Investing in Cheap Real Estate: Is a $30,000 House Necessarily a “Pig”?


Well, yes. It’s a pig! But…

And here we go with another installment in my by-now-infamous series dealing with $30,000 houses in the Midwest. I want to add a couple of caveats and some more angles to this conversation, which I hope will shine some additional light on the matter. Here we go.

On the Forums This Week

I was invited to comment in this thread this week. DJ is looking into the “pigs” and wanted some commentary from the BP community, and from me in specific. If you read the link above, you’ll notice that I didn’t flat out tell him not to do it, and if you know anything about me, this should be shocking to you. So, let me take this opportunity to explain.

Why You Should Not Buy Pigs

My issue with pigs is three-fold:


The house is cheap for a reason—the economy sucks. If this house was in Sacramento, it’d be worth $1.8 million. So, as a matter of broad strokes, you are buying property that’s going nowhere long term because the location is such.


The house is old, but since there’s no equity appreciation, outing money into CapEx on this location is akin to throwing good money after bad. However, you basically don’t have a choice—if you own this house as a rental, if the furnace fails you have to replace it. You’ll never get that money back on the resale, but you have to do it. All of the cash flow you think you’ll make because the house is cheap you will, for the above reason, give back over time. And while your tenants are indeed paying off the loan, in the end, you end up with a free and clear PIG—congrats!

Related: Newbie Investors: Here’s the Truth You NEED to Know About $30k Properties


Tenants aren’t stupid. Tenants want nice things. And good tenants, those who won’t stiff you with a 20% economic loss every year, will likely choose to go somewhere else. So, good luck managing that pig.

On the Other Hand

All of the above are real issues—they are headwinds for sure for us guys in the Midwest. Because there’s very little organic appreciation, we have very thin margin for error. We can’t be lucky—we have to be good.

And with this in mind, it all comes down to two things: Management and Value Add.

I am a huge proponent of buying where you live, at least smaller projects. You simply do not have the spreads to underwrite the costs and the economic losses that are part and parcel with outsourced management. So, if you are in Lima, OH, that’s where you buy, but…

You understand every aspect of your market to pick out only the absolute best deals, and aside for the management, the aspect that makes a deal good is value add. Do not buy anything where you can’t increase value within 4 months, period!

And Then There’s This

The poster in the aforementioned Forum thread indicated that the average home costs $71,500. Since the houses don’t exist in a vacuum, we must. So, let’s say that the most expensive house in his town is $160,000, and the average price is in the low $70,000s. What does this do to the definition of “pig”?

Well, the upper economic bracket in this town lives in the $140,000–$160,000 price range. No one rents there; everyone is owner. Likely, $120,000–$139,000 is the upper class, and still no rentals here. The middle-middle is in the $90,000–$119,000 range, while the lower-middle is in the $70,000–$89,000 range. The lower class of owners are likely in the $45,000–$69,000 range, and anything cheaper is likely almost completely renter-city.

What About the Rents?

The most expensive rental in town is likely $1,200/month; this is an executive suite. The slums go for $325–$450. The entry to decent locations starts at $550–$750. And nicer, newer rentals are probably $750–$950.


If my analysis of a town I’ve never been to is accurate to any degree, then I’d say that by buying a house for $30,000 that rents for $650, you are buying a pig in a sense that the location will never appreciate, and in fact you may have to take a loss on the sale, when you are ready to sell. Also, you have to ask yourself whether $650 will be stable and will have enough margin so that you can re-invest into CapEx.

Interestingly, I bet you could buy a house for $60,000 and get $750 of rent. You’d be paying twice the amount and only achieving marginally higher rent. However, you tenant base would likely be a lot more stable, causing your economic losses to compress, and because of the strength of the location relative to a $30,000 pig, you are much more likely to see stable and perhaps growing value.

