Investing in low-income housing is beneficial, because it provides you more cash flow. This can be better explained with the help of an example. In a small town, the average cost of two-bedroom house is around $130,000 and you will get $800 a month as rent for it. The cost of a mobile home will not be more than $45000 and the probable amount of rent is $500 a month. Therefore, the increase in the amount of rent is not in proportion to the increase in the cost of the house. There is about a 200 percent increase in cost as compared to only a 60 percent increase in the rent. What it indicates is that investing in low-income housing like mobile homes, run-down apartments and old houses can be a wise decision.
Risk And Management Problems Are The Price For Higher Returns
People often tend to ignore investing in low-income housing, because of the greater amount of risk and problems in managing such kind of houses. This is true. Whatever negative points they may have in their minds are not baseless. You may need to manage small repairs here and there on and off. Sometimes you may receive the rent late. However, you should not forget that this is the price you are paying to get higher returns. Had there been no possibility of getting higher returns, nobody would have recommended investing in low-income housing.
Tips on Buying
Investing in low-income housing is ideal for generating a long-term cash flow. In fact, low-income housing is a very good asset capable of producing income for several reasons. The very first reason is that houses are plentiful. Hoses exist everywhere, whether it is a city, a town or the neighborhood. The easy availability makes houses easy to buy. Getting discounts on buying is also possible because so many sellers want to sell the property due to problems. If the house is well maintained, the average period of occupancy for a tenant is three to five years, while most of the other cash flow vehicles do not have this longer occupancy period.
Tips on Selling
Investing in low-income housing may fetch you 10 to 15 percent price premiums if you sell the property by agreeing for a sort of payment contract with the buyer. By investing in low-income housing you are not putting your money in slums. These are starter homes, but the location is not always so great.
25 Percent To 40 Percent ROI
You should keep an eye on the auction sales such as tax, estate, and foreclosure sales for investing in low-income housing. There, it is possible to buy these houses for $3,000 to $25,000. You may receive $350 to $500 a month by renting out these houses. In terms of return on investment, it may be possible to get average returns between 25 percent and 40 percent.