Generally in real estate, it is believed that properties worth $30,000 or less are not lucrative so investors avoid them like a plague. While it is true in some cases, it is false in others. The thing is, making money as an estate agent on such properties requires certain strategies. There are people who have been making money from this kind of properties for the past five years and they are still making money on them.
In fact, a single investor that understands the business has been able to pull more than 500 of such deals through and he is still counting. Apart from him, there are more than 100 hundred investors that are also making considerate profit within this niche.
When people hear about $30,000 or $20,000 houses, they immediately assume that the houses are either located in war zones or in ghettos. Well, contrary to those thoughts, the houses are neither located in ghettos nor in war zones and they are not even C or D-class properties. They are B-class properties. They are blue-collar, working class areas.
Some of the areas have qualities people look for in the location of their homes. They have big companies around and there are hospitals in the areas too. Most importantly, they are good school districts. If you locate any of those areas, you will definitely make money from houses whose values are $30,000 or below. You will definitely make some money on the houses.
Another not-so-true belief is that such houses would either be a dilapidated property or a meth lab. Some people even believe that it could be a vacant piece of land. Indeed, some of them are dilapidated properties but not all of them. To underscore how good some of these areas are, some of the people that invest in such areas also live there with their families. In fact, there are working class people in some of these homes. So, they are neither war zones nor ghettos. They are not as bad as you think. Your success in the business depends on how deeply you can search.
How it really works
The first step is to mingle with the right people that you can get good information from. You will eventually work with some of the people. This is necessary because you need a lot of information for you to be able to locate houses that yield good returns.
Start your search from a particular area. You will eventually search all the streets in all the areas but you have to search them one area after another. You will need to find out the cost of distressed homes in the area. You will also find out the cost of renovated homes. This will help you decide on which homes to buy and sell. You also need to find an estimate of how much it will cost to renovate a home. Once you come across any home whose current value added to its renovation cost is still much lower than the general cost of renovated properties in the area, you are good to go.
In addition, you also need to study the area very well, especially to know who’s buying what and at what price. You must know the cost of both distressed and renovated properties. A good way to find out a B-class area is the consistency in the sales price of a renovated property in the area. Consistency in sales price in an area indicates that people are investing in it. So, you either buy, fix, and hold or you buy, fix, and sell.
If you decide to buy, fix, and sell, you can either sell it to other investors that may want to buy and hold or sell it to owner-occupants. What matters is that either way, you will make some money. You will buy it for about $20,000 or $30,000, spend some money to renovate it and sell it a higher price. That is the crux of the business.
There are a lot of opportunities in these areas. You only need to keep an open mind and you will tap into the opportunities. Some investors are eager to buy some of the houses because they know they will make good returns from them. In addition, some of these investors live in some of these areas too.
To recap the steps, you need to search for houses whose values are $30,000 or below. Find out the cost of renovated properties in the location. You also need to get the estimated cost of renovation and do your analyses to find out the houses that are profitable.