I have found a place that was previously valued at around $25,000 USD for sale at around $9,000 USD pictures show the outside structure appears intact but some windows are boarded up.
Obviously as they show no inside pics, the place has been trashed by a tennant / owner before repo or eviction.
My question is, how cheap is too cheap? there is only a finite amount of $ to spend fixing it up again no matter what has been done to it.
So, for those in the know… what sort of costs might be involved.. yes there are variables but as a worst case scenario if everything except the frame needed replacing what kinda costs would one be looking at hypothetically ? $15,000 – $20,000 ?
(which would still leave it over $2,000 cheaper than the same kinda house in it's area with a brand new fit-out for good rental returns)
place is 4 bedroom 2 bathroom but states it has 2 seperate water and gas meters.. might be i could rent out two 2 bedroom units after it's all done up.what's the worst case / bottom line scenario ?
anyone ? not even a "no dont do it because…" seriously if there have been disasters you have been through with this kind of thing id like to hear all, so i may educate myself.
or on the flip side.. if you bought that sucker for $1 and made a fortune .. there would be a lesson there too.
Pat007
First off were is it? If its an inner city Hood Ghetto property its not worth even a dollar.
If its in a 3rd or 4th tier little town that has little to no crime it could be worth exploring.
for instance I have some rentals in Kokomo indiana,, which is 45 mintues n of Indy… You can buy them for sub 10k usually put 15 to 20 into them… they will rent at 600 to 700… however rents can be alittle challenging there, as there is not a lot of work…
but there is no crime to speak of and absolutly no Capital growth…:term cash flow play and I do not offer these to my investor group I just keep them myself.Now that same house put it any market in the Mid west or east coast that is a big city, take your pick does not matter, memphis , Detroit Indy, Atlanta, Rochester, anything Ohio,,, St. Luis, Kc, fortwayne indiana, Toledo Atlanta etc etc.
And your buying a board up in the run down crime infested area no doubt…. YOu can buy the house and you can rehab it, the house within 5 years will no doubt look exactly how you just bought it…
The only people that can make a go of inner city rentals are the locals that do it for a living, being 6k miles from a low end rental in my mind is juts throwing your money away…Keep in mind these foreclosures are not coming from Owner occuppied they are coming from Landlords that got tired of throwing money down the rat hole…. There is no retail sales to home owners in these neighborhoods.. Anyone who can afford a home does not buy one in these price ranges and or locations.
Just go to this web site http://www.bid4assets.com or http://www.bidforassets.com they specialize in selling these super low end houses all accross the country… As well as you will see land Auctions from various counties across the country, they do most of CA counties land auctions and you will see some interesting items. there…. There was even a lake front developement Parcel on Clear Lake CA. just north of SF and wine country with a minimum bid of 800kkk I know that property well and for the right buyer that was a deal.
Its quite a sport really,,, there are those and you will see big sellers on this site that will pick up one of these homes for 500 bucks then put it up for 2 to 3k.. Never see it never touch it and make a few grand flipping them…
Other than those that play in this sand box most of the property sellers would probably advise you buy something more substantial and in better neighborhoods… You do get what you pay for in the US> by and large
And then theres another term us US investors call these low end homes and not to offend anyone but we call them
TRASHFLOW houses…Just saying
JLH
Trash flows make me more money than any other projects that i have. One mans trash flow is another mans gold mine!
You got it just need to buy 100's of them… 1 or 2 and your going to get thrown out with the garbage:)
There is certainly a place in the US for slumlording and those that live and work it do very well… Its a niche for sure.
Same with those that buy low end Apartment blocks and crappy retail space in high crime areas. there is always some one that will make it a go.
Just not an appropriate investment in my mind for the Out of area out of country investor.
There is a reason the commercial banks in the mid west will not loan to anyone for an investment property if they live more than 100 miles from the property… The banks know they just end up owning the assset and loosing their butts.
