In my prior post, I used my recent real estate transaction as an illustration of showing the strong demand for real estate investments.
In my last post, I wrote about the 30+ offers that came in when we placed the home on the market. It served as an example of how many investors are in the market looking for a deal. With so much demand, the return on investment has plummeted.
Some say that in today’s low interest environment we should be satisfied with a low rate of return on investment. But, not being ready to “throw in the towel” on a higher rate of return, I mentioned that many investors are seeking out niches where the competition is less, and thus the returns higher.
Today, I’m bringing a few of those alternative investments to your attention.
- Buy houses in rundown locations. I know, location, location, location. However, there is such a high demand for affordability that it can trump location. My first house was purchased for less than $50,000. Now lenders don’t even want to make a mortgage for under $50,000. Also, many low-end houses are not eligible for financing that is meant for affordable housing because of relatively minor repairs. A home that is in good repair with some updates, in almost any location for $105,000 or less will sell. Even though there is a huge demand for affordable housing, today there are 23 single-family homes for sale in Polk County for $55,000 or less; thus, available supply. If you improve a few homes in a specific disadvantaged area, you can begin to make a difference in a community. We all want to see that happen! Maybe we should replace location, location, location with affordable, affordable, affordable? Keep in mind also, that there are certain locations that one can receive wonderful tax advantages when a substantial investment into it is made. That is a discussion for another day.
- Mobile homes. They’re not everyone’s first pick, but maybe they should be. Generally, they’re easier to repair than single-family homes. Additionally, financing is not the problem that it once was.
- Mobile home parks, rather than traditional apartment buildings. Since small apartment buildings are prevalent, it’s the first thought most people have when discussing income property. Yet, mobile home and RV parks, with their lower expenses, can be more profitable. Let’s look at an example:
A recent 7-unit apartment building sold for: $520,000.00
Gross Scheduled Rent: $60,600.00
After basic expenses of Taxes & Insurance Income: $54,600.00
Contrast that to a mobile home/RV park that is available today for $480,000.00
Gross Scheduled Rent: approximately $77,500.00
After basic expenses of Taxes & Insurance Income: $67,500.00 m/l or about 24% more income for about 7% less money. Not only that, you don’t have to worry about roofs, air conditioners, kitchen appliances, floor coverings, paint, etc.
Linked is an example of how profitable and sometimes controversial mobile home parks can be from Aspen.
- Commercial properties. Converting single use retail, office, and warehouse buildings to multiuser flex space to meet the needs of today’s small businesses and entrepreneurs. There are huge industry changes occurring in this industry, and with most change comes opportunity.
There’s something to be said about staying in one’s “wheelhouse” but, especially in these changing times, there’s also something to be said about evolving. So, investors consider your options!
Are any of these alternative options for you?
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