Let us clarify. By “cheap” properties, we’re certainly not referring to those in crime-ridden neighborhoods or the home that’s been abandoned for a decade. And “cheap” will come at a different price depending on the real estate market in your area, but generally you’re looking for properties below the $100K mark and as close to $50K as possible.
Focusing on properties that fall within this price range offers two major rewards.
Risk Of Investing In Cheap Properties
There is an inherent risk that comes with investing in any property, but targeting cheap houses greatly reduces your potential danger. You’re risking less money from the beginning and you’re allowing yourself a greater rehabilitation budget if you want to make higher quality upgrades.
You can also reduce your risk of sitting on the property for an extended period if time by networking with several real estate professionals who are familiar with the area. Ask how quickly properties are sold. Get a list of comparables so you know the potential profit to ensure the purchase is worth your time. If you go through with the investment, stay in contact with the realtors, contractors and others with whom you speak with so you can better market the finished product by word of mouth.
Before you invest in properties that will need extensive work, even if the majority of the fixes are cosmetic, ensure your team is solid. You want to surround yourself with real estate professionals who will give you honest feedback on the house, fair prices for work and who understand how to market the property once it’s complete.
Competition For Cheap Properties
What you’ll discover when investing in cheap properties is there is generally much less competition. Many real estate investors, especially beginners, go after properties that need minimal work before being put on the market. The geographic location of the property may also decrease investor interest. Don’t be afraid of up-and-coming areas. Many first-time home buyers are often willing to invest in properties because of what the neighborhood is becoming, not what it is currently.
The competition for the finished refurbished home, however, is steep. When you create a beautiful property that falls within the budget of most working-class Americans, you have more showings, offers and sell more quickly.
Dismiss the stigma that surrounds cheap properties and begin exploring properties outside your usual style and location. You’ll be surprised at how easily you can purchase these homes and make a profit by investing less.
Reduce your risk and increase your ability to turn a profit with properties between $50K and $100K. Forget the unnecessary stigma and enjoy a less competitive market when you include these properties in your portfolio.