Tips for Owning Low-Income Rentals

Low-income properties may seem like the worst meal on the table, but that doesn’t have to be the case. If you know how to invest successfully in these types of properties, you can actually make a good profit out of it. 

The risk involved with such properties is quite high, and that's one of the reasons many real estate investors look the other way. Understandably, the resale values of these homes are low, as not many people are keen on buying these properties.

As an investor buyer, you must:

Accept It for What It Is

The only way to make such properties work for you is by first fully understanding what you are getting yourself into. This means that you should completely know the risks associated with them. You need to come to terms with the fact that some years might be very lucrative for you, while other years might not be. You must embrace the fact that resale values of low-income properties will usually be abysmally low until some miracle comes your way.

Understand the Cash Flow

Surprisingly, what many investors overlook is that the cash flow rates are usually very high when it comes to low-income properties. This means that while the buying price is low, rental rates on them are high. You will need to understand that the acquisition cost isn’t the real cost with these properties.

But you need to understand that because you are already making a purchase in a low-cost neighborhood, the property will not necessarily go up in value. It may, however, do so if the neighborhood is going to revamp in the next few years.

Do the bare minimum if you renovate in the meantime, but make sure everything is durable. Don’t overcapitalize on the rehab. And no—by that, I don’t mean slumlord it.

Work With a Responsive Property Management Company

The key to success in low-income investments lies in having a very responsive property management team. A good team can help you to identify suitable tenants, improve rent collection, and ensure that you get your rent on time. The extensive knowledge that these teams have about the local neighborhood and markets can be an added advantage and can save you a lot of time, money, and resources.

Such teams will also act as a buffer between you and your tenants, allowing only for the least amount of interaction, which means that you won’t get unnecessary phone calls in the middle of the night.

Finally, the marketing expertise and experience they have in the online and offline markets can work as a big advantage and help you get your property rented faster. All of these are important areas, and this is one special region where you are better off working with a good property management firm.

Finally, Give it Time

You need to be patient with real estate, and low-income properties require much more from investors. So instead of being in a hurry to get these properties and then rent them out to the first tenant you see, spend some time researching the area. Keep in mind that every market goes through a recession phase and a good phase. So, if you really want risky properties to make you money, first be willing to take the risk and second understand that you will be investing much time and energy on them.

Low-income properties aren’t a bad investment at all. In fact, they can really be the cash cows that throw gasoline on your portfolio if you know how to go about it. However, know that this is definitely a tricky area and venture into it only if you’re ready to take losses, as well.