JLH
Pat007 wrote:I have found a place that was previously valued at around $25,000 USD for sale at around $9,000 USD pictures show the outside structure appears intact but some windows are boarded up.Obviously as they show no inside pics, the place has been trashed by a tennant / owner before repo or eviction. This is the type of investing that should be done by local guys only. They know the market and the risk associated with this.
My question is, how cheap is too cheap? there is only a finite amount of $ to spend fixing it up again no matter what has been done to it. It not the numbers you buy and fix for.It is the numbers to maintain and hold the property that should be a concern to you. Those are the hidden expenses that the international clients need to focus on. For example every one that is buying in Atlanta and wanting 20 % returns and hoping for appreciation. They are forgetting that each house will need $10 to $15k to bring to a retail sales price down the road. As well no American will buy a home to live in a rental area. So keep that ion mind for future reselling of the properties.
So, for those in the know… what sort of costs might be involved.. yes there are variables but as a worst case scenario if everything except the frame needed replacing what kinda costs would one be looking at hypothetically ? $15,000 – $20,000 ?
For me to replace plumbing $2500 , electric $2500 Ac unit average $3500 clean sewer lines ( thanks jay we do this now on all older homes ) Lucky if we get $500 but some times up to $1500. Now the cosmetics I am not overly concerned with as much.(which would still leave it over $2,000 cheaper than the same kinda house in it's area with a brand new fit-out for good rental returns)
place is 4 bedroom 2 bathroom but states it has 2 seperate water and gas meters.. might be i could rent out two 2 bedroom units after it's all done up. If it is a duplex for sure but again take into consideration about lower end and all the comes along with them. I sell these same deals fixed up ( opps cant say that it would be as the moderator of this site says advertising )<moderator: there is no problem writing about your experiences to add to the conversations and assist other users>
what's the worst case / bottom line scenario ? it depends on what your exit strategy
is and what you want to accomplish..Hope this helps
AlexLets have some fun with this
Could you humor us and tell us where this house is and how u found it? There has been many a time i rolled the dice and score big with these hood houses.
unfortunately the one i was looking at previously has sold and was removed from the site. but there are plenty of similar places out there.
6bed 4 bath or so it claims.. likewise they only do external shots of the property
previous tax value around $38,000 selling for about 9kwould make an interesting case study
pat007
go to http://www.bid4assets.com you will see all sorts of low priced real estate.
Also the last thing you want is a huge house in the NE the heating bills in the winter kill the renters…
I learned this the hard way with one I bought in Chicago…
We prefer to buy where it does not snow and freeze… those conditions are tough on properties and lead to increased maintenance.
I know a lot of Aussies like Rochester, although i know a lot of Aussies got their clocks cleaned there as well… It could be they were paying 80k for these same houses…
good luck
just looked at the link..
Pat that my friend is a money pit.
HOuse built in 1896 way too big for a rental 3300 sq ft. this home in my humble opinon has NO value whatsoever…
Unless you live there and maybe turn it into a little apartment and rent the rooms out seperatly that type of thing,.
Absolutly not the type of property a absentee landlord should buy…
again in my ever to be humble opinion.
JLH
Here is one for ya:
http://www.zillow.com/homedetails/4129-Forest-Ave-Kansas-City-MO-64110/2340572_zpid/
Went and looked at this one last week. Had a new roof on it, probably needs about 1,000 in plumbing, new furnace 1,000 (small house) and maybe another 1,000 for cosmetics. Bank of America will take 3,000 and it will cover closing and the real estate agents fees. I don't get to crazy with cosmetics cause tenants are hard on houses in these areas. So I'm in it for about 6,000 and it will be tenant ready in about a month. Property taxes are around 300 and insurance is 200, that's the average compared to my other rentals.
So lets say u rent it for 8 to 10 months at 550.00, cause i see 8 to 10 months mentioned a lot for low income areas. On average it's about 10 months for me and that's with me doing the property management. It seems the biggest problem is the property management most of the time not screening good enough and trying to nickle and dime you for repairs. A lot of horror stories i hear sound like they could have been avoided if they would have put more time in getting quality tenants. I haven't had an experience yet were the tenant trashed the house and left thousands of dollars in damage, most of the time there deposit covers there wear and tear. You just HAVE TO SCREEN them good and not take the first goon off the street.
