Hi Folks,
How are you? I am very new in this forum.I am from New York , USA. I have very basic question, Please answer me with your experience in details with reasons.
Option A:
(1) I found some single family houses (presently rented or ready to rent) at the price of $25k to $60k. I can rent the for $600 to $1000. Even if I don’t take any loan, I can afford to buy these with my own money. Let’s say 3-5 houses like that. After insurance, maintenance,taxes, I may get $400-$500 per month per house spending $150k-$200k (more or less) (not a penny as loan). It is about 6 hrs drive from my present home. It is a small city of 30000 people with all facilities and amenities of suburban/town. Home prices in that area will increase very slowly. But rent is definitely possible.
Option B:
(2) I have another offer to buy some properties at the price of $50k-$70k. It is only 2 and half hours drive from my home. I have to buy these houses and repair them for $20k-$25k. Rental income will be $1200 per month max. I may be able to buy 2-3 of these (without any loan).This area is very promising and resale value is good. Like for a remodeled house in that area ,can be sold at $120k-$140k after one year which might be bought at $70k-$75k (with rehab cost).
Please suggest which option I should take. Or I will just buy and hold it for some time and sell it again. My main goal is to have more properties so that the net rental income slowly replace my present income to get financial freedom finally.
I can buy more house in Option A with stable rental income whereas I can buy half of the houses in the option B with a great potential to higher resale value and higher rent in option B.
Please suggest me. Thanks,
Hello Alan. Welcome to the community.
You raise good questions, and I’ll do my best to try and help point out the issues.
But first, which option seems best to you? And why? Do you prefer profit potential (Option A), or convenience (Option B)?
At the start of my investing career, I would have gone with Option A all day long. Being an accountant, I would have been wooed by the return, and having more time than money, would not have minded the additional travel burden.
Now though, being somewhat older, and hopefully wiser, and with more money than time, I would gravitate to Option B – happy to earn less, but more easily.
But there may be even another option… properties even closer to home, which are income earners, but with more growth upside.
After many years, I have discovered that the cashflow gains made by purchasing in higher-income lower-growth areas tend to be less than the capital growth by purchasing in areas which have higher-growth, lower-income.
So, applying the above, my approach is to invest in residential for growth, and commercial for income.
And the McKnight mantra about which property to target? The one that will make you the most money, in the quickest time, for the least risk and lowest aggravation.
All the best,
Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Hi Alan,
As Steve has shown there are many options – even too many to mention right here perhaps, but do spend some time familiarising yourself with this site, and some good books on the subject. Also did you check the link in the welcome message I sent you (the “Big Picture” one)? It shares a host of different thoughts on the “How to” and “What to watch out for” in property investing. Also on this forum website’s Home Page there is the Training Centre. Spend a month or two just looking and learning of the many options you have open to you.
Here’s an extra thought that I had on reading your first post:- Depending on your borrowing capability, is it worth considering financing some/all of these purchases? You see, if 5 houses can return you $400 each, what if you bought 10 instead using finance? That could work better in a higher capital growth area as you’d have twice the number of properties gaining equity even as the income pays down the mortgages. Of course, that decision would need to be tempered with your lack of knowledge – i.e. don’t jump too soon, but spend some time educating yourself to all possibilities, then go with the one that makes the most sense to you.
Welcome Alan – do come back with more questions if you wish,
Benny
Just to extend on your option B, once you up the house and rent it out you should have created some equity. You could then refinance out that equity to buy another similar house to do up and keep repeating. This is the benefit of buying cheap houses with cash and creating value. Get with a wholesaler in that area who could probably show you great offmarket cash deals that you wouldn’t see on the MLS.
HomeBuyerLouisiana | Home Buyer Louisiana
https://homebuyerlouisiana.comAussie entrepreneur investing in New Orleans houses
If you are new comer, I would have suggest you Option A.
when you gain some experience in investment.you would go with Option B.
You can buy the house and rent it out you should have created some equity. You could then refinance out that equity to buy another similar house to do up and keep repeating. .
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