(ok I’m reading this board on a Sat. night so I guess I must have no life :rolleyes)
If you own a cheap rental house in a marginal or bad neighborhood, do you encounter the same tenant issues (people trying to pay their rent with cash, etc.) as the low income apt. tenants, or is there any improvement? Thanks.
There is a pecking order in life. Rich people live in mansions. Upper middle class people live in McMansions. Middle class people own houses. Lower middle income people live in rental houses. Lower income tenants live in apartments. The lowest of the lower income tenants live in public housing. A very small percentage of the population are bottom of the barrel drug addicts and/or mentally ill and are homeless.
Yes, in my experience, there is a slight difference between the tenants in low income rental property and the tenants in low income apartments. Having said that, I wouldn’t consider tenants paying the rent with cash to be bad. Quite the contrary, I encourage it. Cash doesn’t bounce (just be sure to check it with a counterfeit pen)!
Thanks Mike. Another thing I was wondering–do you buy rentals that only need cosmetic rehab, or full rehab? I was reading on the Wholesaling forum that a lot of landlords prefer to buy properties with only cosmetic so that they can get them ready for rental soon, but I was wondering how these people get cash flow/good buying price if they’re buying props that are in pretty good condition already?
Remember, many people are lazy. Many people looking to buy a house for their family won’t want to put in any work. Since there are lots of properties on the market, they’ll pass on the one that needs paint/carpet/some work in the kitchen or bath/etc. for another one that doesn’t need as much work. With all the properties out there now, you can find a REO or desperate seller.
I have low income apartments and low income houses as well. And what Mike said is my exact experience so far.
As far as buying for cosmetic rehab only, this is what I do:
I like buying SFH’s and small apartment buildings that have been vandalized myself. In my area you can get these REALLY cheap. And as long as the city doesn’t know (no code violations) then you don’t need to pull permits (a.k.a. hire licensed guys). I’ve been buying stuff with no plumbing and electrical (stolen copper). Lately i’ve noticed a decrease in copper theft though. This was huge last summer when prices were so high. The perfect combo is a bank REO that has sat on the market since the summer badly vandalized. In my area, they are begging for just an offer on these. One house I bought a couple of years ago had about 2lbs of feces in the rear bathroom in addition to no copper. One of the most disusting things i’ve every done, but that house now makes approximately 250 dollars a month in income and I would do it in again.
To be a serious rental property investor, you need to have the tools and knowledge yourself to do basic repairs like this anyways. Unless the HVAC compressor unit is missing, which is it almost always is, then I can rewire the inside and replumb with pex for less than 1K dollars most of the time. I’ve finally discovered how to get cheap HVAC units and cheap labor as well. (cheaper than installing baseboard heat instead)
I made a deal with a tenant of mine who does this full time for a large company in the area. He told me his company has a collection of slightly used ones from upgraded homes that he gets for around 100 bucks each. He gets a free months rent for installation labor from me and I pay for hook up materials as well. Not a bad deal!
I agree with John that you can get some GREAT deals when the property needs more work. You don’t need much know-how to install PEX water lines. If you can put a child’s building blocks together, you can do PEX. It’s easy!
Having said that, given the choice, I would much prefer to buy property that doesn’t need much work. If I can slap some lipstick on a pig and rent it out, I’d rather do that than spend a month working on a property.
ME TOO!! But that still isn’t happening here in my area. I know of just about every real estate transfer in the county, including price paid. You can’t find 50GRM deals with little to no work. Not here not yet. Trust me, if I could do this I would know already. This isn’t the rust belt, which in the long run probably is a good thing.