Author Topic: Should I buy a 25k property?  (Read 2045 times)

rawr

  • 5 O'Clock Shadow
  • *
  • Posts: 5
Should I buy a 25k property?
« on: December 17, 2019, 09:42:53 AM »
There are some very low priced homes in my city (25k) that are located in an area that is undergoing revitalization. It's fairly rough right now, C or C- neighborhood, the street I would be buying on is 1/3 abandoned homes, 1/3 occupied homes that are a little rough but folks keep their lawns mowed, and 1/3 beautifully restored historic homes that millennials are buying. There are two major developments less than a mile away that will be completed in 2-5 years. The property I have my eye on will need about 40k  in renovations to make it livable. Comps in the area for renovated homes are 100,000+

I've done a lot of research on real estate but I've never bought a house before. Just wanted to consult the hive mind---I'm a risk averse person, but this seems like a gamble that might pay off. I have enough saved to buy it outright, but I would prefer to leave some of that money in the market and just put down a hefty down payment.

Please let me know any thoughts, things to look out for, etc. Thanks fellow Mustachians!




JLee

  • Walrus Stache
  • *******
  • Posts: 6272
Re: Should I buy a 25k property?
« Reply #1 on: December 17, 2019, 09:46:33 AM »
Is this to rent or to live in?  What are comparable houses renting for?

rawr

  • 5 O'Clock Shadow
  • *
  • Posts: 5
Re: Should I buy a 25k property?
« Reply #2 on: December 17, 2019, 10:04:07 AM »
I would hold it or rent it, it would rent for about $750.

sammybiker

  • Bristles
  • ***
  • Posts: 433
    • Making 200k in equity in 6mo - Back down the rabbit hole, long distance RE
Re: Should I buy a 25k property?
« Reply #3 on: December 17, 2019, 10:21:19 AM »
@rawr  If you're going to live in it and work on it slowly, taking this as a learning experience that may or may not boost your networth while showing you a path towards FI via real estate investing, then do it.

If you're going to only rent it out and you're truly risk adverse, no way.  Purchase at $25k + $40k rehab only to rent for $750/mo in a C neighborhood on your first deal, absolutely not.

rawr

  • 5 O'Clock Shadow
  • *
  • Posts: 5
Re: Should I buy a 25k property?
« Reply #4 on: December 17, 2019, 11:05:26 AM »
Thanks for the advice, truly appreciate it!

waltworks

  • Magnum Stache
  • ******
  • Posts: 4720
Re: Should I buy a 25k property?
« Reply #5 on: December 17, 2019, 10:05:05 PM »
What do property taxes look like? At the low end, your overhead matters more than the purchase price. If you have high insurance/management/tax numbers, there are plenty of places you wouldn't want if they were free (I'm not kidding, this actually exists in parts of New England and maybe soon Illinois).

If you were going to live there and learn about rehabbing/house hack/etc, different story. But if you just want an easy investment and you're risk averse, terrible idea.

-W

leighb

  • Stubble
  • **
  • Posts: 160
Re: Should I buy a 25k property?
« Reply #6 on: December 21, 2019, 10:13:43 AM »
A $25 property can be a good investment. But even if it sucks as an investment, it will be a good education. You will learn all the ways a property can cost you money and all the ways tenants will lie to you. You will also find great contractors and make good connections.  Often the only way to learn these things is by doing it. A cheap property is a nice way to go because they are simple and you won't have to take out a mortgage. So if (when) things go wrong you won't be looking at a foreclosure. It's harder to invest in cheaper properties because you might not get that investment back. Just because you put a new $15,000 roof on the house doesn't mean that the properties is now worth any more than the $25,000.

I have few "cheaper" properties. Many I bought at the bottom of the housing market. 20% of them have lost me money, and the other 80% have now paid for themselves. I've learned a lot from each of them.