What is everyone’s feelings regarding 1 bedroom single family houses? We have a potential deal, but I’m a bit apprehensive because I think it will be difficult to keep it rented. Here’s the deal.
Price= $18,500 (listed)
487 sq ft
built in 1921
House is in a decent neighborhood in a small town (pop approx 6,600). House looks like it is in decent shape (from pics, and yes we will definitely make a site visit and evaluate). Comparible rentals go for around $300/mo.
My concerns are:
- Small town = not many job opportunities
- 1 bedroom = I would think there would be a limited amount of renters for 1 bedroom
What do you guys think?
I pretty much stay away from 1 / 1 properties as there also hard to exit from at the end of your investment!
However for $18.5k this is an extremely affordable property and over 10 years could recover your complete cost’s, but the down side is it takes 10 years to get to a point of exiting and making an actual profit.
I believe you will find it takes all your additional cash flow to upkeep and maintain this property over 10 years having been built in 1921.
We have some 1 bedroom apartments. They stay rented and we have middle age to older tenants in there. Mostly divorced women (a couple with boyfriends living there) and a married couple. Our rent is close to your comp amount.
Pretty rare to find a 1 bedroom house though. With that low rent, I wouldn’t be too worried about job opportunities. This place will be pretty affordable. Do a lot of people from that town commute to a larger town for work?
You’re right about limited renters. You’ll probably get people like we have or maybe a young couple just starting out.
Since you won’t be able to get much rent out of this place, I’d make sure the mechanicals are good going into the deal. Replacing a roof will kill your cash flow for a while.
If 1 bedrooms work where you are then they are ok. What you need to do is think about who will be attracted to that type of house and figure out if that is the business you want. When I was growing up my dad had 1 bedroom house and they attract a different person than a 1 bedroom apartment. You will find it is more likely to be a single man than a single woman and they almost always remind me of Ted Kaczynski or John Wayne Gacy. You know nice guys but not very socially adept.
One good thing is you usually don’t move a lot so you can get a long term tennat and they never throw wild parties to tear up the house and never have the cops out for domestic violence. You can have a tendency for them to try to turn it into a crake house (but that could have just been where my dad’s houses were)
Thank you for the replies.
Justin: Thats part of the problem. I have a bit of a soft spot for this town since I was born and raised there, but yes most commute. The ones who are employed in the town are probably 70%-80% government employees. They either work for the school, city, or the prison in the neighboring town. It’s sad to say, but the town is dying. No new businesses, no economic growth and with the big G doing lots of cut backs these days I don’t see job opportunities improving in the near future.
Gold River: I agree completely. I hate to sound greedy, but I just don’t see enough profit margin in this to make it a winner. I have to admit, my business partner and I are very eager to get a property. We have been successfully investing in tax liens and obtaining great yields, but realize there is probably more profit potential in actually owning property.
We really want to get started acquiring properties, but I tend to follow a value investors approach. If it aint dirt cheap with a lot of profit potential I don’t want it. lol. This causes us to pass on a lot of deals.
I’ll probably investigate further to see what all has been updated in the house, but it’s not exactly what I would like for our first deal.
It will be harder to rent than a 2 or 3 bedroom, but someone will rent it from you in time. If the numbers add up - do the deal - thats my philosophy. I personally wouldn’t do that transaction because the rent is too low, but if you want to go for it, do it.
One-bedroom houses can be the most attractive for furnished rentals. I was in the same boat as you about 8 years ago.
I has just moved to this small economically static town. I bought a home near my kids’ school, that being the reason for the move.
In the backyard was a boarded-up cottage. I started renovating it and was distressed to learn that market rents were $300-$400/month. So instead I fully-furnished it–bed, TV, linens, dishes, towels, everything.
I discovered a hidden market of short-term workers who need a furnished house for usually around 3 months. I got $900/month from the first traveling nurse who responded to my newspaper ad.
Then I made a whole business out of fully-furnished rentals and am still doing it today. I like the quality tenants and the high rental income. I don’t like dealing with $300/month tenants.
You say your town is full of government workers…where are they staying? Are your hotels getting the $70/DAY government per diem rent? Lots of government workers travel. They like the washer and dryer, the pet yard, the home feel of a little furnished 1-bedroom house.
In my experience, you can buy that 1-bedroom and pay it off quickly. We currently charge $1395/month for our furnished 1-bedroom houses. That’s $46.50/day, way better than a hotel for most traveling workers.
Your exit strategy can be like mine–sell that furnished, free-and-clear little house someday on an owner-carryback note. Have that income than without appraisal, Realtors, extra fees.
You might be sitting on a gold mine. WHERE ARE THOSE GOVERNMENT WORKERS STAYING AND WHAT ARE THEY PAYING? They will love staying in a charming 1921-era cottage with all the amenities. It’s worth a shot.
I love that business model and funny thing is, the house would be sold to us already furnished. However, most government workers are local. There are a few that travel and rent, but most of those people rent the higher end houses in town.
In any case that is definitely something we will look at if we can determine there would be a market for it. Thanks again for the insight!
In my opinion, you won’t be able to determine if there is a market by talking to locals. Here all the locals that I spoke to thought it was a terrible idea: “Furnished? Your place will get trashed! Don’t do it!”
The locals related renting furnished to flophouses, boarding houses, or other low-income furnished rentals. You need to be the high-end alternative to a hotel room. With a washer/dryer, TVs, dishes, pet yard.
If there are hotels in your town, there is a market. Can you get stats from your local Chamber of Commerce on local hotel occupancy rates? That will tell you a lot. Also, find out what the hotels charge weekly and monthly guests.
Buy that little furnished house and run a test ad in the paper. You should be able to get between 3 times to 4 times unfurnished rent. There IS a market.
Currently staying with us are traveling doctors, nurses, physical therapists. Two families whose homes burned down. Two engineers repairing solar and airport stuff. One aircraft inspector. Two medical students doing their local training. One temporary manager for a barbeque chain restaurant. One transferee from the Bureau of Land Management, etc, etc.
Ask for a minimal stay of 30 days. Just build it and they will come.
"Staying in Ourtown? Try our fully-furnished 1-bedroom private charming cottage. $1200/month, $40/day, utilities pd. including washer/dryer. Pet friendly, all credit cards OK. Call engineer xxx-xxxx anytime to see. Great hotel alternative!
The more I think about it the more I like it. If there is a market for it, there is almost zero competition. I’ll get a hold of our chamber of commerce tomorrow to compare notes. Thank you so, so much for your help and advice! Wish us luck!
P.S. - This forum is awesome! Thanks again!
We just had a traveling ultrasound technician check in yesterday. She loved our business of small (mostly) furnished cottages.
I quote her: “Small furnished houses are SO needed in most towns, because there won’t be extended stay or other accomodations suitable for the 3-6 months that I have to live there.”
“I’ve been all over the US, working, and this rental and the price is perfect for me.”
We run 95% full constantly and with a waiting list. Good luck, and feel free to contact me for tips. I do like my little home-grown goldmine.