HOW I BOUGHT A $23,000 HOUSE! (Buying Cheap Rental Properties)

This is the digital nomad quest podcast with Sharon Tseung. teaching people how to build passive income, become financially free and design the best lives. Hey guys, it’s Sharon from digital nomad quest. And today we’re gonna talk about how I was able to buy a property at $23,000. Now, if you guys are new to the channel, welcome, I’m all about teaching on how to build passive income, become financially free and design your best lives. So if you guys are interested in that, make sure to subscribe, hit the bell button to be notified on my latest videos, a lot of people actually contact me saying how are you able to buy these low priced properties, I’m not able to find any. And I actually think that’s kind of interesting, because I’ve been able to see a lot of these properties that are under $100,000. On the market, even on the MLS, for example, there are areas in Detroit, there are areas in Chicago, there are areas in Florida, Texas, everywhere that I have seen for under $100,000. It doesn’t mean that you should buy it though, you need to do your analysis, you need to do your research in terms of your target market, your neighborhoods, you want to make sure you’re purchasing a property that’s in a good location, you don’t want to buy a money pit that has negative cash flow every month, you have to pay property taxes, you have to deal with problem tenants or you can’t even get tenants in your property. And it’s vacant all the time, and you’re just losing money on a property like that, you want to make sure you’re purchasing a property that will appreciate that will have tenants, they’ll provide good cash flow every month that aren’t problematic. And that really does involve a lot of research and analysis. Now back to my story, I had actually purchased a four Plex, I’ve talked about it in a previous video, and around then I was actually getting impatient, I wanted to buy another property. So I was perusing bigger pockets ended up connecting with a wholesaler who had this property and it was in my target market. So I was really excited. I talked with him around February 12th. About this property, I had him send me pictures of the property and you know, to make sure the inside wasn’t completely beat up, turns out it was and it was a three bedroom, one bath, it was under 1000 square feet. I thought you know, for $23,000 How bad could this be? To me, it wasn’t too much risk because I had money that I could spend. And in my mind, I thought the more I did this type of stuff, it was more a learning experience for me. So it wasn’t that risky. In my eyes when I was purchasing out of state my mentality was even if I lost money, I’d be happy about the education I received from you know, buying these properties. So just a tip, if you are going to look for properties, make sure that you are comfortable with the amount you’re investing, if you were to lose it maybe or some bad scenario happened, would you be able to handle it, you should kind of think about these situations and see what you’re able to handle what your risk tolerance and etc. So I asked a few more questions asked why the seller was selling, it turns out he was getting old having some health problems. And he wanted to get rid of this property. So in my mind, I thought you know, this could be an opportunity, I could help him out and get a discount. So it was listed at $25,000. It was an off market property, I ended up negotiating down $2,000 less. So essentially, the way I negotiate it was kind of in an asking way, I never kind of demand it, I want to be nice. So what I’ve experienced is whenever I kind of ask rather than demand, I get better results. Actually, I found out that this property had a tenant that was paying $400 a month, and they had been there for about 20 years. So I decided maybe I could keep that tenant in there. So I didn’t have to worry about rehabs or anything like that I didn’t want to pay too much more into the property, I just wanted to get this property out there and just get cash flow right away. Turns out when I started closing on this property, that tenant already signed a lease for another place. So it was already too late. They were already leaving. So I had to find another 10 in the future. So instead of using their same property management company, I had already researched other companies and reached out to them saw if they would be able to manage this property. And actually, before I close on it, I had to make sure that the property management company would be able to kind of handle that property and they were able to so I was like alright, let me just purchase this property ended up taking actually almost two months for this property to close. There are different problems with communication and things like that. But we figured it out. And it was way longer than what I had expected. I thought it was going to be able to close in like a couple of weeks ended up being longer, even though it was a cash only purchase as the property manager was going through the property and getting really scared. I was getting scared of you know the cost that it was going to take to repair the whole property. I thought it’s going to cost a lot. You know, when
I first talked to the other property management company before who was handling the previous tenants, she was saying that estimator repair might be 10 to 20k. And then I talked to this woman and they come back to me saying the estimates might be around 22k. So it was even more than I had anticipated. And I was like oh my gosh, I you know we have to do it. You know I have no choice. Essentially I’m in too deep. So I’m like alright, let’s just go ahead and do it. So this took maybe I would say one to two months for rehab, which isn’t too bad. I’ve heard nightmare stories of rehabs in the Bay Area take months and months and months because they have gone contractors that are just lagging us don’t have a good team that you’re working with. Luckily, this property management company had a bunch of vendors that they’re used to working with. And they essentially got it all done. They coordinated everything, they would just ask me for approvals. And I’ll just approve different work orders and things like that. So I kept asking for updates, I kept asking for pictures. And the pictures looked amazing, the more and more they sent it, and she kept telling me, everyone on the team is amazed by how much of a transformation it was. So normally, a rehab like this in the bay area would be like over $100,000. So this is actually really amazing how it turned out and ended up costing around $33,000, which is pretty high, and it was over the estimate twice. But I’m still very proud of it and still very happy about it. And I’m glad it didn’t go to six figures in repairs. So now after everything I basically cashflow about 650 a month, not including vacancy and repairs, but that should be the regular cash flow I get after Property Management taxes and insurance. And I’ll go into those numbers more in the next video. I also account for 5% vacancy and 10% repair costs in that video. You know, the best case scenario is 650 a month cash flow and it’s great that I own it free and clear. So I don’t have to pay for a mortgage. And as you can see, it’s just like really cool to have bought a fixer upper and really get it to that point that just looks amazing. So I hope to do more of these projects. Again, I actually love purchasing properties at this low price point because I’m able to do so much more with it and bring the property value up by doing these repairs. But then again, buying in these price points is definitely riskier because there’s a reason usually why it’s at that price point and you want to make sure that you’re not just looking at the numbers seeing the numbers look good and it’ll be okay, you got to make sure that the area will be okay in terms of crime in terms of will you be able to fill the property with a tenant, you know, other issues that you may anticipate you you want to have a boots on the ground team if you’re going to invest out of state at this price point and make sure that your investment is good. Okay, so just as a warning, my experience might have been good but you want to make sure that you are accounting for all these different factors doing your analysis doing your market research before you purchase a property like this. Okay, just because the numbers look good just because the price point looks good doesn’t mean you should be buying it. So do your due diligence. So hope you guys enjoyed this episode. Please make sure to rate review and subscribe. It really helps our podcast grow. And thanks again. I’ll see you guys in the next one.