My first Class B hood
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My first Class B hood (by Roy [AL]) Mar 25, 2023 10:46 AM
       My first Class B hood (by plenty [MO]) Mar 25, 2023 11:07 AM
       My first Class B hood (by Ken [NY]) Mar 25, 2023 11:23 AM
       My first Class B hood (by MJ [PA]) Mar 25, 2023 11:40 AM
       My first Class B hood (by WMH [NC]) Mar 25, 2023 11:59 AM
       My first Class B hood (by Roy [AL]) Mar 25, 2023 12:15 PM
       My first Class B hood (by Roy [AL]) Mar 25, 2023 12:37 PM
       My first Class B hood (by Robin [WI]) Mar 25, 2023 12:42 PM
       My first Class B hood (by Small potatoes [NY]) Mar 25, 2023 1:01 PM
       My first Class B hood (by MJ [PA]) Mar 25, 2023 1:03 PM
       My first Class B hood (by Robert,OntarioCanada [ON]) Mar 25, 2023 1:07 PM
       My first Class B hood (by Ken [NY]) Mar 25, 2023 1:08 PM
       My first Class B hood (by Roy [AL]) Mar 25, 2023 1:11 PM
       My first Class B hood (by Roy [AL]) Mar 25, 2023 1:32 PM
       My first Class B hood (by Homer [TX]) Mar 25, 2023 3:20 PM
       My first Class B hood (by plenty [MO]) Mar 25, 2023 3:50 PM
       My first Class B hood (by Renne [TX]) Mar 25, 2023 4:12 PM
       My first Class B hood (by DJ [VA]) Mar 25, 2023 9:38 PM
       My first Class B hood (by Vee [OH]) Mar 26, 2023 5:32 AM
       My first Class B hood (by Robert J [CA]) Mar 26, 2023 11:49 AM
       My first Class B hood (by Dave [MO]) Mar 26, 2023 7:26 PM
       My first Class B hood (by S i d [MO]) Mar 27, 2023 8:23 AM
       My first Class B hood (by GKARL [PA]) Mar 27, 2023 12:48 PM
       My first Class B hood (by Roy [AL]) Mar 28, 2023 6:22 AM
       My first Class B hood (by OTC [TN]) Mar 28, 2023 8:19 AM
       My first Class B hood (by Roy [AL]) Mar 28, 2023 9:42 AM
       My first Class B hood (by Dave [MO]) Mar 28, 2023 3:19 PM
       My first Class B hood (by Roy [AL]) Mar 28, 2023 5:04 PM
       My first Class B hood (by Ray-N-Pa [PA]) Mar 30, 2023 7:20 AM

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My first Class B hood (by Roy [AL]) Posted on: Mar 25, 2023 10:46 AM
Message:

Next Friday I am breaking with tradition of buying houses only in C & D neighborhoods where my rent to value ratios are phenomenal.

Next Friday I am closing on a 1900 sq. ft. 4/2/1 house that is in Mint Condition and it is located in a Class B hood. The homeowner is leaving all of her stainless steel kitchen appliances behind which are included with the house sale.

Okay, now for financial details. House is being bought for $160,000. To achieve a 1 % rent to value ratio, this house would need to rent for at least $1,600.00/month. However, since I am not familiar with this Class B hood, I have no idea of what the rental market will bear here. In every neighborhood where I have houses, there is a 'sweet spot' in which the average tenant(s) will pay in rent for a given house.

I plan to advertise this house on Zillow within one week of closing on it. If this was your house, how would you go about finding the 'sweet spot' for what this house is likely to rent for? If this house was in one of my good Class C hoods, the most it would rent for is $1,000/month.

--71.207.xxx.x




My first Class B hood (by plenty [MO]) Posted on: Mar 25, 2023 11:07 AM
Message:

I closed on similar property on a Wednesday, had it rented and they moved in that weekend! I have always used OPM to make that house payment. Going on five years now. Ask the $1600 , start advertising it, say available to show (the closing date), or ask for access of the current owners are not living there, and start listening for the phone to ring... No ringing... After a week reduce the monthly rent until it does. It's all good. This is an awesome experience for you, you may be surprised! --172.59.xxx.xxx




My first Class B hood (by Ken [NY]) Posted on: Mar 25, 2023 11:23 AM
Message:

You can put an ad on craigslist or facebook at $2000 or whatever amount and gauge interest. You could look on facebook for ads for rentals,in my area we have facebook sites just for tenants looking for a rental and landlords looking for tenants.How much are you paying? did you get seller financing or how are you financing it? --74.77.xx.xx




