I just got into it AGAIN on my facebook page (shameless plug: facebook.com/CashFlowMercenary) with someone else pitching cheap-ass properties in bad areas with Section 8 tenants as the Holy Grail for buy and hold investors. He came on my page with an unsolicited pitch for his properties, and then really got his panties in a bunch when I pressed him on his ROI “projections”.
It’s an epidemic I think. More than just the flavor of the month this time. And I just finished doing battle with a bunch of clowns doing the same thing with Detroit properties here in my area.
I don’t know what’s wrong with me. It seems that all these other investors out there know the secret to finding magic properties that are really cheap because they’re in bad areas, that Section 8 tenants love and stay in forever so they don’t have vacancies, and that are so solid and well cared for buy their Section 8 tenants that they never need repairs and maintenance.
See what I mean? Magic. Pure and simple.
Since I don’t have the keys to this Magic Kingdom, I have taken a different approach to my buy-and-hold investing. An approach that fits my significant time constraint with my day job, and that also fits my constraints as the head of a large family.
There are a lot of ways to describe it. Set and Forget is one. But to be succinct I can sum it up by calling it Pay MORE. Buy BETTER. Buy FEWER.
The biggest reason that I do this is, like I said, because it fits really well with my significant constraints. I buy great properties in great school districts. I get tremendous tenants, very often with young kids that stay for a good long time. And I don’t get a lot of calls for repairs and maintenance because the housing quality and upkeep is so good. So I have been able to minimize my time investment in the business.
But another reason for doing this is because I can. What I mean is that right now I’m buying houses as rentals that never before in their history would have cash flowed as rentals if they were bought with conventional financing. So there have never been a lot of rentals available in the area, and so area isn’t renter-heavy. And that means good solid and consistent rental demand.
The icing on the cake with this approach and these houses is that over time my net cash flow is higher and my ROI is higher than crappy houses in crappy areas with Section 8 renters. I have less vacancy time, my turnover expenses are less, and I get higher rents. Without needing to pay a property manager a huge cut of my net. All of this puts more money in my pocket.
At some point the prices in my area will increase, and the banks are trying to do that now as a matter of fact. But while the opportunity exists, why not take advantage of it and put together a portfolio of spectacular houses in a spectacular area that you can hold forever? When the market rebounds someday, then houses in these areas will again be priced beyond where rentals make sense, which will limit supply and keep demand strong.
And let’s face it – the crappy houses will always be there. So if you’re like me and you don’t have the keys to the Magic Kingdom of perfect houses in crappy areas, or you have a day job and a family or other significant constraints, while this market exists Pay MORE. Buy BETTER. And Buy FEWER. It will pay off in the long run.
For a five minute ROI analysis of the difference between great suburban properties and crappy inner city properties, visit www.SuburbanTurnKey.com. Scroll down to the middle of the page on the left and watch the video in blue called “Slumlord Millionaire or Set and Forget Suburban Landlord”. No opt-in is required.