Make Millions on Undesirable Properies
“Only invest in property that you would feel comfortable living in yourself”. Here is some advise you may find on the internet, and if its on the internet its true right? While this advise is free its also worth what you pay for it.
The bulk of the properties I have purchase are probably looked at as undesirable and yet they stay occupied with rent paying tenants. How is this possible? Who is wanting to rent these properties?
This probably has less to do with “desirable and undesirable” and more to do with the fact that people are just different. Everyone has their own ideas of where they wish to live, and how.
Although there is many many ways to invest in Real Estate, when it comes to values there is 2 strategy’s.
- Investing for Cash Flow
- Investing for appreciation
I have mainly invested for cash flow as you can read about in my post “Make Millions in the Coming Crash“.
Reading this article you will see that I bought 17 houses for on average about 30-35,000 each. Today those properties are worth over one million dollars. These houses rent, on average, for about 900 monthly.
As an example, in an alternate universe maybe I was investing for appreciation. Maybe I was buying houses that I felt comfortable living in which cost 75,000 at the time.
Those same houses would probably rent for 1200 today. I would have less turnover and a lower maintenance situation with repairs and just with problems in general. FYI- Affordable housing is more management intensive by nature, not every instance is, but overall thats the deal.
Guesstimated Math- my payments would have been roughly more than twice as much probably leaving very little to nothing left over for cash flow. My profit would be made later on in appreciation since these houses tend to increase in value more than affordable housing does.
There is no right or wrong here despite the free advise you may get online. These are just different strategy’s at your disposal.
I feel comfortable with affordable housing for a couple reasons.
- I originally lived in these neighborhoods
- affordable housing will always be needed
- recession proof strategy
- guaranteed monthly income at my disposal
Currently, there’s a trend happening across the country. People are having a harder and harder time finding inexpensive housing. Builders are incentivized to build luxury not affordability. There is very little housing being built for people who can’t afford granite counters, indoor heated parking, balconies and locked lobby’s.
Cities are beginning to react to this by loaning and giving money through elaborate programs to people willing to build or rehab affordable places. Additionally, laws are being enacted in many places aimed at controlling rent and also requiring landlords to accept rent assist.
This problem is further evidenced by growing homelessness in major cities. If and when a recession hits no-one has to live in high end rentals, they do have to live somewhere. In my opinion, this is why affordable housing is recession proof. Provided you’re a buy and hold investor.
“We buy Ugly Houses” is a Franchise co. that has made a successful business model out of teaching people to buy houses that no one wants. If you can buy an ugly house and add value by making it a little less ugly than you can make money.
Houses can be undesirable for a number of reasons…..
- floor plan
- unleveled floors
Ugly House Take 1
I had a home once that I purchased for 35,000 and it had a terrible sewer smell. No matter what I did I couldn’t shake it, I even had the city walk through in addition to a plumber.
Besides the smell it was on a little street that almost resembled an alley. It wasn’t an alley but you just got the feeling that it wasn’t quite right regarding where it was.
This house was so ugly even ugly people didn’t want to rent it. In fact, not many people wanted to.
I had several bad experiences with tenants breaking leases and giving us a “Kentucky Fried Headache”. I decided to cut my losses and sell it.
I listed it for 55,000 and was forced to do a complete remodel since the tenants left it a wreck when the Sheriff physically removed them. I ended up accepting 50,000 cash and in the end, on one of my worst houses ever, I still made money.
Ugly House Take 2
I once bought a house for 10,000 and really just bought it cause I couldn’t believe how cheap it was. This house had no yard or even grass. It was a miniature house on a miniature lot shaped like a triangle.
One side was a busy road, one side was bordering the next door property and you could almost reach out the window and touch the house. The 3rd side was an alley and off the alley was a little parking spot.
The ugly didn’t stop there, when you looked at the front of the house it had a door on the ground level and another door right above it on a balcony. The back door was the only way to enter the main house and to enter the basement you had to go into the lower door in front.
When you walked into the back door you were immediately in the kitchen, the only bathroom was off the kitchen with only a shower (no tub). The bedrooms were upstairs in the attic and chopped all to hell. There was even a midget room, meaning you had to be 3 ft tall to walk through the doorway. I’m a short dude but even I was too tall for the room.
So when I originally went into the house to look at it there was a…..ummm-working girl inside taking care of a client. This girl was not even renting a room, she was squatting while running her business. Thats some gangster shit!
Anyway, my realtor Jim, thought I was nuts wanting to buy it but I liked it. In an alternate reality I could see myself living there, it appealed to my minimilist nature.
When we informed the working girl she couldn’t be there she was fine with it. They collected themselves up and proceeded to walk through the alley right outside the door into a flop house type place right behind the house. In fact there was several apt’s and houses located on the alley!
If I tried to rent it during the summer there was always shady people hanging out on porches and it just turned people away. In fact, I was suspicious of any applicants who actually wanted to live there. At one point I was renting this place for less than a comparable apartment.
Again, after several “Kentucky Fried Headaches”, I threw in the towel and listed it for 50,000 and accepted 35,000 for it. Even after installing a new roof and siding I still made a little bit of money.
After paying cash for the house the 550-650 monthly rent went right in my pocket, for several years.
To sum shit up, you dont need a house worthy of the pages of “Better Homes and Gardens” to invest in. Don’t think you have to be willing to live there either. Most of all, dont trip if its UGLY! May just be an opportunity.