My first Class B hood (by MJ [PA]) Posted on: Mar 25, 2023 11:40 AM
Message:

Hi Roy, There are several ways to determine the correct rental value. My experience has been that when the neighborhood gets better, demand for rentals gets low. Weakest demand is in the top areas. I would look up what section 8 would pay for the same house, see online ads for rentals in that area on Facebook and Craigslist etc and check your competition, then offer a small discount to get it rented quickly. The better the area, lower the CAP rate. Some people prefer better neighborhoods in hopes of finding better and decent people to rent to. Your cost of purchase and the 1% rule does not apply. It all has to do with the market and what it is doing. Good luck. --73.174.xxx.x




My first Class B hood (by WMH [NC]) Posted on: Mar 25, 2023 11:59 AM
Message:

Congrats! $1600 would be low for my area... --50.82.xxx.xxx




My first Class B hood (by Roy [AL]) Posted on: Mar 25, 2023 12:15 PM
Message:

Ken,

There is no mortgage here. I have two LOC's which have zero balances on them. Those will pay 2/3 the cost of this house. I have cash on hand from a house I sold last October to complete the sale with.

I am looking at this house purchase as a learning experience for me. If I can't get at least a 1% rent to value ratio ($1,600.00) then I may decide it is not worth the extra expense to have a rental house in a Class B neighborhood. Another thing I want to learn is,...does the quality of the tenant pool get better in the better quality neighborhoods? I have waited 17 years to find the definitive answer to this question!

Now, what happens in the next 12 months will determine if I keep this house as a rental or just sell it and go back to the C hoods I know best. --71.207.xxx.x




My first Class B hood (by Roy [AL]) Posted on: Mar 25, 2023 12:37 PM
Message:

WMH,

In your Class B hoods, can you buy a MINT CONDITION 4/2/1 house for less than $200K? Most of the houses in this hood usually sell between $200K-$300K. I got lucky here due to the seller being motivated and just needed enough money to pay off her mortgage. --71.207.xxx.x




My first Class B hood (by Robin [WI]) Posted on: Mar 25, 2023 12:42 PM
Message:

I have class A tenants in my class C houses. They exist!

Sold my one and only B house because it was worth $160K but I struggled to find someone to rent it for $1250.

My class C houses are worth about $110K and rent for $950-$1000.

Have you considered flipping it and buying 1-2 class C houses? This will be an interesting experience! --104.230.xxx.xxx




My first Class B hood (by Small potatoes [NY]) Posted on: Mar 25, 2023 1:01 PM
Message:

I would look at comps on zillow and if using a realtor for rentals is the practice in your area, then invite one to give you their opinion. My B property is in a capital college community so most are looking in June for Aug /Sept. I don't typically want the 'moving now' tenant for the B bldg. But there are also professionals moving to the area all the time. Who is your market here? You should find they have good rental history and credit, perhaps w student debt, but earning the income to cover everything. Is this a bedroom community or are there local businesses? I think they would not expect to have to do the yard work. What were you thinking there? --172.59.xxx.xxx




My first Class B hood (by MJ [PA]) Posted on: Mar 25, 2023 1:03 PM
Message:

You can get good people to rent your places in any area. Finding them is a matter of luck and its an art. I have had great section 8 tenants too. --73.174.xxx.x




My first Class B hood (by Robert,OntarioCanada [ON]) Posted on: Mar 25, 2023 1:07 PM
Message:

Try for $1,800 to $1,900 per month then after listing on internet see what market will bear. if the house is in good condition then should be able to rent. Here a basic brick single family home is a million plus. Remember the wife or girlfrient determines if the house is rented where try to maximum income. Even if had the cash it has to cover investiment along with funds for future repairs and renovations. Can not even rent a condomium or apartment here for $1,600 per month here. While incomes in the south are lower there are still who earn more. --68.69.xxx.xxx




My first Class B hood (by Ken [NY]) Posted on: Mar 25, 2023 1:08 PM
Message:

Roy, you did not get lucky,you are skilled at finding motivated sellers,recognizing they are motivated and making the deal happen.The tenant pool is definately better in Class B neighborhoods,you can look for perfect tenant not just good enough.If you cant get enough rent then just flip it for a quick buck. --74.77.xx.xx




My first Class B hood (by Roy [AL]) Posted on: Mar 25, 2023 1:11 PM
Message:

Thanks Robin! I can tell you think like I do. It is all about the numbers. A 1% RTV ratio translates into a 12% annual return and that is my personal minimum if I am going to be someone else's landlord. I refuse to be someone's LL for chump change.

