My thoughts on property and real estate investing in my local area have lead me to some interesting discussions and realizations about the real estate market.
First a little bit of back story. I live in an area that is about half and hour away from Austin Tx in a small town that is relatively economically depressed when compared to many of the other surrounding areas. The powers that be are in control and don’t want a whole lot of change, but they are also old. The demographics of the area are old and young, without too many people in the middle. Only about 40% of people in town own their own property. There is not much of an employment base in town and most people that make any money work in Austin or from home.
That said I was kind of scared to invest in local property because of the lack of employment in the area. This lead to a discussion with a successful local investor that has no problem buying lower income housing and financing on a 10 year note. He pays 20% down and gets many of his properties for less than $60,000. Having a relationship with a local banker is essential to the success of his business because it allows him to be able to close quickly.
I like this approach for a couple of reasons. First, it keeps the property close to home and keeps the cost down. Second, we are talking about payments as low as $400 per month, even on a short term loan. There is a minimum rental price for single family homes and this monthly payment is well below the minimum. It is also not a stretch to say that if I had to pay carrying cost I could afford $400 a month for a few months.
Another consideration that I had not taken into account was that when you are dealing with families looking to rent out a home in the $600 – $800 range you are dealing with renters that are either on their way up and out as most people will be at some point in their life, or you are dealing with people who will never leave. Either way you have the potential to have a winning situation.
I have reevaluated my real estate investing strategy and will be apply the strategy to buying local property.