When I got started investing in real estate it took me awhile to figure out out to actually put together a deal without using much money. The problem was that I did things like working with Realtors who didn’t understand what I was looking for.
Sure, I had explained that I wanted to get into fixer uppers and that I wanted to put as little of my money down as possilble. What I didn’t realize was that most Realtors don’t really understand what a motivated seller is or why that’s so important for a real estate investor who wants to put together a winning deal.
“You can get into this one with just $40,000 down.” The Realtor mentioned as we were leaving the third property he had shown me that day. I almost choked in response to this. First off, I didn’t have $40,000 and if I did then I most certainly wouldn’t put it all into one property.
Before long I discovered that focusing on cheap investor houses made so much more sense than trying to buy that really nice home that had already been fixed up. As for Realtors, I said goodbye to this one but ended up meeting others who had a better understanding of what us real estate investors are all about.
One example of a cheap house that I bought – by calling on an Realtors ad – was an older home that the owners Bill and Gloria had inherited from Bill’s father when he died about five years previously. I found out later that Bill and Gloria had originally sold the house for $110,000 and carried back the financing.
That’s one of the reasons that I like to look for cheap investor houses is because the owners are often more willing to finance it for you. This may be due to the fact that it’s harder to get new financing in some of these areas.
The home was divided up into four units which included a 2 bedroom apartment, a 1 bedroom, and two studio units. When I spoke with the Realtor he told me that two of the units were vacant and that the owners had just taken the property back in foreclosure from the people they had sold it to 5 years previously.
It had been on the market priced at $89,000 and the owners had just lowered the price to $79,000. I ended up getting it for $69,000 with the owners carrying back the financing for most of the purchase price.
After all the prorations at closing I ended up needing about $3,500 to buy the house. I learned quite a bit while owning this properties and some other similar cheap investor houses including how to put down carpet, vinyl flooring, and how to fix basic plumbing.
When I sold it a few years later it was fully rented and looking much better than when I had originally bought it. I found another investor who was going to live in one of the units and therefore qualified for owner-occupant financing.
The check that I took home from closing was equal to about three years salary when compared to what I used to make as an auto mechanic. Cheap investor houses may not sound glamorous but they are a good way to get started investing in real estate.