A good example of what 50K gets you in PHX. (foreclosures, HOA)

[PoppySead]

Originally Posted by Zippyman

Actually some of the most profitable rentals are low-end, and the rent price doesn't necessarily mean the tenants are inherently bad. In a property management class I took a while back the 40-year veteran property manager who taught the class claimed the worst tenants were lawyers. In fact, it was one of his written "exclusions" he provided to all tenants under the fair housing laws. " no lawyers, no felons, no aggressive dogs, no waterbeds, etc"...

That said, these places are too much work & too much cash out-of-pocket for small investors. Financing anything under $50k is a problem, and if you add in even $10k in necessary repairs, you've got $60k cash hanging on one tired unit. With good credit, you could probably do at least 2 and possibly 3 more expensive properties using financing & net a much more reliable income stream & better "cash on cash" return.

True enough but 100,000 to 150000, isn't high end by any means, it just isn't ghetto. And like you said, it does't need 50 thou in repairs you can't see yet. You are bound to rent to a lower middle class family, which do well paying you rent. When you are looking at a family of 3 or more paying less than 700 a month rent for a house then you are looking at someone with a job that has way less stability than someone who is paying 1000 to 1500 a month.

But, my logic isn't professional, I know plenty of slum lords that don't fix their properties when called to do so. They ignore fines until it's an absolute fix and they have a turn over in their houses like jack in the box, but they make money on deposits. I couldn't do it, but some can. My advise is simple, buy a decent home, fix the repairs, and make an even 4 or 5 hundred extra a month. Don't use a deposit to fix a home, make sure you have enough to invest without using up your new profit.
In my experience it takes at least 5 years to be making extra money on a couple of rentals. It's not instant and people trying this out without the knowledge end up being bad landlords and in turn get nothing but bad tenants. It's a long term investment, not a get rich quick investment.

I'm sure you know this. Like I said, I'm not a professional, just a small investor, with long term goals who see people all the time with 50 thous and want to be landlords or flippers. I tell them they really need 500 thous to make it work the right way. But, to no avail, they are all over the valley loosin their ask. lol

[ReadyFreddy]

I agree, there are plenty of good renters at lower income levels. Most people do pay their rent, regardless of their income. Just because they don't make a lot of money doesn't mean they're scum or going to wreck the place and sell drugs and disturb the neighbors, etc.

[PoppySead]

Originally Posted by ReadyFreddy

I agree, there are plenty of good renters at lower income levels. Most people do pay their rent, regardless of their income. Just because they don't make a lot of money doesn't mean they're scum or going to wreck the place and sell drugs and disturb the neighbors, etc.

No, it doesn't mean their scum, or going to wreck it but what it usually means is the landlord isn't going to make enough money off the top and sometimes he won't keep the property up. Doesn't mean he is a bad person either, don't put words into my mouth, it just gets into something he can't get out of.
The landlord could just as easily be at fault because he doesn't make enough money off the property. Sometimes that happens.

Where do you think the name "slum lords" came from?


Ever had a SlumLord? (Landlord won't fix ****) - YouTube

I've worked with a landlord who only wanted to jimmy anything he could, said he was broke all the time. Or he'd get to it someday.

That's what I think of when I think someone only has 50 thou to invest into a rental property that's 50 thous and wants to make money. Are they going to fix it? If they do it will be a property with 100 thou in it by the end, he won't be able to charge enough rent for the house fixed up because of the area and comps. Other rentals in the area will be cheaper.
So, he starts taking people who don't have good credit but are willing to sign the lease. Sort of a snowball effect. Of course I shed light on a bad scenario. Maybe someone has a good side they can post.

I haven't seen it work out good on either side. But, I keep stating I am not a professional, this is only my opinion of course and I'm not trying to ruffle anyones feathers. Just food for thought, take it or leave it.

The success I've seen with low income housing has been through the government. I haven't seen many successful landlords who own low end property. Sorry I don't have the other side for ya.

I don't mean to say that all low income renters or landlords are scum though, that's a little harsh. And sure, some middle class homes blow up from people doing drugs but I didn't mention drug addicts in my post. Simply the job market and the stability of working at a low end sales or customer service job. It's different than someone working for Motorola. I'm talking about the stability of the job, not the human being.

