Distressed Homes Have More Potential
If you are buying a property for the first time to rent out, it can be a nerve-racking experience. You are trying to find something in the right price range, but you also want the house to be perfect. The problem is that perfect homes cost a lot of money, and even in the best markets, your return on investment is going to be relatively low.
Unfortunately rents don’t have a linear growth, so buying more expensive homes doesn’t give you enough rent to justify the spending. For example, if you were to buy an $800,000 property in Silicon Valley, you could rent it out for $3000-$3500 a month. On the other hand, if you were to buy a $100,000 property in Palm Beach, you could get back $1000 in rent a month.
You are better off buying 8 $100,000 properties than 1 $800,000 property, with this in mind. To maximize returns, you must try to get the price as far down as possible, and that means you may have to purchase an imperfect property.
Maybe the kitchen needs to be remodeled, or the bathroom is broken down, or new appliances need to be installed. These types homes are far from perfect, and they require a higher level of attention than the perfect version of that home, but they are also significantly cheaper.
If you have the capacity to make some of these distressed homes presentable enough to be rented out, then you could get returns of over 13% in the first year. Usually a brand new buyer does not have the skills or the contacts to rehab a distressed home by themselves, and this is where it is important to have a strong partner.
At TCS Management Florida , we work with people who have been doing rehabs in the area for years. They are able to rehab a property in the most cost effective way, so that your investment is maximized. The potential for profit with a distressed home is much higher than a home that is in perfect condition, and with the right partner, anyone can realize that potential.
