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In places where a house can be bought for $50k and still rented for $700+/month, what is the catch? Also, might it make financial sense to accept a lower-paying job just to move to such an area and start buying them?
Has anyone here relocated to an area simply because it had cheap real estate, and then bought a lot? Was it worth it?
We have relocated but not bought a lot because we know the realities. I have seen people do it and unless you are really, really lucky, and most aren't, it will be a big mistake.
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Originally Posted by Jkgourmet
Where can you buy a home for $50k and rent it for $700/month? (Without doing tens of thousands of dollars in repair and upgrades before it's habitable)?
Kansas except for the metro areas.
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Originally Posted by WildColonialGirl
Listings don't tell the whole story. I would hazard a guess that the $50,000 houses aren't able to be rented in their current state, or that the list price is not necessarily the sale price. If that is truly the situation, then I'd expect the market to be cutthroat and values for both rent and sale to be changing rapidly. In SE Michigan a lot of those super cheap houses owe large amounts of back taxes or have been empty for a long time, so need rehab. In a depressed economic area you're also going to run into defaulting tenants, which will quickly eat away at any profit. I would also guess from previous renting experience that the expensive rents are not the same houses or neighbourhoods as the cheap houses.
It would be a very peculiar market if many people would choose a $700 rental over a $250 mortgage. These sorts of markets exist where there's a lot of very short term or seasonal labour, and even then they tend to get bought up by people looking to profit.
Also, don't forget you won't be deducting interest, you won't get cheaper rates like residential borrowers do, and you won't get county tax breaks.
In most parts of KS, a $50,000 house is livable in its current state. Here we have houses for both sale and rent at the same time and yes at the point you are talking about a $60,000 house, you can rent for $700.00 a month. Sadly, there are a lot of vacancies and that is why you don't want to go big scale here. The better the house, the more likely it gets rented at all.
Downside is that these houses are in economically depressed areas. There are jobs though if you really want to work but low cost areas also mean lower paying jobs. There are production jobs paying from $8.00 to $12.00 an hour. Generally shopping and other amenities are more limited.
These high rents prey on people who can't make a down payment. They pay so much in rent that they can never save enough. It is a sad situation really.
Sound good? Try the job service in KS. We need residents.
Where can you buy a home for $50k and rent it for $700/month? (Without doing tens of thousands of dollars in repair and upgrades before it's habitable)?
Much of PA, OH was already mentioned. Western NY state, western MD (go to maybe $60K there), large swaths of the South.
A lot of those houses for sale are being sold by people that had the same idea you did.
Weren't you the person that asked about Youngstown before? A city with declining population. When you can't reverse a declining population you have services and schools that suffer. The tax base continues to shrink. No jobs means no people that can afford the rent. You also have to look at the houses in the neighborhood. The one advertised may be the only one that isn't abandoned or burned out.
I spent from 1972 till I retired as a commercial/investment real estate broker. I bought a lot of houses for clients and myself. I also lived in the Northern Suburbs of Detroit for a year, so know a little about that area you are talking about and would be afraid to go into such a neighborhood to collect your rent.
1: Those $50K houses you are talking about are in very undesirable areas. If you buy one of them, you will be a slum lord.
2: Rents on $50K houses are not in the $700 range.
Where can you buy a home for $50k and rent it for $700/month? (Without doing tens of thousands of dollars in repair and upgrades before it's habitable)?
I love all the incredulous replies. I get that a lot too when discussing real estate with folks. It really is shocking to some people.
My wife and I bought our first intentional investment property in Jax for $40k with an additional $20k in rehab. It rented for $875 (now is $900)
Bought our second one for $30k with an additional $30k in rehab (poor choice in GC, now that I've tried out half a dozen GCs I know that one should have been closer to $20k rehab) and it rented for $960.
These both have high-quality young professional tenants who really love where they're living.
We've since bought over a dozen more, with equity partners and with lenders, most performing in similar fashion (just a few that don't but those we intentionally purchased in much higher priced area geared more towards the appreciation play)
In Jacksonville (and elsewhere) you can actually get much better gross ROI than the OP states above. I see stuff all the time that could be had for about $20k (including repairs) and will rent for $600. But these are in rough neighborhoods, will usually be old with frequent maintenance issues, and will never appreciate much. They're basically there to be passed on from one investor to another. You can make good money investing in these (especially with Section 8) but it's not something we choose to do.
