Low income population segment

[Glenn Espinosa]

So I've been looking at different rehab models within my area and I think I've uncovered a niche that at first glance seems to have a lot of potential.

The market for 2/1 single family homes in low income/transitional neighborhoods seems to be very light. I'm talking about 800-1000 sq ft homes that would essentially require a 400-500 sq ft master + en suite addition to turn them into 3/2 1200+ sq ft homes.

I've seen a handful of these that are going for 30-40k and would need about 50-60k worth of renovations, conservatively. ARV is 125-135k with avg profit spread of around 25-30k.

Initially I thought that the low price point would mean lower DOM as you could assume there are more buyers in this market segment. Surprisingly, however, I've found that these houses are sitting for about 4-6 months on average.

I'm thinking this is probably because of the increased lending restrictions in todays market and how people at this price range generally have lower income and less than desirable credit.

Has anyone else seen this trend in their local areas? Are profits moving towards the higher end areas where the young, professional crowds are spending top dollar for homes (eg. DC/Philly/Silicon Valley)? Any creative strategies for me to lower the DOM for these types of houses? I was thinking maybe owner financing/lease options for buyers with borderline credit but it'll take some convincing to get me down that route.

Anyway, this is definitely a model I want to explore and any ideas to tweak it before I dive head first would be greatly appreciated.