Are $100K Rental Properties EVER Worth It?

Quick Overview

Properties under $100K are worth buying if the underlying math supports profitability and the condition allows for stable tenancy, as low price alone is not a reliable indicator of a good deal; investors must focus on the age and condition of big-ticket items rather than the arbitrary price point.

Key Points: The decision to buy sub-$100K properties is relative to the market, as areas like Detroit offer decent homes under this price, while markets like NYC or Washington D.C. do not have such options available. The critical factor for low-cost properties is their condition, specifically the age and maintenance of big-ticket items like the foundation, not just the purchase price; one speaker noted selling a sub-$100K house because the foundation issue made it feel like walking through a funhouse. Investors should base decisions on whether the numbers make sense, such as a $70,000 property needing a $100,000 renovation that rents for $2,500/month, rather than focusing on an arbitrary price line. Some investors, like Henry, buy properties for under $100K but plan significant renovations; one example cited buying for $80,000, spending $60,000 on rehab, with an ARV of $250,000. Flipping properties off the MLS is considered smart business when investors take on risk, provide needed rehab, and boost neighborhood values, although gentrification through outrageously high resale prices is discouraged in favor of revitalization. To improve cash flow, putting more than 20-25% down is a good strategy, especially for those prioritizing debt-free ownership over optimized total return in the short term. Hard money lenders must recognize that investors are the prize because lenders depend on investors having deals; lenders should act like they are in customer service and implement tiered processes that reduce hurdles for experienced investors.

Context: Dave Meyer and Henry Washington from Bigger Pockets discuss the viability of purchasing real estate properties priced under $100,000, addressing common investor confusion regarding their profitability and ethics. The conversation also branches into the ethics of flipping properties acquired through the MLS and preferred strategies for financing, including down payment amounts and frustrations with hard money lenders.