Why not slumlord in South Bend Indiana?
Sure, there are assaults on the reg in these neighborhoods and gang activity but some of the houses are $20-25k asking and would prob rent for $600 a month. Why not lever up and rake in the fat stacks?
If bought for $25k and put $5k down, then monthly costs are $135 (mortgage, property tax, insurance). Assuming $600 rent, which seems reasonable based on what I was looking at, you would net $465 each month. $465 x 12 = $5580. Maybe we subtract out 2 months rent for vacancies. $5580 - $600x2 = $4380. $4380 vs the $5k you'd put down. Cash flow positive in basically a year boom, less than a year if bought for 20k. Lever up buy a couple of these babies and rake it the fat stacks.
Seems to make sense, eh? There have got to be evil genuises out there making this work in what some might consider to be 'war zones.'
fine looking example property
I don't know what I'm talking about but thought that this would make for an interesting discussion starter
Lots of trouble being a slum lord, destruction of property, violence, being targeted for being the slum lord. If you are the hard nose type who can handle these complications, why not? Bring some people to clean up the area and you can probably do well. I am a little bit concerned about the level of liquidity when you want to sell them later on though.
A friend of mine owns a trailer park...and he has seen some shit. I love money but there's no way I would want to do what he does. Fucking disgusting lol
do tell
I love trailer parks. Awesome investments. Sounds like your friend isn't doing it very smartly. If he's going and physically doing shit himself, he's running that business incorrectly. I love self-storage facilities too.
This is why buying apartment complexes in downtrodden neighborhoods is popular. Welcome to the industrial age, we doth farm the finest potato.
Buy an apartment complex next to ND.
heard through the grapevine that rent is $1025/month per person in a 4 person place, it's absolutely brutal. booked up till 2021 already.
Poverty Pimpin' son. Get it locked in wit Section 8!
Go give it a shot and report back :)
And just look up a good turnkey provider if you actually want to do this correctly while being uneducated on the matter.
Is it wise to even upgrade the property in such an area or just leave it in a shabby condition?
Anything more than a spit shine would be a negative ROI.
AFAIK finding "creditworthy" renters is going to be a huge problem. I've dealt with this business before and it's a total nightmare. Plus in the state I live in, tenants have way too many rights, and you're SOL as the landlord. Perhaps finding people that have the govt pay the rent for them might be the way to go. Not sure how that works but would be worth looking into. Definitely keep the apartment shabby looking, as probably any upgrades done to it will be destroyed shortly anyways.
EDIT: Just looked at the link you posted. Not bad. How come the seller is selling? It's occupied and leased year to year...... If he's cash flow positive and has a tenant then why on earth would he want to sell out? I wouldn't ask this question if the person who lived there was selling. But someone who already has this for investment purposes selling out is a bit sketch...
also I'm game for a partnership on this matter... split risk 50/50 or 1/3 orr 1/4 with 2-4 partners... curious as to overall viability with this
Sounds like CA
NJ, but yeah it's ridiculous...eviction is nearly impossible and way too costly.
There are like a million reasons someone might sell a performing investment property. 1031 exchange... need cash... tired of landlording... owner died, testate
Okay those are some great points. Definitely helps me understand this a bit more.
Outside of Chicago, almost all of the Midwest is suspect. South bend is a dump in the middle of nowhere, with nothing promising on the horizon. When all the boomer pensioners die off, the Midwest / rust belt will be an even bigger hellscape.
There are a ton of dope marks in the MidWest...
Sadly I agree with this. I would say that some of the larger cities in the midwest/northeast that dealt with some form deindustrialization like Buffalo, Boston, Cleveland, and Pittsburgh are coming back or already have, but I legit can't imagine places like Gary or South Bend getting better any time soon.
A couple of problems (although I'm sure there are many more).
1) Getting a lender interested in making you a $20,000 loan would be a first hurdle. For most lenders, it's not even worth their time. If you really wanted to do this, you'd probably want to do 3-5 units at the same time to get a lender halfway interested. I'd also be thinking closer to a 30% required down payment, not 20%.
2) You'd need to live in the area. If you had a single unit, your economies of scale are simply not good enough to justify third-party management (at least not at a reasonable rate).
3) Your turnover costs will probably be high due to destruction of property.
4) If you have a conscience, I would imagine running a slum would weigh on you.
With that said, if you did this in bulk (hundreds of units) I think it makes a ton of sense economically. Accepting Section 8 vouchers would help with the creditworthiness of tenants, too.
Well said. I actually researched mortgages on the property OP linked above....seems the minimum for >90% of banks is $50,000..... seems a personal loan is the only way to finance a property this cheap, and with those the interest rate crushes the viability.
as for your second point, how many units do you think one will need to justify 3rd party managements. OP's business models nets roughly $450 a month of profit.