Related: We’ve Done the Math: You Can’t Make Money on $30,000 Houses. Here’s Why…


Buying a rental is like a marriage in that it is a long-term proposition. Make your bed wisely because you’ have to sleep in it for a long time. Who do you want to manage? Do you want to do CapEx on 1920s plumbing, or 1960s?

While a $30,000 house is always a pig, in a location where the range goes up to $600,000, $30,000 means one thing. But in a location where the most affluent family lives in a $160,000 house, $30,000 means something a bit different.

Don’t get me wrong, relative to CapEx, $30,000 is always a pig. But relative to economic losses this may not be the case. Investing is about playing the delta—figure it out…

Investors: It’s your turn to weigh in. What do you think about buying “pigs”?

Leave your comments below.

About Author

Ben Leybovich

Ben Leybovich has been investing in multifamily residential real estate since 2006. His area of expertise is creative finance. Ben works extensively with private as well as institutional financing. Ben is a licensed Realtor with YOCUM Realty in Lima, Ohio. He is also the author of Cash Flow Freedom University and creator of a cash flow analysis software CFFU Cash Flow Analyzer.


  1. John Underwood

    I buy my “pigs” for cash and they pay for themselves in under 3 years. I can get 650 rent for them. I prefer to call them the ugly ducks that lay they golden egg each and every month. My tenants often tell me that my houses are the best place they have ever lived as I make them nice so that they want to stay.

    If I wait to find a wholesale deal I can find a decent house for 20-30K that will rent for around $700/month. I could also find a 130k house that would rent for $1100/month.

    I can diversify by buying the lower price house and not have all my eggs (golden eggs) in one basket. This way it is less painful when I have a turnover and loose a months rent.

    I would never buy anything but a pig. They are the most profitable. I have 14 pigs now and they are fantastic!

    Check out this book:

    Investing in Gold Mine Houses: How to Uncover a Fortune Fixing Small Ugly Houses and Apartments

    Dec 18, 2008

    by Jay DeCima

    John Underwood

  2. James Green

    It sounds like the key is if you are going to invest in “pigs”, buy them in your own backyard where you know, vs. buying a “turnkey pig” several states away. Baltimore city is a city of “pigs”, but you have to know what streets & what blocks of those same streets to buy your “pigs” on to get returns like @John Underwood mentions. You buy on the wrong block, get ready for a rough ride.

    • Susan Maneck

      Exactly. You have to know your neighborhoods. Most of my houses are in the neighborhood where I live. I paid 30-35K for them and spend maybe 5K rehabbing them. The only one I spent more was a house that used to be my principle residence. I bought it from HUD for 72K ten years ago. It is now under water but since it is rented for $870 a month I would’t complain except the smaller houses I bought in the same neighborhood rent for $825 and $850. The neighborhood is still mostly owner occupied. The house I live in I bought for 30K last year. The next door neighbor offered to sell me her house for the same amount I expect I’ll buy it as soon as I get a HELOC on one my other houses. (I generally pay cash for my PIGS, get a HELOC instead of a regular mortgage the following year, then buy another one, my own version of a BRRRR) The only house I have that gets only $675 is a two bedroom in a poorer neighborhood that i bought for 16K. Jackson, MS is also a city of pigs where you have to know the right streets and the right blocks. BTW, my tenant rented it at $700 a month but I offered her $25 a month off the rent every month she paid me early. She always pays earlier. Most of the houses I buy at 30-35K were built in the 60’s. The ones I’ve paid 15-20K were built in the ’50’s.

  3. Ben,
    What if the current owner or one of the previous owners “already” did some (maybe not all) of the “CapEx” fixes (upgrading plumbing, electricals, flooring, roof etc) for that 1920s house. That should shield some losses and improve the cash flow…

  4. Monique Rene Coates

    Good article! I just spent last night researching a large bulk SFR deal in IN, MI and OH. ROI looked wonderful! However they were all PIGS but I didn’t know it until this morning after reading this! LOL I’m learning!!

