Hello I am a new investor. I have spent the last 4 months honing my skills I am still having a hard time finding good deals or so I think good deals. I live in Reading, PA THere are three colleges surrounding the city and we are flooded with 2 bed 1 bath homes that are going cheap. These homes go for 19,000 and top out at 25,000 I know the investor rule is try to find something thats 3 bed 1 bath or more but I want to find a different niche. Should i test the market and fix a 2 bed 1 bath in to a urban college students dream apartment “IKEA style” and charge per room or should i stay away?
There is no investor rule that you should find 3 bed, 1 bath. That’s just silly. The divorce rate is WAY up and I just heard yesterday that 40% of the children born in Ohio last year were born to unwed mothers. I have a bunch of 1, 2, 3, and 5 bedroom houses and every single one is currently rented. There is an increasing number of single mothers out there who need two bedroom rentals. There is also a demand for 1 bedroom houses, although not as great as for 2 or more bedrooms.
At any rate, I don’t see any problem doing a 2 bedroom house for a rental. The most important thing is to buy at a discount and be absolutely sure that it will cash flow.
As a landlord in the NYC metro area, I can say there’s a greater demand here for 2BR apartments versus 3BR apartments or 3 BR houses. While 3BR’s are great for families, in the main, single professionals, 2 roommates, a married couple, one or two people who just retired prefers 2BR’s.
Usually, they go for a 2BR condo, as 2BR houses are rare in my area.
You should do well with a 2BR house. Housing prices, and rentals are actually two different markets, since folks considering renting look for things different compared to somone owning a home. For instance, I have a SFH on a corner lot, small backyard.
People looking to buy don’t like corner lots because it’s a lot more sidewalks to maintain, and because of setbacks, a smaller back yard. But renters, especially young singles, or even families who entertain likes them because of the additional parking, and the fact that they have less of a yard to mow or maintain.
Getting good cash flow means buying something that buyers avoid, thus lower prices, BUT renters love to rent, thus higher rents. Where these two factors intersect, you have a good cash flow.
Keep in mind if you buy cheap, expect to sell cheap, since the buyer would probably be another investor.
Thanks everyone for your help !
I agree with everyone else. It is a local question. In Houston renters live in apartments until they want a garage. So if you don’t have a 2 car garage it will take you twice as long to get a house rented. What moves the fastest in Houston is a 3 bed 2 bath 2 car garage 1500 sqft or over that rents for $900 to $1100/month. If you can find that it will lease in a week. I know in Virginia it is rare to find a rental with even a 1 car garage. I always thought that was backward, in a state that it snows every year garages are rare and in a state where it never snows they are mandatory. Look at what moves where you are.
Let’s not forget about our divorcee’s! I’m currently renting a 2 BR sardine can, which is known as the “divorcee house” in the neighborhood, because of the stream of us that comes through one after the other. I opted to rent this house while I try to sell my primary residence in SC and finalize my divorce.
This house (and the 2 next to it) are interesting case studies. Young guy bought this house - 2/1, 650sf - from his dad for 50k in 2003. His dad basically gave him a gift, or is as clueless as he is. He probably put $1000 into it; new appliances, and a pitiful painting/wallpapering job, decent floor refinishing work, a few lightbulbs. ARV=200k+. My rent is $700. A literal steal for this neighborhood-the LL is getting robbed. He lives in the next town over and has no idea what rents go for apparently, and has a crappy mgmt. co. in another city handling it for him. I’ve told him his mgmt. co. stinks, he knows his mgmt. co. stinks, but he says his dad said to use them, so he does. Whatever. He’s a truck driver, he’s cash flowing, he doesn’t care. I’ve casually talked to him about buying it from him, but he’s well aware of the market value, if not overly optimistic. Moron.
His dad owns the next house over. It’s a 2/1, 700sf, to a YOUNG married couple. I mean young (19 & 20 y/o) but they are very nice, low key christians-really weird to see in society. Anyway, they pay $750/mo. The next little house is owned by a little old lady, and it’s the same as these, a shoe box, and it’s rented at $1475/mo.
These 3 little houses stick out because they were built almost like cabins back in the 40’s on someone’s property smack dab in the middle of an arts & crafts neighborhood that was built in the 1920’s. All large 3/1’s that start at $330k, go up to the $500’s, then next street over $750k straight up, then across the street from that is the Grove Park Inn golf course, if anyone’s familiar with Asheville, NC.
Sorry to digress so profoundly…I’d post a pic, but this BB doesn’t seem to be photo friendly. My point is, 2 BRs are valued by a growing # of society-divorcee’s.
It sounds like you may have found a great opp to aquire property so reasonably priced in an active college town. A 2/1 house is actually the perfect size for a roomate share. At those purchase prices, you should do well as far as cashflow is concerned especially if you keep your head with the rehab. Be practical, yet tasteful and you will attract decent tenants.
One tip…contact the student services office at the nearby colleges to see if they offer off campus graduate student housing. If so, then try to get in that network. Graduate students can be better tenants beacause they are usually older and sometimes more focused than undergrads.
Best of luck to you!