Buying homes with 850 Square Feet or Less?

Question

Hey Guys, I'm looking at a home with a little less than 800 square feet. The deal seemed good at first. The location is good. The neighborhood is good. The rents are good etc. However, we've never purchased a property this small before. Even the duplexes we have are 1000 square feet. Are you guys aware of any issues with marketing, renting, selling, pulling equity, etc.? No other home in the area from what I can see is similar in size. Our main concern is our ability to pull equity as our strategy for growth stands on that feature. Any insight is helpful. We are in Michigan if that helps. Thanks!

Account Closed · Answer

@Deon Knott For a rental it doesnt seem to be a problem but if you need refinance it and pull out money i worry it wont appraise the way you want if there are no comps similar in size. do keep in mind though appraisers can go out in distance into similar or competing neighborhoods or back in time to find homes of similar size so maybe try expanding your comp search 1st to see what you can find.

Billy Smith · Answer

My fist rental was a REO “A” area 875sqft SFH, I did a complete gut job, the area is booming with growth now. This house competes with apartments but with a yard and privacy that eludes apartments.Everyone wants to buy it that lives there, this house is very easy to rent just a few days.The rent started out at $775 to $1000 over 6 years. The house is worth around $1050 to $1100.I just fresh up paint every other renter gives or take.

Deon Knott · Answer

@Frank WongThanks Frank! Thanks to all of you guys. Looking more into it the home is 600 square feet. We have design ques we always try to implement that we will definitely apply here. As far as layout, obviously the room dimensions are small. The oddest thing is the two bedrooms and kitchen all are off of the living room. But, the bathroom is off of the kitchen. Meaning, you'd have to go through the kitchen to get to the bathroom. On the plus side, the lack of sq ft is made up for with a huge front yard (largest in the block)a very nice shed out back and it's rent ready. I'd just do some cosmetic touches. Is this too small or too strange of a layout to work? The property will cash flow and we'd be doing a buy and hold.

Frank Wong · Answer

It all depends on the layout. You will need to have a nice finishes. Vinyl floors stainless steel appliances granite counter. That's what I did to my house but it was also in a nice neighborhood and rented it out in 10 days easy.

Joshua B. · Answer

Okay for rentals but hard for flips. People are okay if they have to deal with the small space for a short period of time, but it becomes a problem if you're looking to sell to a owner-occupant.

Deon Knott · Answer

@Jerryll Noorden sounds like you were personally offended at his remark. I can understand why. But what you have to understand is the vast majority of people don't approach college with this level of attention, planning, and engagement. And thus they don't reap the rewards that you have. Furthermore it takes a lot of time and money to accumulate those credentials unless you were a stud in highschool or already have the money to pay. That's just a fact or else we wouldn't have the student loan "crisis" that we have or at least supposedly have now. Your accomplishments are remarkable. But your comment was the exact tone as his. College didn't work for him so it was a waste of time. College worked for you so it's not a waste of time. You're both just speaking from your own experiences, you a bit more aggressively so. And with reason because you have verifiable results. The point is if we don't know anything about this kid or his aptitude the best advice to give him is based on what would be most effective for the average person. It doesn't suit the average person to commit 15 years of their life to higher learning when they could just jump into the field and pursue real estate now. It sounds like you already believe yourself to be an exceptional and above average person as "you have done in 1 year I'm REI than most have their entire career". If that's true I agree. You are exceptional and above average. But that's not the average person. Heck, even the founders of this platform didn't do what you did. That alone proves college, while great for some, definitely isn't necessary and very likely isn't the best path for alot of people who want to pursue REI. But don't think I wholeheartedly disagree with you. I have a Bachelor's in Marketing and if I could do it over again I would probably get a nursing degree or some other STEM degree to pay off debt sooner and have a better DTI ratio with less debt and a higher gross salary. Also, it would provide me with a network of potential investors with other gross salaries to go in on deals with me. Short story long, more than one way to skin a cat.

Jacob Sampson · Answer

Oh and in answer to your actual questions. No, there shouldn't be any significant difference in renting, pulling equity, or selling. Just make sure you don't purchase for the same price as a 1000 sq' home.

Jacob Sampson · Answer

I love smaller homes. All maintenance is cheaper. Need to replace roof, no biggy. Paint, flooring, no problem. Plus rent on an 800 sq ft will be nearly identical to a 1000' assuming bed and bath are the same.Give me a 2 bed 1 bath 800 sq ft' home on a slab all day long.