Scott Esmail

30 k for a house, deal of a lifetime?

Yes! believe it or not, there are houses with 4 walls that are livable for 30k. The biggest question you should ask is after finding a property in that price range that may not need a huge amount of work, is what is the neighbourhood like? The neighbourhood plays a vital role in the type of tenant you are going to attract. Is that important, YES! tenants are the one paying you the rent, so there ability to pay and pay onetime is important. H houses can always be improved with money and time, but you won’t be able to move the house to nicer street once done.  There are many factors that play role in a tenants decisions when comparing properties to rent 2 big ones are condition of the house and  the neighbourhood.

30 k house in the hood

Here’s a tip if your thinking about buying a 30 k property.  Never buy it online without seeing the property, even if the realtor says it’s fine. Some houses in decent area’s can be bought without being seen, for example if your realtor saw it and you have gotten a property inspection report from a home inspector and you think it’s in a B area or above. The same does not apply in a neighbourhood that is in lets say a C to D class area, this is the type of property you should see for yourself. Not so much the house but the area and more important the street it is on. What I like to do is before anything else is take a walk down that street during the day. I say day because it is safer if you don’t know the neighbourhood yet. If you think it is okay during the day, go again at night and see, things can often be a lot different at night.

Generally but not alway you will attract the same type of tenant as the neighbours.  Questions to ask yourself,  when looking at other residents on the street, is this the type of person who I feel okay to deal with ? Is this the type of person who I think can pay rent each month and on time ? Do I like the pride of ownership on this street or is it really run down? Would I feel safe coming down here at night to collect rent? Would I feel okay sending my staff down to collect rent at night? If most of your answers or all are “No” then run the other way. Save your money for another deal.

I have found  with many investors who many not be so experienced is that they will buy a house fix it up but not be able to get a tenant who is qualified to pay rent, they end up settling for a tenant who hasn’t met the requirements.  The process after that usually goes like this. They then fail to pay rent, you have to evict, rehab the house again and start the process all over. Also the investor is out of more money because the costs  is much more than they got in rent. Don’t forget the other important thing the time and stress that an unpaying tenant can cause.

So you ask, what do you suggest? I suggest looking for a nicer neighbour lets say B class blue-collar working neighbourhood, with a decent schools. Yes, it will cost more, yes you may have to borrow more or save longer. At least with this type of property you should be able to collect the rent if you qualified right. Also tenant after the first year of completing a lease will tend to want to stay longer in a nicer neighbourhood then a bad one, and yes lets not forget that means no rehab costs, each time a tenant leaves to get it rent ready.

The bottom line is you can’t manage your way out of a bad neighbourhood, and just because the ROI looks great on paper doesn’t make it reality. Buyers beware of the attractive MLS listings/Zillow on-line 30k money pit.

Scott Esmail

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