    If any investors like these things contact me. I’ve got a GOOD ONE for you!
    ROI 900%+ with 5% down

  5. don alberts

    Ben, learning from you is an asset. I am learning, but it does appear to me, being in Chicagoarea investing in lower priced homes could have a part in my cash flow. Being closer to the area, 1hr away, and adding value to the property to attract better tenants might work. I hope. Still investigating. Also properties being on the borderline of a better area. What do think. Don

  6. John Hamilton

    Hi Ben,

    Good article. This is definitely not for the spring chicken new to investing. Not what you, or they, would think.

    Lower purchase price with some rehab might still leave you decent cash flow, considering the outskirt neighborhoods. Close to ghetto, but in a nicer part of town.

    In my experience, it’s hard to find a pig that needs no reno. They are out there, but at retail, or close to it.

    However, I know that it can be done by looking closely at all CapEx and economy in the target area, among other points of interest affecting cashflow. Like John Underwood, says, they are the most profitable. How can you argue with that logic?

  7. Mindy Jensen

    Ben, thank you for this article.

    You have articulated the reason for not buying these “bargain” houses in a way that makes them not make much sense. I live in a hot real estate market right now. No chance of anything going for $30k. I can’t even find anything for $130k. These $30k properties do look very appealing to out of staters in hot markets, and I have considered buying into this market. Now I’m going to be doing a LOT more due diligence before I dip my toes in, and certainly won’t be jumping in whole-hog!

    • Susan Maneck

      One house that did turn out to be a mistake was one I bought for my mother’s self-directed IRA in what turned out to be a very bad neighborhood. My mother paid 15K but it turned out to be a headache and a half to get good tenants. It has been more trouble than all my other houses together! I checked the property records recently and found out most of the owners live in California. I’m sure they thought they were getting a real bargain when they bought these houses at probably 30K and were told they would get $750 a month in rent. That’s true, if you can get the tenant to pay the rent. Good luck with that!

  8. Andrew Syrios

    We bought a house once for $28,250 and put $14,000 into it. But the house was wildly misslisted and is actually worth $105,000. Maybe the best deal we’ve done here in KC. So technically, a $30,000 house (purchase price) is not a PIG, but if a property is worth $30,000, yeah it’s pretty much always junk.

  9. Curt Smith

    Our business evolved over the past 4 years. Starting out in top high school districts with traditional rentals, now at 25 rentals we’ve moved to small towns along major freeways. Cheap houses can be found in rural areas and they work fine as long as you do your economics study that the area is growing jobs wise, and is a few minutes to major freeways. To further reduce risk, management effort, we do an optional step of offering rent to own. If your pig has been fixed somewhat, meeting FHA, then it’s financable. You’ll get a few years of rent then a nice sale without paying agent fees.

    We evolved further, to now exclusively buying doublewides on their own land. Once you start looking for these deals they are everywhere. Whole subdivisions of just doublewides. We buy them REO and at the on line auctions. So far there;s no such thing as buying doublewides at a good price ($20k-$25k which includes up to an acre of land) from owners. Too much debt since we only buy 1995 and newer and prefer 2000 and newer. Owners all have mortgages this new, so they have to come through foreclosure channels.

    So we are in pig heaven! 🙂

  10. Cody L.

    Eh, I still have a few ‘pigs’ I bought years ago. Still renting them. One was $42k (rents for $900). One was $57k (but I put in about $12k). Rents for $1,000.

    I’ve owned them for 5 years. They’ve about paid themselves off.

    I don’t mess with them anymore simply because the extra bit of income from a few pigs isn’t worth my time, but if someone were looking to start, I’d tell them to go hog wild (pun)

