Success in SFR investments in Wellington Heights Neighborhood?

Question

Has anyone had success investing/renting out SFR in the Wellington Heights neighborhood in Cedar Rapids? We are just getting started in REI and there could potentially be some good deals on the housing in this area, although the neighborhood is sub-par but slowly improving I believe. Thanks for any input.

Andrew D. · Answer

@Melissa Mullane When I first began buying SFR I focused strictly on getting the most reasonably priced homes and they ended up being predominately Wellington Heights and Mound View.  As I advanced in what I could afford I stopped buying in those neighborhoods but have not sold the 5 rentals I have in those neighborhoods.

The CoC on these houses are phenomenal and they cash flow ridiculously well.  I have had good luck keeping them rented with quality tenants but you do have to take your time finding a qualified tenant so that might mean a month or 2 of vacancies between tenants.  I also believe in diversifying my investment portfolio so it only makes sense to have houses in all different areas of Cedar Rapids.

One thing to note is that a good portion of that area is deemed a historic district.  That means that you cannot alter the exterior of the house ie install vinyl siding or vinyl windows.  Most exterior remodel work needs to be approved through the historic society so you have more hoops to jump through.  All in all I don't think its a bad area to start investing with limited borrowing ability but I wouldn't invest solely in that neighborhood.

Andrew D. · Answer

In my experience its been difficult to find newer high cash flowing properties in our market.  The majority of my houses are 100 years old.  I buy them distressed and fix them up and rent them out.  After the rehabs I really haven't had many problems and they all cash flow very well.  With newer houses its hard to find properties under 100k that then rent for 1050 to 1200.  On the other hand my Wellington Heights houses rent for 900 to 1000 and I have significantly less money in them.  One has been rented ever since I bought it 4 years ago to the same people.  I've found that the 4 bedrooms don't cost that much more but the tenants tend to stay put longer.  Of course my advice to any starting landlord is to screen your tenants very well.  I know that it is unnerving having a rent ready house sit empty but but getting unqualified tenants in there will cause problems in the long run.  Best of luck.  Any other questions feel free to ask.  I know the Cedar Rapids market well.

Andre Lokasari · Answer

Hello Melissa & others,

It has been quite a while since your last post on this topic.  But, I would like to hear from you to see whether you have made any investment in the mentioned neighborhood and what your experience has been like.  I am also a new investor and agree with the sentiment on this post that older neighborhood tends to cashflow better. @Andrew Dunham, I don't mind older neighborhood (though granted, some houses look abandoned and dirty looking) as long as it is not a war zone area (E.g. neighborhood with a lot of crime rates, drugs, property crime, etc.).  Crimes tend to drive good tenant away, and yeah, you would have more vacancy and maintenance problem on the long run.  People tend to generalize and jump into conclusion that cheaper property always mean one located in the war zone area, but I think sometimes it could also mean hidden potential working class older neighborhood as well.

I would like to know how is your experience so far on this crime subject with the Wellington neighborhood?

Andrew D. · Answer

Sewer lines can be inspected by camera.  Costs a couple hundred dollars.  I've had one house that had a crack that had tree roots in it but otherwise these cast pipes hold up well.  I've had more issues with houses built in the 60s and 70s having Orangeburg needing to be completely replaced at about $4500.  If the water is on to the property ie not foreclosure, you can easily determine water pressure.  If the water is not on there is some risk there.  If the supply from the shutoff at street is damaged or clogged your looking at about $1500.  You can have water pipes pressurized to check for leaks.  From my experience with foreclosures they don't get winterized until after the first winter of the house being abandoned.  This means the pipes have already frozen.

When I have water turned on the these old 2 stories I have a process.  I make sure there is a good ball valve on the metered side then have the water department turn on water and close the valve.  Then I go in with a helper.  They stand in the kitchen while I crack the valve in the basement.  Then they look at kitchen sealing and watch for rain.  Usually the 2nd floor bath is above the kitchen and I have yet to find a foreclosure that doesn't have a burst pipe in the kitchen ceiling.  Now this is not an expensive fix once you've located it but there will be plaster that needs cut out and repaired.

The electrical could be an issue.  These houses most likely had the plumbing and electrical added after house was built.  Sometimes the knob and tube has been replaced and sometimes not.  I've only had a couple electrical issues and they've all been minor.  Overall I've had good luck with the older houses.

As for cash flow personally my best cash flow is from the older neighborhoods.  Wellington Heights and Mound View have the cheapest houses to buy but they have there stigmas.  You will have people that won't even look at them based on the location.  Mound View you can potentially rent to college students though.  I think the next step up would be around Daniels Park, near Penford and over by Harrison Elementary.  These houses aren't as dirt cheap but people aren't scared living there either.  Also easier to sell to first time home buyers.  What I like about these areas is they are in close proximity to large industrial plants with many good paying jobs.  Lots of their employees are looking for housing close to work and most of these people work a ton of overtime so they can usually afford the place.  I'm sure there are other areas of Cedar Rapids that cash flow well but these are where I've had the most luck.

John Welty · Answer

Brandon recently did a webinar on buying old houses. He addresses the concerns and gave direction on what to look for to minimize that risk.

https://www.biggerpockets.com/proreplay/171-how-to-invest-in-older-rental-properties-without-losing-your-shirt

Melissa Mullane · Answer

Thanks Andrew. Our biggest concern is possible electrical/plumbing/sewer issues with these older homes. Have you run into this issue at all? Is this something the inspector can look at or are these issues normally hidden? I know a lot of these century old homes have poor water/sewer lines and can be a money pit once problems start. We have a few older houses we're eyeing but this is what's making us hesitate.

In your experience, what are the best areas/neighborhoods to invest in for positive cash flow? I really appreciate your valuable input as a more experienced investor in this area!

Success in SFR investments in Wellington Heights Neighborhood?

Most Popular Reply