Real Estate Blog & Podcast

What you get with each price range investing in single-family real estate? (2024)

May 30, 2024

 

If you wanna get into real estate investing, single-family real estate is a great place to start. But before you get started, it might help for you to understand what you’re getting into with each price range you invest in. 

 

Now I should say every state and market is different, the price range you get in California or New York is not what you get investing in Missouri, but the concepts of supply and demand remain the same at different price ranges no matter what state you’re in...

 

Here's a breakdown of what you get with different price ranges in most midwestern markets in my experience:

 

$0-$100,000:

 

Single-family homes that you buy in this range are gonna usually gonna require significant repairs or be located in less desirable neighborhoods. 

 

Anybody can get started with these properties, but they’re usually gonna come with higher risks and potentially lower returns.

 

$100,000-$200,000:

 

At this price point, your properties will also still most likely be in not that great of neighborhoods. The supply of prospective tenants is generally high, but tenant quality can be a major issue. 

 

You may face higher turnover, property damage, and rental payment delinquencies. Crime rates also tend to be higher in these areas. 

 

But, the mortgages are also low, so even with some vacancies, you can still cash flow with minimal costs. With these, you wanna make sure to budget significantly for repairs and maintenance.

 

$200,000-$300,000:

 

Houses within the range of 200-300k usually are gonna attract middle-class professionals and families looking for quality housing in nicer neighborhoods with good schools. 

 

The tenant pools for this category are smaller than the lower price tiers, but you'll attract more stable, long-term tenants who take better care of your properties. 

 

With these houses you’ll start charging higher rents to offset the higher mortgage and holding costs so you can generate solid returns.

 

$300,000-$400,000:

 

With Higher-end single-family homes you’ll neede to market and attract upper-middle-class professionals.

 

With these properties you can start charging high rents, but with the smaller pool of qualified tenants you’ll have much higher vacancy rates.

 

Good marketing and professional management are super important to consistently fill vacancies with well-qualified tenants able to pass your strict screening process.

 

$400,000+:

 

Once you start getting into properties over $400,000, you’ll be able to start charging luxury rents. With these, you'll be competing for a very small group of tenants. 

 

Very few people are able to afford rents of $3,000-4,000+ per month to the point where it makes sense for them financially.

 

These homes require high upfront costs, extensive marketing to attract the few tenants that can afford this price range, and generally longer tenant screening/vetting processes. The vacancy risks are going to be high if you can't consistently find qualified long-term tenants. 

 

Despite the fact that most people can’t afford it, higher-income areas are extremely desirable to people, so the properties you buy in these areas will still have long-term appreciation potential. 

 

Evaluating your own market

 

This gives you a general idea of what to expect at different prices ranges so you know what you’re getting yourself into. 

 

You’ll have to evaluate your own risk tolerance, your market’s rental demographics, and economy to decide what price ranges make sense you want to invest in. So keep these things in mind if you wanna invest in single family real estate!

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