Cheap purchase in area increasing minimum wage.

[Aaron Vernon]

I am interested in investing money in upstate New York where the economy is not the best,  but also not the worst.  I can purchase properties for 20k that need about 10k in repairs that currently rent for about 400 per month.  I understand that their minimum wage will be steadily increasing over the next few years.  I am trying to figure out if this increase in minimum pay would help or hurt rent prices. Am I missing something in my analysis?  I figure that I'm getting in the market while values are low. Do rents follow minimum wage increases?  Or can they crush job growth?  Will I be holding a worthless property because businesses will just move to another state? 

[Jeremy Kalaf]

You say upstate NY.  Where specifically?  I am in Oneida county, which is actually upstate.  Some people think that Hudson county is upstate just because it's north of NYC.  Not the case though.  Albany, Syracuse, Utica, Rochester, all upstate.

There is never a shortage of renters in our area. $400 is a little low in your estimation. Look through Craigslist in the For Rent section. Yes, you can buy a $20K house, and put $10K into it, but what's the ARV you're estimating? You'd be better off looking for ARVs of $70-100K. 2 Families are popular, too, but you seem to be a long distance landlord.

If you can find a decent property @ $50K that doesn't need much more than $5K in rehab, renting can definitely bring you $600-800/month, and have the tenant pay utilities.  

Taxes can be a bear in this area, which might damper your passive income, but rehabbing a property that you buy cheap might not raise the taxes based on a newly established ARV.

Areas also make a difference.  A neighboring town could have a much different rental rate based on school district.

Let me know if I can help.