Quote:
Originally Posted by ncole1
In places where a house can be bought for $50k and still rented for $700+/month, what is the catch? Also, might it make financial sense to accept a lower-paying job just to move to such an area and start buying them?
Has anyone here relocated to an area simply because it had cheap real estate, and then bought a lot? Was it worth it?
It could certainly make financial sense but does it make sense for your lifestyle?? You can invest from long distance...plenty of people do. In any case, I do know a number of people who have relocated for real estate investment...but thats their profession. Being in Jacksonville and in this industry, actually, I've met many people who have moved here in the past 3 years because of the market. I also know people who have moved to other places...Detroit (about two years ago) and Vegas (7 or 8 years ago) specifically.
Anyway, I didnt read the entire thread but I think I noticed a few people mention some of the issues you must be aware of. Firstly, in FL property taxes and insurance are higher than average. Secondly, you will have costs maintaining your properties. This applies everywhere...high-priced NYC where it's almost impossible to find cash-flow positive deals and low-priced Jax where it's hard not to find a cash-flowing deal...but when your rent is so low that maintenance cost can take a much higher percentage than a pricier market. That is, a low-priced home that is essentially the same condition and size as a much higher priced home in a expensive market is still gonna be subject to the same maintenance issues and will cost roughly the same to maintain, maybe a little less if labor/materials are a little less. So you're better off getting that much larger rent check each month...
So, with those things in consideration, yes, it still makes sense for some folks to buy these houses up.
I spent from 1972 till I retired as a commercial/investment real estate broker. I bought a lot of houses for clients and myself. I also lived in the Northern Suburbs of Detroit for a year, so know a little about that area you are talking about and would be afraid to go into such a neighborhood to collect your rent.
1: Those $50K houses you are talking about are in very undesirable areas. If you buy one of them, you will be a slum lord.
2: Rents on $50K houses are not in the $700 range.
You are talking an apple and orange argument.
Hmm, I actually know people in Detroit who are doing this. In the suburbs, areas decidedly not slummy, even by non-Detroit standards. You can get homes ~50k that will rent at $800 or more. But it's about knowing the neighborhoods well, or having someone you can really trust who does. I cannot stress that enough!
So why can't I become one of these people looking to profit? If I get a decent job out of grad school, I'll have more than enough to buy one in cash within 1-2 years, so I don't care about interest rates or interest deductions since I won't be paying any. What am I missing?
Don't forget opportunity cost. You need to make a comparable amount compared to another investment.
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Originally Posted by ohio_peasant
But before one gets too agog over a potential cash-flow bonanza for slumlords, note that property taxes (as percentage of house value) are high, maintenance costs are high, and consequently cash-flow margins become low. The overhead of being a landlord isn't much different on a $50K house vs. a $500K house, and given the age and condition of the roof/water-heater/etc., the cheaper house might actually have more overhead. Some of my coworkers have a couple of these $50K houses that they rent out, and while there is an annual profit, it's not especially high, and it involves frequent service-calls. The landlord is of necessity a part-time handyman.
Exactly, if you were not local you'd need to be paying for a management company, plus the costs of the materials and trades. A water heater is a water heater, even in a junky house. A plumber doesn't charge less per hour because the house was cheap (although, they would probably charge less than in a HCOL area).
The upshot is, you'd have to really know the area, and given the OP's propensity to think he knows everything about something after five minutes with redfin and a calculator it's a disaster waiting to happen.
In places where a house can be bought for $50k and still rented for $700+/month, what is the catch? Also, might it make financial sense to accept a lower-paying job just to move to such an area and start buying them?
Has anyone here relocated to an area simply because it had cheap real estate, and then bought a lot? Was it worth it?
So, bottom line location....location......location. Move that same house from the rust belt to silicon valley or the gold coast and the land it sits on is worth more than 50k. As far as living there, that depends on you, what are you're goals? Do you want to become a developer or property investor/manager? Is there something you know about the area where you see potential for increasing values? Do you just like it there?
Where can you buy a home for $50k and rent it for $700/month? (Without doing tens of thousands of dollars in repair and upgrades before it's habitable)?
In much of Maine....a little different story, but we bought a big old rental house a few years ago for $40,000 cash. The owner had cancer and needed to unload. It was in good shape. We put in $5-6,000 for upkeep. We get $1,200 a month but it's a duplex. A few tenant issues but it's a nice small town (middle class),so nothing we couldn't handle.
Last edited by maineguy8888; 05-16-2015 at 09:47 AM..
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