Tough rental markets call for specific and targeted actions!
There are many markets across the country that are still experiencing tough times. North central Illinois is one of those areas. Unemployment is still high in communities such as Rockford, IL, Freeport, IL, and surrounding communities. There are many reasons why these communities are still suffering after the disastrous housing crash from the late 2000’s, early 2010’s.
Home prices in many parts of these communities are so low that if you buy a distressed property you cannot afford to fix it up as you will not get your money back out of it. And to be honest there are a lot of distressed homes in these communities. Current landlords are trying to milk every cent out of these houses that they can with only putting minimal paint and lipstick on these pigs. When it comes time to divest themselves from the properties it often needs major renovations.
It is not uncommon to see a distressed 1500 sq-ft homes with good bones in the $40k range or less. If the home has a bad roof you can assume a $10k – $12k repair before even getting on the inside. Never mind that the building may be in a less than desirable area.
Flipping houses does not often work in these areas as you cannot afford to put the money into them. Buying, renovating, and holding is risky as well. So what can a real estate investor do?
There are specific and targeted actions to take. First, know your market and your areas of these communities well. Drive them, talk with police, other landlords, people in the community. Whatever it takes to know the areas.
Second, get to know the landlords in the community who are buying properties. Learn where they are buying properties and what type of properties they are looking for. You need to know them as well as you know some of your relatives. You have to know that if you buy a property you can sell it to one of your contacts quickly so that holding costs are low.
If you cannot sell then you have to have a plan B. Often this will mean holding for rental income. Maybe your real estate business is not geared toward being a landlord but to work in these areas you have to be prepared for it.
Finally, look for ways to help your prospective tenants. Don’t be afraid to investigate Federally subsidized housing such as Section 8. Local communities often have available help. Freeport, IL has an organization called Township which helps low income and needy people. Talk with local churches as they often have or know of help programs for low income people.
These markets can be challenging but there are ways to make money and make a difference in the community. Many of these communities are in desperate need of real estate investors that to come in and invigorate areas. Because of this there are some gems out there just waiting for the right investor.