It's possible to gain profits when buying, remodeling, flipping or renting out “cheap” properties, and America still has an abundance of reasonably priced investment properties in the real estate market. Remember, that a lower price tag doesn’t necessarily mean a cheap or valuable investment. In reality, it’s true that you can lose money quickly by purchasing cheap real estate if you’re not doing proper due diligence. I will share some ways you can minimize your downsides when working with— and investing in— homes that are less than $70k each.
Location, Location, Location
Yes, there is a difference between well-priced real estate and an a “cheap” property. Sometimes properties are not worth that much now and won’t be worth much ever. This has a lot to do with where the property is located. When you pick a property in the right location, this will help keep you away from an investment that has no chance of appreciation. The important point is to always pick a property in a great location that has a good foundational value and steady demand.
Insure, Insure, Insure
You need to purchase buyer’s title insurance. This is particularly the case when buying significantly discounted homes at auction or properties that are in distress. Agents and Auctioneers will attempt to walk away from any liability as soon as possible— an entirely understandable response. Just make sure you cover yourself by buying title insurance.
I have bought auction properties sight unseen. I’ve also used this strategy on out-of-the-area properties, and still, I’ve stayed profitable by keeping my offers smart and on-the-money. It doesn’t make a difference if you are bidding on a $2M property in Los Angeles or a $30k property in Indy— the secret is to buy undervalued property and secure a profit from the start. We hear it constantly that you make your money when you buy.
Inspections, Inspections, Inspections
What happens to a many investors is that they get themselves a “cheap” property, only to be faced with the prospect of throwing in more than the purchase price in renovations. Get accurate and reliable inspections done, unless you are on-point with your rehab numbers.
Top-Tier Management Company
There is quite a bit of investors out there who are simply not good at operating lower-end properties. They don’t get the tenants or processes. If you're a poor manager in general, it doesn't matter if you're managing cheap or high end—you will not do well in either. When you have great management, you will be able to turn those lemon properties into sweet lemonade profit machines. I would advise NOT to manage these type of income properties from afar. It will quickly turn into a full-time job.
As an investor, you have many low-priced and appealing properties you could invest in today. Be certain you know exactly what you are buying. Price your offers correctly. Have legal protections in place and secure good management. This will be the keys to you making money instead of losing positive cash flow.