I'm just throwing some numbers around, but for a property like this, geesh, you'd probably be talking 12% ($860) of revenue management fee (revenue isn't a lot, you'd probably struggle with your tenancy, and you'd probably be dealing with some maintenance issues on a routine basis), but I have to imagine there might even be some sort of minimum fee that would be higher than that given complexities that may be involved. But I could be wrong. Maybe cost of living is low enough in these areas that $800/year fee on one of these units is just fine for a manager who has several hundred units already under management.
To get closer to your 3-5% standard management fee, you'd want to be in the 50+ unit range. When you get into the couple hundred units range then you could start thinking about having your own management personnel.
Sounds like a good plot for Slumdog Millionaire 2
Slumlord Thousandaire: Raking in Fat Stacks
Why not do the same thing somewhere safe in the Midwest?
I mean the kinda place where ppl are so nice that they don't lock their doors. Probably a little more expensive than slums, but still pretty cheap.
I mean Chicago is a major city but it's really cheap to live (cheaper than Seattle). How about average nice suburbs in the Midwest?
I feel bad for places like this... Most of my family is from Western MA, Upstate NY, and Central PA, all of which are places that got absolutely slammed when deindustrialization hit. I have a cousin who works at the US Steel Gary Works (last member of my family to work in the steel industry...) out in Gary, Indiana and you wouldn't believe how much some of these places are hurting. Lots of cities like this... Youngstown OH, Johnstown PA, Fall River MA, parts of Buffalo and Springfield, etc etc. Idk about property values in these places but it bums me out to see how far these places have fallen.
I remember watching a news segment a few years ago on John Fetterman, then-mayor of Braddock, PA. I still remember him talking about how either the only ATM or one of 2 ATM's the town had went bye-bye when one of the last large employers, a hospital, if memory serves, closed up shop.
What's happened to the various steel and rust belts, is tragic. And when we've driven upstate towards Saratoga or Roxbury, the number of roadside businesses that have closed up is really sad, you totally feel like you're driving through a ghost town or a movie set where everyone's off to get lunch.
The majority of my family on my moms side is in Bethlehem PA and my dads side is in Steelton/Harrisburg, so we know steel pretty well. It was a different way of life back then--both my grandfathers, both grandmothers, my dad (briefly), and like a dozen of my aunts/uncles worked for Bethlehem Steel at one point or another. Some of my older family members in Mass worked for the BS shipbuilding division in Quincy. And a lot of them still cant get over the fact that the once great symbol of American industry no longer exists. It was this like big bright beautiful thing that represented pretty much their whole lives, and then one day it just wasn't. Poof-like that it was gone, and the idiots who ran that company refused to face the facts until it was too late. Its super sad and the economic footprint this stuff left behind is even worse, especially in the Midwest-Northeast "rust belt". While the city of Bethlehem is actually great now (I wanna retire there in like 40 years lol) some other places in these states have really fallen a long way. Whether its steel, coal, clothing, ships, guns, or cars, this stuff really hurts when its gone.
Edit: Also, I know Braddock--its close to Clairton (my cousin working out at the Gary Works started off as an engineer at the Mon Valley Works there). Braddock is home to the USS Edgar Thomson plant, part of that whole Mon river circuit. Those river communities south of Pittsburgh have it rough.
Check out this podcast episode from Bigger Pockets- the guest focuses on South Bend real estate because of the attractive pricing. A lot of the people on Bigger Pockets are total amateurs whose strategy is to lever up as much as possible, but this guy is one of the exceptions. Worth listening to.
https://www.biggerpockets.com/renewsblog/2013/08/08/bp-podcast-030-cons…
Fun fact: South Bend is the only place where I've ever been mugged.
nice, thanks
After reading this post earlier today I took a light dive into the real estate market in the South Bend area. I was originally very interested, but I found a major flaw.
If you look at Zillow there are maybe 2 houses within 1 mile of UND's campus for sale. This is alarming because if you look around it there is a significant amount of places for sale in the 50K range that are 2-3 plus miles from campus.
Being the "dangerous" neighborhood that it said to be (I have never been in this area myself). No students or their parents are going to want rent an apartment where the student faces getting mugged on the daily by walking 2.5+ miles two times a day. (To & from Campus)
This leads me to believe that the housing market is extremely competitive in a 1 mile radius from campus; therefore it will be very difficult for a non-resident outsider to purchase the real estate that you are seeking. If someone is selling property in that area I assume there are 3-4 RE firms that are willing to pay a pretty penny for these houses/apartments. The seller is more likely to sell to a well renowned firm than, an outside individual unless you pay a premium. They might even be associated with UND campus making it even harder for outsiders to get in on the action.
This is just my opinion. I would appreciate some criticism or some feedback into my research.
Cordially,
Nick H
Interesting timing. The Mayor of South Bend, IN has launched a presidential exploratory committee.
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