My Strategy.
Hello all, I am a total noob to this site, but am curious to see if anyone handles their rental game the way I do.
I live in a high dollar town that is 25 minutes from a low dollar town (think "fancy Detroit ghetto"). In high dollar town you could buy a $100,000 house that would appreciate some over time and you could probably rent it for $900 a month. You could by a $200,000 house that would appreciate better and rent it for $1200-$1300 per month. In low dollar town there is a floor as far as single occupancy rentals in cost, around $450. Meaning, even the poorest people who need a single family residence will pay $450, but that is for the worst piece of shit you could possibly find. You can buy, on a rare and good day, a horribly ugly POS house that is solid, functional, safe and in great need of some aesthetics for around $15,000.
I have purchase the following POS houses for the following prices over the past eight years in this order.
1. $33,000 POS, rents for $500
2. $20,000 POS, rents for $525 (I had to dump an additional $6,000 into this place to get it ready)
3. $12,000 POS, rents for $475 (I had to dump an additional $5,000 into this place to get it ready)
4. $15,000 POS, rents for $700 (I had to dump an additional $11,000 into this place to get it ready)
5. $40,000 OK house, Rents for $825
People tell me I am a slum lord and look down on my hobby, but these POS houses, ugly as they may be, in crap/dangerous neighborhoods though they may be, all keep out the weather, all are warm and safe and solid.
And the best part is, they all make $ and have long term tenants, some of whom are section 8, even better!
I figure it is much more profitable to spend $26,000 on something that rents for $700 per month than something that cost $100,000 and rents for $800, even if the POS house will never rise in value.
Anyone else focus on POS houses that have a FAR higher rate of return?
Anyone else get accused of being a slum lord?
Anyone else not give a shit and smile every time you cash the checks?
Just curious, most landlords I know seem to focus on really nice houses……
Most of these were found on Craigslist and one even had the oozing remains of a dead guy stained on the living room floor…..floor paint works magic! I have found the best way to buy these things is to find about 10 houses that feel like they might be a good fit, look at them all. 8 out of 10 need bulldozed. But when you find one that will work you fist ask them what their bottom dollar is. They always say a number lower than what they are initially asking. Then you have to think of a price that is extremely insulting, then chop it in half and offer that. You might get one in ten people who are desperate enough for the money or tired enough of the headache and they will agree to your price. Once I bought one for $5,000, but sold it the next day for $7,000. People say I have no shame…..maybe they are correct.
I have a job that pays around $75,000 a year and want to quit so desperately, but I figure I need five more houses to do it. I don’t buy a new house until the ones I have are paid off so this snowball is finally getting to the point where it is rolling faster and getting larger….very exciting!