Investor · Vincennes, IN · Member since 2013 · 223 posts · 108 votes
We are in a rural, Midwest market where a $300,000 home is expensive. The homes we typically do, sell for $130k-$250k. They seem to be our bread and butter, where we can do a quality rehab and still make a profit.
We would like to increase our volume and we are trying to figure out a way to make something, with the older 2-3 bedroom bungalows, we have around the area. Does anyone do anything with these homes and how do you manage to make a profit, with the margins being so thin? Most usually need some sort of serious rehab and you can quickly put $40-50k in one. The less you pay for one the more you have to put into it. Just seeing if anyone has managed to flip these homes, on a regular basis and still make a profit?
I did a couple but the profits were so tiny, and risk so high, I've chosen to not do anything with an ARV less than $160k (and that depends on what I can buy it for and expect to have to put into it).
I bought one at Sheriff's Action for $45k and sold it for $110k but had to replace most of the drywall. After all expenses, including selling costs, I made $20k. I was fortunate that the HVAC system, roof, siding, foundation and bath shower were all in good shape and it already had vinyl windows. It was a learning experience. Even without major issues, it was a lot of work for little return.
I personally have never done anything in those price ranges except in Texas back in 2006-2009. I don’t think it is worth the time if you have other opportunities with higher spreads. Could you just increase your cast of nets to gain more opportunities in the price ranges you already have?
I think properties under $100k rarely have enough upside to be good flips. Almost all our rentals are under $100k homes but none of the deals we've made would have had enough margin to flip. For buy/hold rentals they work fine.
I has made a living in the under 100k space for approaching 30 years. Mostly in smaller communities in Texas and surrounding states
Typically, the buyers appreciate the lower end materials such as tile counters, inexpensive laminate/tile flooring and low end appliances. Keep in mind at this price point it is not possible to make a home perfect and access to dependable cheap labor is important
The difficulty is most of the buyer pool needs FHA or USDA financing which comes with minimum standards and conditions