These types of houses are a gold mine. Play it safe and get one for 45,000 and rents around 900 lets say. Nah, I'll take the chance and use the money i would invest in the safe house and get 6 or 7 low income houses and make close to 3,500 month.
I agree though, unless you have a good team here. Not something for the OZ investor.
Posted for all us inner city landlords (slumlord, such a crude word, lol)
Kyler
That thing is a beast, they probably were going to make it into a duplex if there was two meters. The plumbing and electrical will be expensive to replace if u have too. That and it will be lath and plaster, always a pain in the butt to work with. I hear the taxes are high as hell in New York also. I agree with Jay though, to much for somebody to take care of over seas. If u have a good team in Rochester it would be worth looking into.
jayhinrichs wrote:pat007go to http://www.bid4assets.com you will see all sorts of low priced real estate.
Also the last thing you want is a huge house in the NE the heating bills in the winter kill the renters…
I learned this the hard way with one I bought in Chicago…
We prefer to buy where it does not snow and freeze… those conditions are tough on properties and lead to increased maintenance.
I know a lot of Aussies like Rochester, although i know a lot of Aussies got their clocks cleaned there as well… It could be they were paying 80k for these same houses…
good luck
The climate thing is an interesting point that i had not thought of , but should have
we get the opposite here in summer, just finished 2 weeks of 35 celcius – 40 C and dropping to about 27 C over nights with the trend for "modern" open plan building it is near impossible to keep my place cool due to the sheer volume of air that needs to be cooled.I wouldn't bid on anything on line if i hadn't been through the whole house, who knows when those pictures were taken
And just think some out of area buyer bought this for 70k from some nice turn key company in 07 and lost all their money.
Kyler,,, there is defiantly a play for locals that can look after these manage them themselves etc etc.
The tenant pool regardless of how well you screen them is going to be hit and miss in these neighborhoods period.
I just got to think that the Absentee landlord just does not want the constant drain on energy managing these that is reality. Your turning tenants every 6 to 10 months. hardly predicatable cash flow.
I have 2 differrent buddies that are in your bizz in KC.. they work it but again the constant turn over is really tough on all but the ones that do this for a living.
JLH
kylermrice wrote:That thing is a beast, they probably were going to make it into a duplex if there was two meters. The plumbing and electrical will be expensive to replace if u have too. That and it will be lath and plaster, always a pain in the butt to work with. I hear the taxes are high as hell in New York also. I agree with Jay though, to much for somebody to take care of over seas. If u have a good team in Rochester it would be worth looking into.I have been put in touch with someone who has a reportedly good team on the ground in Rochester that they have built up over many years, i also know another Auzzie who has a property managed through them and they are very happy thus far. Still investigating the nitty gritty / fine detail of such investments, i love the debate on here it is both constructive, informative and backed by experience on both sides of the investment spectrum
kylermrice wrote:I wouldn't bid on anything on line if i hadn't been through the whole house, who knows when those pictures were takenPeople buy these 1 to 5k houses everyday of the week of off the interenet… Heck people buy 100k rentals off the internet.
It really boils down to the team on the ground and how well the investor vettes them.. And what kind of credentials the team has to present to the investor.
with The TWH Model I have only had one person go and actually look at a property physically,,, they are investing in us the property is important but we are really what they are investing in… Our financial standing and experince and ability to execute.
Just like large Reits and such… Not many of the people that poor billions into these investments ever do more than read a perspective look at some pics maybe google it then buy the stock. They are more interested in the operators track record and financial ability the properties are just the vehicle. Or if you buy any other blue chip stock.. Not many people go and inspect the factory or office complex.. they might go to the shareholders meeting. speaking of this.. That is why I always own a few shares in some of the nicer winery's in Napa… Like to go to the share holders annual party Eh meeting I mean.
JLH
Surprising though, Cali investors eat these type of properties up for $25,000 all day long as turn keys. Most turn key places in Kansas city do them for 35,000 to 40,000 ouch!
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