  11. Hi Ben Great post sir I did have few questions for the 30K pig. What if the area is still not highly populated and it grows a lot in the future for ex austin tx 10-15 yrs ago the houses in east downtown area of austin you could have purchased for 30-40k the same area now the price per sq ft is like $125-$130. What if its a small town that is stable but could grow in the future.
    What about inflation calculation I remember when brand new Honda or Toyota or chevys family size sedans used to cost 16k-20k now the same new cars are 25-30k.
    I know the leverage and appreciation are big factors in building wealth in real estate but along with few leveraged properties what about having few of these cash flow properties that basically cost almost as much as a down payment & closing cost of typical leveraged properties . So instead of sending the bank the interest money you can make good replacements of the equipment and repairs and find tenant that takes well care of property and likes affordable rent the property would essentially pay for itself in 5-10 years and who knows in 5-10 years people might think 50-70k homes are cheap deals due to inflation and growth of income and population density.
    I just thought to ask these questions because I thought these may be the questions that would run through some investors mind including me i question that sometimes.
    You are one of those guys with lots of knowledge so would love to get you explanations on that.

  12. WADR: I have made $200,000 from the b-h-s of three $30,000 houses in three different markets. Two others will not be losers either. Two of these were held under five years.

    I can see that it could be possible in the some of the rust belt markets to struggle but process is critical in any business. Certainly many markets will not generate signifigant short term value gains, so your goals must work.

    As my farmer Grandfather use to say on market day “pigs can be beautiful!”. He never lost on pigs either.

    Goodluck – AW

  13. How about a $1 pig. Our planning and zoning has been active in tearing places down and some small (and not so small), ugly places are available for $1 by owners that want to avoid a government action. Note I have the equipment to tear it down and dispose of it, if need be.

    One offered to me now is only about 600 sf and half way renovated. It still needs major roof work, but I have some supplies on hand. I wouldn’t take on a big one ( pit), as I want to keep the investment low and we certainly are not a growth area. Six months and $5-8 k to finish.

  14. Ralph Mayrant

    I own several pigs in Chester PA most rent for 900 to a thousand a month and my tenants stay for years. I have seen houses sell for 10 to 20k which need about 5 to 7k of renovations done. This is not the greatest area but it is a gold mine, section 8 pays up to 1400 a month for a 4 bedroom house and there is no shortage of tenants now resale is another thing the seem to stay on the market for a while but at this point of my career I’m looking for income. Pigs are great when your making bacon!!!

    • Ralph Mayrant

      There is one that I have used in the past called Block Realty in Aston, Pa. now if you need a bird dog I’m him I work with a local Realtor who is able to get the deal done, I also have a crew who will get the property rent ready. I know of several properties that need new owners

  15. Kasey Sulheim

    I am curious how out of state investors do thier homework about the economics of a specific neighborhood without ever physically being there? Who to talk to? Who to believe? Thank you for the artical Ben and to all others who have chimed in. As the saying goes ~one mans trash is another mans treasure~ for low earning beginner investors, i see these “pigs” as opportunity to get the ball rolling so to speak.

  16. Patrick Desjardins

    Everything is relative. We foreclosed on a home in central Florida where the agent said the value was about $35,000, saying it’s a migrant neighborhood, and basically saying it sucks.

    It was winter in Virginia so I decided to go check it out. My wife thought I was going to get stabbed. What can you expect from a $30,000 neighborhood except gangs and drugs?

    So I drove in there and all I see is old people taking walks, riding their tricycles and stuff like that.

    Obviously the house wasn’t a palace and had some repairs needed but with some upgrades I would have lived in it. Its low price was mainly due to being in a rural area. The people who owned it before us were renting it for $600 so it would have made a great return. Only downside is there was no decent property management company so we sold it.

  17. Great article, Ben.

    Even though most of my properties are $50,000 or less, I have learned it over 3 years of active investing that Location is everything.

    Good locations in bigger towns will require much higher investment, but it will pay you back when you sell it BIG.

  18. Bart H.

    I have a property under contract for $30k, 3BR/1B , tenant has been renting the property for $600/month. Here is the issue. Public main water line has a leak and water is running down the street and through the neighbors front yards. Yards stay muddy and soggy. Home does needs some repairs but is livable and it has little to no crawl space under the house. Is this something that you would still buy? Bank will finance it at 4% fixed, 30-year conventional with 20% down. ?

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