but is not as neat and doesn't take care as good of care of the property, which would you rather have?

I think I would take the late-paying tenant because the maintenance is probably going to be less because of how well they take care of the house.

What are your thoughts?

Agreed, I think sometimes the greed of more could come back to hurt you.

If you inherit a tenant and the rent is below what the market is but they can not afford market rent do you kick them out as soon as their lease is up or immediately if they don't have a lease or do you keep them on as a tenant. To make it a better argument pretend it is a 2-4 unit building so only 1 unit is under market.

In my opinion, it all depends on these factors

1. What type of tenant are they?

2. What kind of shape is the unit in?

3. How long is their lease?

4. How much below market rent are they?

5. How fast do you think it could rent on the open market?

6. How much would it cost to get the unit rent ready?

Those would be my main factors to figure out whether or not to keep them in the unit.

Investment Info:

Small multi-family (2-4 units) buy & hold investment.

Purchase price: $25,000
Cash invested: $12,000

This is a smaller multi-family that I purchased with a tenant already in it, I was able to raise the tenant's rent right after I purchased it to 600 ( it was all he afford). I then rehabbed the downstairs unit and am renting it for 800 fully paid by a housing program.

It was a probate property so it was in pretty good shape just a little TLC and I upgraded the kitchen in the downstairs unit, redid the upstairs kitchen but not a complete remodeled and remodeled both bathrooms.

What made you interested in investing in this type of deal?

The price and house when I saw it.

How did you find this deal and how did you negotiate it?

I found it on the MLS and it was listed at the price that I paid.

How did you finance this deal?

Cash

How did you add value to the deal?

Complete remodel of bathrooms, complete remodel of 1 kitchen and an upgrade to another kitchen and new windows.

What was the outcome?

I was able to raise the rent on the tenant that was currently living there and was able to get 800 for the downstairs unit totaling 1400, the upstairs tenant had to move he got sick but I have another tenant that will move in the new year for 700 so the home will be making 1500.

Lessons learned? Challenges?

Probate properties can take a long time due to arbitration but if it's the right property it can be worth it.