I see a lot of investors and talk to them a lot. One of them called me this week and told me of an investor that had purchased 15 homes for $300,000(homes worth between $1,000-$5,000). They were all over the place, but most were in the Detroit Michigan area. I have drove through that area and decided to pass on buying investment real estate their.
After the investor purchased the homes he was left with finishing them. The company he was using left the deal high and dry. There was still rehabbing and getting the properties cash flowing. The areas he bought had a very high crime rate and that would add on to your rehab cost. Things tend to get stolen in those type of neighborhoods.
The other problem was the neighborhoods they were in. They were awful neighborhoods and need a lot more attention. When your looking at investment real estate make sure your neighborhoods are solid. You can do this by looking at the area or seeing the type of rents that people are paying in that area. In our area for example if a home is less then $750 a month red flags go up. That may not be all that good of area.
When your spending your hard earned money make sure you check out what that company has already done in real estate properties. I had a client fly in this week and spend a couple days looking at our portfolio(we encourage it) and the neighborhoods. He was very happy at what he saw, after seeing the areas he put a 5 bedroom home under contract for $26,500. It will cash flow $700+ a month.
Always remember that the real estate investment game takes some investigation on your part. Just because you find a cheap home doesn't always mean it's really that cheap. Check out some areas I like and see what you think? Click here to view Brett Young
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