I’ve been debating this question for the longest time, please give me you input (pros and cons). One of my targeted market for SFHs are 3bd/2bath in working class neighborhoods. The issue is that most of the houses in these areas are RENTAL houses and will probably will always be rental houses (ie, you will make more renting them then fixing, flipping them). I’m a buy and hold guy. How long am I holding??? At least til I pay it off the mortgage, which is about 10-15 yrs.
The houses usually, runs about $65K (that total cost, purchase price, rehab, closing costs, holding). And they rent for about $1000. My credit is great, 790’s range, and I can get these at about 6% mortgage rate.
So, my question is this. Is it wise to invest in these houses, if the only option is to always rent them???
Neighborhoods stagnate, deteriorate, and then rebound and are rehabbed. Some just continue to go downhill becoming more and more low income or industrial.
Since you want to hold for the long term you will need to get educated on your area.
Think about it–if Starbucks, or Wal-Mart or the Hilton are going to invest in a community they come in and do a big analysis and projection of average income, income growth, customer base for the future.
That’s exactly your situation. You need to know where and how to invest in order to make the most money. What will be the “hot” neighborhood in 10 years for young home buyers.
I would try the Chamber of Commerce (you want to invest in the community) and also the local development council, etc.
If you start seeing upscale stuff going in somewhere, be sniffing around. Upscale buyers/renters should follow.
Good luck and tell us about your research, and how you did it. We will be very interested as this is a topic affecting every investor.
I’d say if your putting at least $100 a month in your pocket after the the $500 a month in expenses more power to ya’. So long as you have the stomach to be a landlord or bought good enough to pay someone else to run it. It is not as sexy as flipping and making a better chunk of money short term. But I am sure there are some guys on this sight that are getting fat on good old boring cash flow. You said… one market you are looking at. Maybe these neighborhoods aren’t the best for flipping, then where is? So now you have 2 strategies: a buy and hold neighborhood and flip neighborhood.
One side note: I like the 3br thing, but I try to avoid the 2nd bath. An extra bath gives me three extra drains to unclog, sink, tub/shower, toilet. If there is room to put one in at a later date I’ll do it before I sell.
all the best,
Brian
Are you worried about being able to sell when you decide to do so? Maybe a rent-to-own program at that point would work for you? Give a family of renters a chance to own with a nice rent credit for a year with option to buy. Now you’ve got interest income.
MakeTheMoney, I read that a 2nd bath is wise b/c it means the difference between an emergency plumbing bill, or having a day or two to get it fixed, since the tenant is not without facilities.
Also, do any of you guys have in your contracts where the tenant is responsible for drain clogs?
I don’t know how long you’re holding, but I’m holding FOREVER! Why would you ever want to sell if the properties are giving you a nice, stable income? Don’t eat the goose that lays the golden egg!!!
The houses usually, runs about $65K (that total cost, purchase price, rehab, closing costs, holding). And they rent for about $1000.