Main Pitfalls of Investing in Cheap Property

Main Pitfalls of Investing in Cheap Property

Cheap housing anywhere is always about the bad neighborhoods.

A bad neighborhood is primarily:

  • bad schools, especially high school,
  • disadvantaged neighbors (unemployed, with bad habits, with a low educational level, with a criminal present or past, with the presence of fighting dogs),
  • with poor urban infrastructure,
  • immigrants,
  • with the danger of leaving the house at night).

If you want to buy cheap housing, you have to be ready for it. Is not taken out garbage there, there it is thrown right from the windows, there is loud music at any time of the day and there is no public transport.

Studio apartment in Florida

Studio apartments are the cheapest accommodation. They are about 30 square meters in size. They are located in the most disadvantaged areas. They cost from $10,000 to $20,000.

The entire condominium in such an area is a two-story barracks, built in pairs parallel to each other with staircases in a circle on the second floor. It is not customary here to smile and greet, as in all the rest of normal America.

The parking lots around the houses are empty because the people in these barracks have no cars. There is no swimming pool or playground on the territory.

2 bedroom condo

A 2 bedroom, 2 bathroom condo costs about $20,000 in such disadvantaged areas.

Pitfalls of buying a cheap apartment in the USA

One of the main pitfalls is monthly payments to the condominium – community fees. As a rule, if they are high, then this additionally devalues ​​the apartment.

For example, consider seven different condos ranging from $27,500 to $70,000 with 2 bedrooms and 2 bathrooms.

When you compare their main figures, you will see that the cheapest condo (at $27,500), built forty years ago, may have the most expensive community fees – $398,50. And the most expensive condo (for $70,000), that built in 2007, has a community fees of $266.

Community fees

If you bought an apartment, or condo, in a condominium, you must pay monthly for the use of common areas, such as:

  • roads,
  • sidewalks,
  • playgrounds,
  • pool,
  • gym or sports grounds,
  • lawns,
  • parking,
  • roofs, etc.

These payments arise from the moment the tenants move in and only grow every year. As a result, condos built thirty to forty years ago can have bumpy roads, muddy pools, tennis courts that have not been cleaned for years, and dilapidated playgrounds. At the same time, the community fees can be unreasonably high.

You cannot refuse to pay, reduce or cancel these payments. They are sometimes comparable to the mortgage payments of an average home.

But, on a mortgage, you can pay fifteen or thirty years, but in the end, you pay off. You will pay for the condo forever and the payment will only grow.

If you are buying an inexpensive condo to rent out, then you should understand that you will never be able to rent it out for a high price, because of a bad neighborhood.

At the same time, your profit from renting will be monthly reduced by the size of the community fees, which you will not charge from tenants, such as utility bills.

For example: if you rent out your condo for $800 and pay $400 for the community fees. That is, you only get half. Isn’t that impressive?

Another pitfall you will surely stumble over

If you bought an inexpensive apartment and made a decent renovation in it, but you will not be able to sell this apartment with a good profit.

Here are 2 reasons:

  1. Because on the one hand the poor neighborhood,
  2. And, on the other hand, the high community fees will limit the value of your renovated home.

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