buying houses $ 30,000 and below

[Romao May]

Question is does anyone know the criteria for buying homes of this price ? How would you get started .

[Joe Villeneuve]

Originally posted by @Richard Dunlop:

Don't buy in the war zone.

 Less than $30k doesn't mean an automatic war zone.

Having said that, one of the biggest problems with buying so low is it takes a long time to recover your cash...and you will be buying with cash, since it is almost impossible to get any type of mortgage funding for anything under $50k.  So you think you're getting a great deal, but in fact if you spent $20k more it would be an even better one...that's if the deal warrants it.

Why? Let's say you bought a house that cost $30k (includes rehab) and is worth $60k, and your positive cash flow, buying with $30k in cash, is $500/month or $6k a year. You can get a refi loan from your lender up to 75% of the ARV. Unfortunately, that is only = to $45k. You will recover your cash 5 years later, if you have no problems during the next 5 years. That means for the next 5 years, you are BEHIND. The house you bought can have all the equity in the world (in this example 50% = $30k), but from a cash standpoint...and it's your cash that allows you to move beyond this property and into the next deal, your cash is being held prisoner in the house.

Alternative? Buy a house that cost you $50k, where the ARV is $72k, and 75% of that is $54k. You can refi out your $50k in cash you put in, and if this house cash flowed at $600/month before debt, it should be around $350/month ($4200/yr) with the refi payments.

On the surface it looks like you're $150/month behind...but you're actually ahead.  Why?  You have no cash left sin the deal anymore.  That cash you used, is making its way to your next deal.  This property is positive cash from the first day, unlike the other $30k property which is $24,000 behind the first year, $18,000 behind the 2nd year, and so on.