[khuntrevor]

but what you are missing is that you will not have a mortgage in the 50K home. It's the people with the mortgage or two, who must get a body in their home. Are you saying that it was a good one 5 years ago at 197K?

[ibarrio]

Originally Posted by khuntrevor

but what you are missing is that you will not have a mortgage in the 50K home. It's the people with the mortgage or two, who must get a body in their home. Are you saying that it was a good one 5 years ago at 197K?

197k is too much. Just like 450k homes (5-6 years ago) in Compton. You can get those homes for 100-200k. Good buy? I Don't think so.

[khuntrevor]

the fact that there are more jobs than residents in 85021 would tend to have a positive affect on values. You're going to be luck to gross 10% on a 150K home in Phoenix. That's not enough. The true investors are looking for 20+% gross and double digit net.

[PoppySead]

Originally Posted by khuntrevor

the fact that there are more jobs than residents in 85021 would tend to have a positive affect on values. You're going to be luck to gross 10% on a 150K home in Phoenix. That's not enough. The true investors are looking for 20+% gross and double digit net.

Well, you sound like you have your stuff down. Good luck to ya. Hopefully it will work out well. Like I said, I don't have any good stories to go on, just some glasses 1/2 empty. lol
I'm sure you'll get a great deal and it will be fine.

[jimj]

Originally Posted by ReadyFreddy

I agree, there are plenty of good renters at lower income levels. Most people do pay their rent, regardless of their income. Just because they don't make a lot of money doesn't mean they're scum or going to wreck the place and sell drugs and disturb the neighbors, etc.

You're right, our neighbors are all that you describe and the rent here is $1300 a month.
Thankfully after a year of this garbage a moving truck is in front of their house.

[ReadyFreddy]

what it usually means is the landlord isn't going to make enough money off the top and sometimes he won't keep the property up.

Or maybe the landlord decides to buy three $50k houses instead of one $150k one for a rental. It's just a business decision. Just because the house is inexpensive doesn't mean the landlord can't afford more and isn't in a highly positive cash flow situation with it rented.

Of course there are slums. There are also a good deal of good landlords and tenants in cheaper homes.

[PoppySead]

Originally Posted by ReadyFreddy

Or maybe the landlord decides to buy three $50k houses instead of one $150k one for a rental. It's just a business decision. Just because the house is inexpensive doesn't mean the landlord can't afford more and isn't in a highly positive cash flow situation with it rented.

Of course there are slums. There are also a good deal of good landlords and tenants in cheaper homes.

I agree, as long as they realize that mortgage is only part of the investment. Here is some good advice, but like I said if they are at the stage of investment they probably already know this. So, I'm sort of putting this link for anyone interested.
8 Issues with Buying Rental Property and Becoming a Landlord

Mobil homes can be a good cheap investment as well. In Phoenix a lot of retiring folks rent them. They'll pay all year just to come down in the winter months.

The older gen make good tenants, they usually have a guaranteed income by pension or social security. AZ is a good one for that. Buy into retirement communities. The initial price is usually cheaper as well. Make sure the community allows personally owned rentals.

Sometimes older people, tired of owning, will give up their well maintained properties for low prices just to move on. Have your agent do a cash analysis of the rental income and the sale price of the home to determine which homes on the market may be a good deal prior to investing in any of them.

Always look into fixers around ASU or any of the community colleges. Gut them, make them indestructible and rent away. Usually a good return on these for obvious reasons. The best renters in these are out of staters. A lot of time their parents will pay the years rent in advance which is helpful.

These are the kinds of properties I would look for. Even if they take work, and are unusually cheap, you will make your money back and for the most part have decent renters or at least a good flow. Of course, this FYI is just IMO. And all won't agree with me. That's fine.

And always have an inspector make sure the building is current with all local building codes and that the home is in good shape before you make the purchase or you can fix it cheaply yourself or know a cheap crew. Renting is a business and you will need to remember inspections of said business and taxes you are responsible for.

I suggest getting all the inspections possible, including structural and pest, just to make sure you aren't buying into a money pit. The more information you get in the beginning, the better informed you will be about the purchase of the property.

LOL, and remember to do all of this really quickly. Because if it is truly a good deal there will be a line of investors bidding on it.