12 months from now I will make a decision as to whether this Class B house is a keeper or a flipper. I still have some learning to do first. --71.207.xxx.x




My first Class B hood (by Roy [AL]) Posted on: Mar 25, 2023 1:32 PM
Message:

I found this house by browsing on Zillow only about a week ago. And this house sits on a 2 acre lot with vacant lots on both sides of the house. This house is still listed on Zillow at this address: 726 Riverside Drive, Gadsden, AL 35903.

The house was first listed on the MLS at $185K. Seller dropped that down to $175K which gave me the clue the seller may be 'motivated'. My first offer was $149K because this is what the house sold for in 2020. I will finish this story later. --71.207.xxx.x




My first Class B hood (by Homer [TX]) Posted on: Mar 25, 2023 3:20 PM
Message:

I would pass on a house that cost 160k if the rent was only $1600 per month. I just rented a 3-1-0 in a class c hood for $1600 per month. Paid $40k for it 10 years ago. The interest rate on those HELOCs will be very steep, and continue to rise while the fed tries to slow inflation. You will be paying somewhere $750 per month in interest right now , ad in property tax and insurance you may be spending $900 per month. Leaving only about $700 per month profit. Just not enough for me with not paying off the balance. Of course, I am not looking to grow anymore, so my thinking may be slighted --47.32.xxx.xxx




My first Class B hood (by plenty [MO]) Posted on: Mar 25, 2023 3:50 PM
Message:

In 2020 it sold for $135k why didn't you but it then? Nice house. Not sure two acres is easy to ask a tenant to cut, I'd raise the rent and include lawn care. Whoo hoo Roy's stepping up his game! --172.59.xxx.xx




My first Class B hood (by Renne [TX]) Posted on: Mar 25, 2023 4:12 PM
Message:

How exciting!

I noticed 1 bedroom looks like it has an outside door. If this doesn't pan out as you had hoped, maybe you could split this into a duplex and get more rent for the two smaller places than you would for the 1 larger place.

Our smaller 1 bed 1 bath properties have a great return and we have no problems renting them out.

Looking forward to hearing more about your experience. --12.196.xxx.xxx




My first Class B hood (by DJ [VA]) Posted on: Mar 25, 2023 9:38 PM
Message:

Hmmmm, I hope you got a good deal, Roy. But, you really should have figured this out before buying it.

By going to all the websites tenants go to, and seeing what rent amount comparable houses are being advertised for.

In my experience, any house that is in mint condition / move-in ready never sells for a low enough price to have a positive cash flow, if it even breaks even.

While I believe it is possible to find a quality tenant for a lower-class neighborhood, it is easier in a safer neighborhood. And, you deal with the "drama" of the neighborhood all the time, in addition to the tenant.

This is why I have moved to a better neighborhood over the last few years. Less headaches.

Now, if you find out that it won't cash-flow, I encourage you to not give up on the idea all together too fast. Just do more homework before making the offer. --68.229.xxx.xxx




My first Class B hood (by Vee [OH]) Posted on: Mar 26, 2023 5:32 AM
Message:

Sell as quick as possible, you got it as the price is falling, too large for a rental - Robin spotted that right away. --76.190.xxx.xxx




My first Class B hood (by Robert J [CA]) Posted on: Mar 26, 2023 11:49 AM
Message:

I saw with my own eyes how easy it was for my parents to purchase, own and operate properties in "A" locations, but this was costly and often not profitable for the first decade.

Then I began to crawl buying single family homes is "B" locations with working class families. I was only 18 but still managed to work part time and attend college.

Then I contracted a bug, flu or ailment. With experience under my skin I examined the Cost of Real Estate, the Rent it Could Produce and Net Returns. I compared:

West Los Angeles

The San Fernando Valley

Korea town

Downtown Los Angeles

South Central

And the City of Burbank

And so I learned there are good neighborhoods that don't require a Bullet Proof Vest, a 50 round magazine and a vehicle that can do a 1/4 mile under six seconds.

The best bang for your buck. For $100,000 per unit I could buy a single unit in West Los Angeles. Or for the same 100K, three units in the San Fernando Valley.

--47.147.xxx.xxx




My first Class B hood (by Dave [MO]) Posted on: Mar 26, 2023 7:26 PM
Message:

Roy, what kind of interest rates are you getting on your LOC? If you donít mind sharing.

I donít see the numbers working as a rental. Whatís your pro-forma ?

What are the taxes and insurance?

Possibly as a flip but as rates continue to increase those will become more challenging.

--199.200.xx.xx




My first Class B hood (by S i d [MO]) Posted on: Mar 27, 2023 8:23 AM
Message:

Hey Roy... good to "see" you again. It's been awhile.

