Old, Lower Income Rental Units
I've decided that landlording is the way I'd like to get into the REI world and have been scouring my area for multi-unit properties in my price range.
I've found several several properties in a town not far away which appear to provide solid cash flow when the numbers are plugged into the performinator tool. My concern is the age of the properties, while cash flow is nice, if the property value decreases (along with the rental income) what will I be stuck with in 10-20 years?
These properties are priced in the $60,000 (2 units) to $90,000(4 units) and rent from $350-550 mo. per unit.
I'm not sure of the future of this town but the surrounding areas are very strong.
Any feedback/experience would be helpful.
I did the same thing 10 years ago. They are all still standing. Had i not refinanced them all from a 10 year loan into a 30 year note they would all be paid for. I got govt grants too on a lot of them. The numbers look good especially on a 4 plex for $90,000. I bought one once for $5000 but it needed about $30,000 in rehab. Wish I still owned it. Go for it nothing but up from where i am sitting. Rents will rise and so will the values
Good LUCK and Thank You
Hope this helps some
Ted Jr
Quote:
On 2004-02-03 09:29, Tedjr wrote:
I did the same thing 10 years ago. They are all still standing. Had i not refinanced them all from a 10 year loan into a 30 year note they would all be paid for. I got govt grants too on a lot of them. The numbers look good especially on a 4 plex for $90,000. I bought one once for $5000 but it needed about $30,000 in rehab. Wish I still owned it. Go for it nothing but up from where i am sitting. Rents will rise and so will the values
Good LUCK and Thank You
Hope this helps some
Ted Jr
Ted, could you tell me how to, or where I could go to find out about getting gov. grants?
Me toooooo!!! Thanks, Tim
Yes, Ted. Could you please tell us more about the govt grants that help you fix up houses.
Thank you in advance.
Tedjr gives us a hint in this thread
http://www.thecreativeinvestor.com/modules.php?op=modload&name=Forum&file=viewtopic&topic=19173&forum=20
I like these old buldings too, and if the numbers look good, then all the better. One small point I'd like to make is that sometimes cities with these old buildings like to come along and force you to bring them to current code, whether or not they are in violation of grandfathered code. For instance, where I hang out and drink 40's, the city wants to force us all to hardwire smoke detectors - even in those well-kept, grandfathered beautiful old buildings. It's not the rule yet, but they are trying. Sure, it might be only a few grand, but something to consider. Z[ Edited by Zach on Date 02/04/2004 ]
I agree older small multi-units are a good way to start. It reminds me of how I started in REI in 1976. I had just completed my freshman year of college and decided,I hated living in the athletic dorm. I found a duplex 2/1 each side a half mile from campus for $14,900.00. I spent most of the summer painting the house inside and out,and putting on a new roof lol. I still own the house today and it has returned more than 12x my original investment. Stay in it for the long haul and everything will be OK!!!
Yeah, I had that happen in my first home. It was an old row and I had to replace window ropes, light fixtures, wiring, you name it.
I was just glad I could do it myself, poor families who had to take out the "low-interest" loans they were offering for the repairs. I guess somebody's brother-in-law made a killing on that deal.
Thanks also for the insight, I'm gonna get movin' on one of these places, some of the deals I was looking at are already gone!
For what its worth, it sounds to me like you are paying way too much if these are truly low income rentals. I don't know anything about your area, or what you are calling low income, but I would not pay anywhere near that much in most places that I call low income areas. The advice given above is good, but again, each of these people has there own idea of what you mean by low income. Cashflows can be deceptive for low income when you plug them into a calculator. There isn't space here, but I would try to get hold of some PM's or realtors in the area you are interested in and try to talk to landlords there. I have known many people who have given up on trying to make money on rental units that sold for less than half what you mention. An example would be one of the real estate agents I use. She bought a low income house for around 20k and spent 18k to repair damage that vandals and crackheads kept doing to it AFTER she bought it. After all the stress she went through over several months she finally managed to sell the house and get out with a 22k loss. Things like this happen all the time, and are the reason you see so many people selling properties in these areas. These areas are actually my favorite for investing in but you really need to get a lot of local advice first. The vast majority of problems can be avoided if you have someone who will take the time to help you. One of hundreds of tips is, don't visit a vacant property you own in one of these areas before 9am. If you do, there is a decent chance you will come face to face with someone who broke in the night before and is still there.
The area is small town poor, not big city slums. And with a 4 unit at $84,900 (listed) with $1,750 per Mo. in rent my concern was with the future value of the property, not the current value.
I drove by several of these properties on Saturday to check out the area. 3 of the 5 I looked at are off the market today!
I'm going to keep my eyes and ears open and be prepared to move quickly in the future.
Thanks for the PM advice, I thought of it during my drive by but it had slipped my mind (I'm not getting any younger).
Jeff
Hello! I too have had my eyes fixed on an older multiple family dwelling. I want to use it for a sober living home. How do I get a govt. grant? I am new please help!
[addsig]
I think you are on the right track looking at older properties. It still seems a little suspicious looking at the numbers though. I will qualify it again with the fact that I don't know if we are talking about the same thing as far as what is considered low income, and rental markets vary by location. That said, I don't know of any profitable low income properties in my area that fit those numbers. The payback period using the price divided by the gross rents seems reasonabe. However, in one small town(pop 45k) next to me where I invest, you could not reliably keep good low income tenants in apartments for those kind of rents. Anything over about $375 is a big stretch for them, and if they are going to have to stretch that hard they want a house not an apartment. You can get very good low income houses with nice yards for about $400-$500 in my area. My experience has been that apartments with rents over $350 in low income areas have high turnover, high vacancies and high crime, high expenses, etc. Most low income people are on disability, SS, or work at low skilled jobs which have similar wage scales across probably 80% of the country so these numbers shouldn't be too far off in your area. I'm sure things are different in areas that have limted rentals available for the demand, but that wouldn't apply to the majority of places.