In 2014, when I was looking for my first investment property, I came across this house:
At the time, it was listed for $67,500.
- 3 beds
- 2 baths
- 1,534 sqft
The interior looked nice - nothing special. For a rental it was "good enough."
The investors I was working with thought that it would only need some "cosmetic repairs" before it was rent ready. Cosmetic repairs = new paint, clean the floors. Maybe an extra $3,000 total.
Some of the positives:
- Brick exterior - less maintenance and wear and tear
- Curb appeal - it looks like a nice house
- 3/2 in the areas could command a higher rent than 2/1 (3/2 = 3 bedroom / 2 baths)
- The neighborhood also had a lot going for it
- This house was located in the 33205 zip code
- At the time, I had identified this area as potentially a place that could undergo rapid appreciation. Why? The neighborhood to the east of it had recently undergone a lot of appreciation and there were many new businesses moving in. The houses in that area - Riverside - were already too costly to offer much in the way of investment opportunities.
- After talking with some investors on the ground, they agreed - this area had appreciation potential.
- While this neighborhood wasn't as crime free as a Class A neighborhood, overall the crime stats looked good (look for the PIN).
- This was not good. Generally, you want your schools to be at least a 5 or 6. But when you're buying in lower price point areas, you won't always find those.
- I mentioned that I liked some of the appreciation potential of this neighborhood. But of course, buying something and hoping it appreciates in the future is a recipe for a disaster. So my first goal is to ensure that the property will cashflow. That means, after all expenses (including loans, if any) there will still be leftover money to make it worth my while.
From what I could gather in the area through Craigslist, the high of the area for 3/2's were around $1,000. The low might be around $750. This particular property, with its curbside appeal and the fact that it was in a nice area, I was thinking would be nearer the higher end. Let's say $900.
Housing comps can vary a lot in this neighborhood. On the low end, you might find 3/2's that are going for $30,000-$40,000 and need $20,000+ in maintenance. On the higher end, you might see houses going for about $75,000-$80,000.
After talking with local investors, the consensus was that the house was properly priced - maybe a little bit on the low end.
So there you have it. The information that I had at hand.
What would you have done? Would you have invested? Why or why not?
To find out what I did and what the results are, come to the October 17 meetup where I'll tell update you on the latest.
If you're not sure you can make it, then post a comment below and I'll let you know how things turned out!