Since you found this house browsing on Zillow, you already have the knowledge and skill to figure out the rents. Do the exact same thing, but this time search for "for rents" instead of "for sale".

Just type in all your criteria (# beds, baths, sq footage), and zoom in to within about 1/4 to 1/2 mile around where your property sits. You should see all properties for rent with those same stats. Boom... you just found your competition. Then spend a few minutes clicking through the ads to visually compare the condition based on interior photos. You should be able--with some time and experience--to get within a 3% range +/- of where you should price yours.

Btw, save your search and you'll get emails as properties with those criteria come on the market. That way you are continually getting educated about the price trends for the market / house type. That's how I keep up to date on my unit pricing with minimal effort.

--184.4.xx.xxx




My first Class B hood (by GKARL [PA]) Posted on: Mar 27, 2023 12:48 PM
Message:

I just sold a SFH that was in a class B neighborhood that I had improved significantly but couldn't get rented. I wouldn't claim my experience would be anyone else's, but I just think that I'm going to stick with MFH for the fact that I'm more familiar with that type of housing. If I did class B, I would go with the MFH limited to 1 or 2 bedrooms.

My problem is this was a large 3/2 SFH and few need to rent that much space and those who do generally have larger families and that almost always means excessive wear and tear. In addition, I agree with DJ that they almost never cash flow. I had owned my place for 20 years and am not highly leveraged on the place, but cash flow was going to be marginal compared to my MFHs. I was looking at the option of mid-term rental and it was too big for that as well, so the highest and best use was to cash out and redeploy.

I just think the sweet spot for rentals is one to two bedroom apartments and maybe smaller SFH. From my perspective, bigger houses are better to flip and sell rather than rent. --209.122.xx.xxx




My first Class B hood (by Roy [AL]) Posted on: Mar 28, 2023 6:22 AM
Message:

Dave,

Currently 7% on a HELOC. This is just a short term loan that will be paid off in 18 months or less. Taxes will be about $600.00/year and insurance will be about the same. Again, this house is a learning experience and after one year I will decide to either keep it or sell it. --71.207.xxx.x




My first Class B hood (by OTC [TN]) Posted on: Mar 28, 2023 8:19 AM
Message:

I love the approach that Roy is taking....he is considering this a learning experience. This is the best way to discover if a strategy works or not. This also applies to new crews as well. Also, like GKARL, after 20 years of being in the business, I believe the best property for the rental business is the 1-2 bedrooms unit. Personally, I prefer single family houses but I believe the same for MFH. The small unit is the most efficient way to go in this business. --104.128.xxx.xxx




My first Class B hood (by Roy [AL]) Posted on: Mar 28, 2023 9:42 AM
Message:

OTC

Thanks for your kind words. In the last 17 years, I have made a small fortune off buying/rehabbing/renting out small 2/1 houses in Class C and some D neighborhoods. Yes, the returns are great but the downside is the hassle factor of dealing with working class or government dole/entitlement type tenants.

I have always wondered whether the grass is any greener in the Class A & B hoods. Yes, the houses do cost more but are the management hassles any less than Class C ? I hope to have this answer in the next 12 months.

After I close on this house and my Zillow Ad goes up, I will let you know if the tenant pool has changed any. I usually can tell just by talking with someone for just 10 minutes. --71.207.xxx.x




My first Class B hood (by Dave [MO]) Posted on: Mar 28, 2023 3:19 PM
Message:

Thatís a pretty good rate for the times. I also have 2 LOCís one is 6.5 % and the other is 9%, ouch.

Nice looking home. Keep us updated. One thing Iíve learned prices are all relative to oneís area. What will work for one investor doesnít work for another in a different market. --174.210.xxx.xxx




My first Class B hood (by Roy [AL]) Posted on: Mar 28, 2023 5:04 PM
Message:

Dave,

Like you, I have one heloc at 7% (secured) and another one (unsecured) that is at 9%. Heck, I remember when 7% was considered a BARGAIN. Interest rates are nothing more than the 'rent' you pay to use someone else's money. --71.207.xxx.x




My first Class B hood (by Ray-N-Pa [PA]) Posted on: Mar 30, 2023 7:20 AM
Message:

I applaud the shift in quality. You will see your rates of return increase typically as the turn over cost drop dramatically as they don't happen nearly as often. Typically I like doing that upshift in an upward market cycle and right now things are coming in mixed - so please don't get discouraged.

That 1% ratio is a great deal harder to achieve where we are at in the market place and market cycle.

I just asked someone of 11 years to leave as I really need to put the property in for phased maintenance overhaul.

--24.101.xxx.xxx



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