Yes you hit the nail on the head… It isnt a wise idea for an inexperienced landlord to start out in these area… I am not here to sell you on some fake dream of rags to riches like most people in the Industry do… I am a realist and want to offer my experiences I hope you dont get discouraged as The Real Estate Industry is the best Industry out there… If you are looking to make money in Real Estate flip contracts or properties… Or mabey broker notes…Options are another vehile you can use. There are many different areas of the Industry you can make money in without the hassles… Landlording is a hassle in most cases… Or if you can afford to pay a mangement company it is a bit less of a headache… But after 10 years of collecting rents and evictions and repairs, and code enforcement and mortgage, taxes and Insurance you might be ahead a few grand… Plus alot of tax benefits… But in one flip that can take a day or less you can make 10-20 thousand and you are out and done… On to the next deal… See the point…
I take my hat off to all the Landlords as they deserve most of the credit, they put up with the headaches and deal with the tenant issues and so on… I know what it was like as I was a very large landlord at one time. I was purchasing for a couple of years 2 and 3 duplexes a month for my self to hold… It got to a point I got so fed up I walked away from all the properties in bankruptcy and concentrated on flipping and notes…
I still hold a few properties but they are 1 family properties in good areas…
i live in an area where “decent” starter homes begin well over 100k. however, i’ve found sections in the city where lower income neighborhoods have quite a few 600-800 sq ft homes in the 50-70k range…these are old (1900’s) bungalow style houses…the areas are not “bad” parts of town, but they certainly aren’t transitional, “up and coming” neighborhoods either…it’s not an area that people strive to live in - more of an area where people go because they can’t afford to live anywhere else.
my question is, assuming that i can find a good deal on one of these houses, is it worth the risk? perhaps i can buy one of these homes for 40k and fix it up - but is buying into this kind of neighborhood a good idea? i’ve seen quite a few for sale signs indicating that i might be able to get a good price - but will i be able to sell???
i know it’s hard to answer this question without knowing more details…i’m just looking for a general viewpoint - is buying into low-demand and low-income neighborhoods a potentially profitable way to go? or is it better to spend MORE money, buy into a better neighborhood, and take the bigger risk…seems like around here, no one is selling in the decent neighborhoods and lots of folks are selling in the marginal ones…
I have to say the posts to this message are all pretty accurate but heres something more to consider… If you are looking to buy and sell you must realize that if a buyer can qualify for a mortgage than they would probably want it to be in a nicer owner occupied area… So here is a way to unload those houses in low income areas to the tenants of those areas…( Sell Owner financed and discount the Mortgage) As far as holding these types of properties in your personal portfolio you are in for alot of headaches… I have purchased entire streets in 4 and 5 block communities in an effort to change the quality of tenants in the area and was very unsuccessful… It also cost me a total bankruptcy… You cant save these areas and are headed toward nothing but evictions and code enforcement issues as these types of areas usually bring un sanitary grades of tenants who leave garbage and debris all over the place and many other various problems, Occupancy is another problem as in a low income area you have low income families that the 1st finacial problem they have affects them paying the rent where in a more upscale enviorment people tend to prepare and save for emergencies. Well enough you have to feel out the area yourself but in no means should you ever think that because it is cheap it is a good deal… It is cheap for a reason…
Douglas Timko notes4sale@yahoo.com
Re: HELP! are cheap homes a good bet? - Posted by SCook85
Posted by SCook85 on December 13, 1998 at 22:07:04:
I like the types of neighborhoods that you are talking of. Except there are mostly homeowners. We have neighborhoods here which are lesser and that is where the majority of the residents are renters. I buy in the homeowner neighborhoods and resell, not to hold. Other investors like these neighborhoods as well so they are easy for me to flip.
What I do when I look at a home and a neighborhood I try to picture who my buyer is going to be. Most of the time it is going to be a young couple buying there first home. I target buyers with challenged credit and bend over backwards to get them into a home. If you picture a couple making $70k+ per year with great credit chances are they won’t want to move into your home, they can buy whatever they want, so keep that in mind. Once you decide who is going to buy your home you need to decide how are they going to buy it. If you are going to have to sell with owner financing you need to know all of your numbers up front and make sure the deal is going to work. This is the way that I approach every deal. I look at the worst case buyer and figure out how much it will cost me to get the deal done then I make my offer.
Next time you look at a home, stand in front of it and picture who is going to buy it, makes a big difference.
These are all great comments and you are thinking with the right mindset. I own a rental house in a transitional area. I am pleased with it. However, you do have to weigh your options as it does not cost much to move up into the more desirable neighborhoods. I am now looking in the more desirable areas for the crummiest homes. They are out there.
I would caution that flipping short term in the low priced neighborhoods may be difficult due to the buyer’s credit. However, you will find high rents considering the purchase price. Try to sell on a lease/option. I did this and am happy with it.
All in all, look in BOTH areas, and focus on the best DEAL! Good luck and take that first step. I did and I am glad I did!
Re: HELP! are cheap homes a good bet? - Posted by Sandy FL
Posted by Sandy FL on December 13, 1998 at 20:21:04:
You hit on some good points here…
what neighborhoods sell the best (do business there. Ask your local realtors what neighborhoods have the most sales)
do what you have to do to sell in those busy neighborhoods. (do they owner finance, take back a second, or what) That is all there is. Buy where you can easily sell later. Sell in such a way that it works for you and the buyer, meeting both your needs.
Re: HELP! are cheap homes a good bet? - Posted by Rob FL
Posted by Rob FL on December 13, 1998 at 14:01:09:
My personal opinion is, if the general neighborhood is going downhill (ie increasing crime/drugs, increasing renters decreasing owner-occupied, increasing run-down properties) than I don’t want it to keep and rent out. I look for properties going uphill or staying the same to keep. The downhill properties are better flip or rehab but not good for long-term.
Chase,
I too live in an area with lots of these “lower priced” homes. The newer nicer homes in the “better areas” all go for around $175-$250k. I have found many homes in the more run down sections of town that sell for $30k to $60k. Will I try to buy these? “YES!”, why?
Because when I need a partner looking for a longer term investment, with little cash out of pocket, these lower priced homes fit the bill. Also, I checked those areas, and up to 80% are rentals, and are always occupied. this is GREAT, because on this type of home in this area I can charge from $800-$1200/month in rent. Just imagine this on a $50k purchase price. Do the math and it works out to a nice cash flow monthly. Also, these people “who cannot afford to live elsehwere” are less likely to want or need as much upkeep. They are happy to live in a nice lower rent home, that is clean. They don’t care about “Custom cabinetery” and all the “perks” the upper priced homes have.
I started out wanting to do “flips” and still will try. But if I own several of the affordable homes, and they bring in income, this will only help to facilitate the “flips” when I need the CASH to do it.
I have an uncle who will not buy a home unless it is in these areas, and he won’t go too far above $40k to purchase them. He now has 14 of them, and is doing quite well.
Rememeber that you can still fill your stomach with a lot of small catch, just as easily as you can with that one big one.
The methods you employ to create your own wealth are strictly up to you. That is the true beauty of this business, you call the shots.
Hope this helps,
Jim
i think i’ll pass on this idea…after all, am i getting into my own real estate business because i want more hassles and headaches? how much money is worth having to worry about negligent tenants, how will i collect the rent, etc? i guess as with anything, you get what you pay for…