One of these things is not like the other:
- Abominable Snowman
- Loch Ness Monster
- Santa Claus
- Man in the moon
- Free lunch
- Perpetual motion machine
- 2% properties
Yes, there is indeed a Santa Claus. And I bet you did not know that he pays $900 per month in rent for a small 3-bedroom, 2-bath, brick-on-slab house with ceramic tile floor and new bath inserts where he and the missus raise a brood of miniature people who have excellent carpentry skills. Not exactly common knowledge, right?
In this day and age, however, what people don’t believe (and scientists have tried for years to disprove) is that Santa’s landlord only paid $45,000 a few months ago for the house he rents to the Claus family.
That’s right—people don’t believe this because there is no such thing as a 2% property, just like there is no Bigfoot or Nessie. An investor can’t find property that can rent for 2% of the purchase price per month. It’s simply a childish myth or perhaps maybe just a dream of a better day.
I have great news for the non-believers. With diligence, research, and an able real estate agent as a sidekick, 2% properties can be spotted and, in fact, captured in the wild. They aren’t common, but pockets of them exist in certain markets around the country.
Hunting the Elusive
At year-end 2017, my unit count stood at 122. Cash flow was good. I had capital that could be put to use. My portfolio loan-to-value was enough below my banks’ requirements that I could afford to hunt for attractive deals. And I was bored.
Looking around, my home market didn’t produce any good results. Ruston, LA is a small-market college town. Rents run about $400 per student/bedroom for housing, but the market prices that demographic at a premium. A 3/2 house will sell for $135-150k but only get about $1,200/month in rent. That might be good for parents putting a kid through school, but I prefer a much higher return on investment. The local market pretty much sucked.
What’s an investor to do? Being a big proponent of diversification, I had been already been thinking about whether and where to further diversify geographically….