OfflineI came across three properties in New Orleans recently, on the MLS, all being sold together for 120,000.
They are three shotgun houses in a row, they are doubles, each side has one bed/one bath, has about 600 feet a side I think, parking is on the street, and its raised on blocks. Two doubles are rented, one is vacant, for the size I think rent is 300 per a side(totalview median is 800, low is 125, high is 3000) Needs some work, paint and freshening up. Area is a definite D, roads are good(for New Orleans), but homes on the block all look to be rented and not very well kept up by the tenants. Not sure if the utilities are paid or the tenants pay their own utilities. The properties are about a 3/4 a mile from I-10 above Marigny neighborhood. They are about 13 miles above the French Quarter.
Totalview estimate is 117, 000 each double.
Gross rent is 1,800.
Mortage is estimated at 265 a month()(100 percent financed)
Prprty mng at 10 percent is 180 total
Total taxes is 2,100 a year, at 175 a month total.
Utilities; lets guess at 225 total
Insurance is; guess at 200 total
Net rent is (1800-1395) 405 dollars
So thats about 135 dollars net a double, and expenses are 465 a double.
The problem is the quality of the neighborhood. I just want to know if it is possible to turn around an entire neighborhood, or maybe just a single block?
Just wanted to get DG.com's thoughts on this.
RENinja
"Remember, success is a journey, not a destination.
Have faith in your ability."
Bruce Lee
I personally would stay out of D neighbourhoods; too much work to turn around a whole block or entire neighbourhood; how do you know if the tenants are actually paying the rents? There are property management companies that will not take those proerties; so if you decide to go ahead with the deal, I would make sure you have a PM lined up who is willing to collect the rents for you and maintain the properties.
Wishing you success,
Valerie
Valerie
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Well it will depend on your area. We have an area that has old homes, but the nicest place to live in town. I saw several homes in a row that were selling together, just waiting for an investor to make mega bucks on them.
www.tw4homes.com website
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The reason I posted it is because entire neighborhoods are being torn down by the city and rebuilt. So many homes in New Orleans were just left after Katrina, in desirable areas, and its making the city look so bad, that the city is just leveling the homes and selling the raw land. I am just curious, I haven't checked, if the city has any incentives for investors to come in and turn it around or if any areas are going to be proclaimed a revitalization zone. The thing is, many people in New Orleans, walk, bike, and take public transportation. Desirable areas, are areas that are close to shopping, festival areas, entertainment areas,etc. This person explains it much better,
"Buying a home in New Orleans is very different than buying a house in other parts of the country. What is value here may not even make sense in other places...this is why:
1) Location: neighborhood is important, but the distance of your house from other important parts of our culture can be a greater factor such as: a parade route, proximity to jazz fest and other such festivals, proximity to restaurants, then in order...schools, places of worship, etc.
2) Utility: how are you going to use your home? When you live in New Orleans, people WILL come visit..friends, relatives and people claiming to be both or either. This means one has to make the decision how big and how many rooms are needed relative to how you will respond to each season..Christmas, MardiGras, every weekend the Saints play in town, etc.
3) Value: forget perceived value..that is what 99% of Realtors will try and sell you...avoid agents who use the word "cute" and "precious" unless you are buying a Barbie doll or a puppy.
You are buying a commodity that is an investment you are going to live in for the long term, with hopes of it retaining value and hopefully make a profit when you sell",Broker from New Orleans.
The problem is the areas are in terrible condition! I am just wondering if something similar to what happened to Flint, Michigan(after they built the commuter rail) is going to happen to New Orleans. You have a good point, one other thing is that New Orleans is a flood zone and there is always the possibility of another Katrina. I think the best strategy is flipping right now in New Orleans. I often see homes being remodeled on major throughways. I just want to get in somehow because I know SOMEONE is making money.
Thanks for your thoughts Valerie!
RENinja
"Remember, success is a journey, not a destination.
Have faith in your ability."
Bruce Lee
I am not sure how to tell if a home is historic or not( 50 years or older?? Or some other requirements?). I can tell you though, alot of shotgun and other type homes in New Orleans look OLD and they are close to the most frequented parts of New Orleans. Colleges, entertainment, and shopping. It seems that many of the old homes are rented to college students as well. I see a lot of remodeling going on too. Many could use paint, landscaping, and a general clean up.
Thank you for your thoughts!
RENinja
"Remember, success is a journey, not a destination.
Have faith in your ability."
Bruce Lee
Too many downsides I think. 1 bedroom units limits your tenants to singles, couples and the elderly. No families. High turn over, vacancies. Deferred maintenance will be a large expense. Will you have 6 months of cash reserves? What do the rent rolls from the last three years look like? You have a lot of research to do before you know if this is a deal. Does not look like enough cash flow, but your research will tell if you can fix the place up and raise the rents. Will tenants pay more rent and live in that area?
Good luck and congratulations, you are taking action!
Michael Mangham
MD Home Acquisitions LLC
Knowledge is power, but execution trumps knowledge. Tony Robbins
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http://www.mdhomeacquisitionshousehunter.com Bird Dog Site
http://www.mdlodeals.com Tenant/Buyer site
I don't have cash reserves for anything, lol. Thats why I am considering small rentals as a monthly check to pay for marketing, closings, emd, and whatever else that needs to be done.
I didn't think about limited tenants, off the top of my head I did see that a large percentage of rent is going to expenses which is a red flag for such a small place, and I don't think tenants will pay more, at least not now. They are probably section 8 or something.
I see articles in the paper about revitalizing the city, remodeling going on, CL ads for contractors looking to flip, etc. The only thing I don't see is jobs coming into New Orleans. Remodeling is doing well, but that only means there is possibility of glut of properties pulling down prices.
I just think that there is a possible boom, if maybe just for a couple of years?
Thank you for your thoughts, I am glad to hear from a pro. I would be glad to hear any other suggestions.
RENinja
"Remember, success is a journey, not a destination.
Have faith in your ability."
Bruce Lee