Going for one of the cheapest places to buy a home is the smartest move because it guarantees a good return on investment. The first thing that you need to mind is that the location matters.

Table of Contents

  1. Pros and Cons of a Cheap Rental Unit
  2. 10 Cheap and Profitable Cities to Buy Real Estate
  3. Is Buying a Cheap Property Worth it?

Being a real estate investor may seem easy at first glance, but you actually need to be a really pragmatic and attentive person to keep your hand on the pulse of the present-day market. Also, there’s quite a small group of people who enter the industry with a large capital right off the bat.

If you’re buying a cheap rental unit, even a high ROI percentage won’t generate a large income. But still, it will add up to your annual income, and the property itself will appreciate with time. To guarantee lucrative returns, look for the best place to buy rental property.

It is also possible that you’ll find a really good but undiscovered property with the well-trained eyes of a professional investor. It might even make you a great deal if you carefully think about your every step.

Pros and Cons of a Cheap Rental Unit

Let’s look at the comparison of advantages and disadvantages of purchasing a property at one of the cheapest places to buy a home. Despite the low price being an obvious advantage, many people fail to notice it at first glance.

Pros

Here are the advantages of purchasing a cheap rental unit:

Low initial investment

The first advantage is the relatively low price of houses, which makes the initial investment affordable for first-time investors. But don’t hurry to pick the cheapest places to buy a home in the US as the cold mind and logic are still important. If you’ve found a good investment property, take some time to investigate it thoroughly because your goal is getting good cash on cash return, not just buying a cheap home.

Since the price for houses is relatively low, it’s probably in an area where you can’t charge a high rental rate. But you’re still going to be receiving a profit and realize a substantial gain once the mortgage is paid out.

Low competition

There’s nothing more pleasant than discovering a top vacation rental among pretty basic options. When the competition for it is not that high or even absent, you feel like you’ve won a lottery. Whether you’ve stumbled across it among the best places to buy a rental property or the cheapest places to live in the US, you still need to mind the risks.

There are hidden gems everywhere, but there are financial traps as well. Though low competition in the cheapest places to buy a home doesn’t always equal poor or unwanted property, you need to research the neighborhood and, most importantly, check whether the neighborhood prices are appreciating. It is in your best interest to stay as unbiased as possible in order to see what others might’ve accidentally skipped.

Low maintenance fees

Maintenance fees play a significant role in evaluating the place where you’re planning to buy investment property. Typically, maintenance costs range from $50 per month to more than $2,000.

In addition, the location, combined with the size of the property, is far from being the last on the list of criteria influencing the final sum. If you are lucky and skillful enough to find a fairly decent property in a developing area, you might save quite big.

Property appreciation

Basically, it would take you about 20-30 years to pay out the mortgage, but there’s an important detail you should focus on. Even if you are choosing your next investment from the pool of cheap houses for sale, guessing the right neighborhood is a big deal.

Purchasing a cheap home in an area that is promising to develop fast guarantees that your property will appreciate in price with time.

Related: Is It a Bad Idea to Invest Solely for Real Estate Appreciation? 

Long-term tenants

The cheapest places to buy a home are mostly small towns, so it’s natural to hazard a guess that tenants will be staying for a longer period of time. It’s quite unlikely that the properties in cheaper states to live in will offer a high vacation potential.

Long-term tenants, in turn, provide more stability for your cash flow. You can rely on the income you get from them and don’t need to worry about always looking for someone to fill the rental with.

Cons

Along with the advantages, buying an inexpensive rental unit comes with a few disadvantages, such as:

Lower rental income

Due to the lower investment price, the return on investment may be high, but the actual revenue you’re getting may not be. It might not sound promising, but you should focus more on the real and achievable goals — purchasing property in LA is not for everyone.

You can always find a higher cap rate or a lower maintenance fee in a house that costs more than you can’t afford. So, they are poor excuses for not even considering less profitable investments.

Finding tenants may be harder

Despite the fact that long-term tenants bring stability, it can sometimes be challenging to find them in the cheapest places to buy a home. You need to remember that people who plan to be in town for a decade will not be renting if the price of a home is under $100,000; they’ll just buy.

So, searching for a tenant may be a bit more difficult than in the more expensive areas, but once you find them, you’re all set to earn a stable income.

Little to no Airbnb potential

Airbnb does provide amazing earning potential to landlords, but only in areas where short-term rentals are a thing. It mostly means vacation areas or large cities where people go on business trips. Since we’re looking at homes with relatively low prices, the odds are they’re in smaller towns.

It doesn’t mean you can’t find a place with both cheap housing prices and a good vacation potential; it’s just rather unlikely. The odds are that you’re going to stick with traditional renting if you’re looking for a cheaper investment property.

Related: Airbnb Market 2022 Trends, Data, and Analysis

10 Cheap and Profitable Cities to Buy Real Estate

With the quick rundown of why you’d want to buy property cheap out of the way, let’s get back to the main question of this article—where do you buy cheap and profitable rentals.

Below, you’ll find the top 10 US cities with the cheapest property in the country, according to the latest Mashvisor data, arranged from the lowest to the highest median listing price.

1. North Apollo, PA

The town of North Apollo, Pennsylvania is located in Armstrong County. With a population of 1,252, it is part of the Blairsville-Saltsburg School District. The town is full of attractions, such as Armstrong County Historical Museum, North Apollo Community Park, and Pine Creek Rail Trail, so there’s always something to do there.

You can consider Pennsylvania when looking for the cheapest properties in the US and check the data with Mashvisor’s rental calculator if needed. The traditional cash on cash return rate is 5.67% and can be described as moderate, but the lower returns simply follow the growing housing prices.

Key metrics:

  • Listings for Sale: 5
  • Median Property Price: $55,320
  • Average Price per Square Foot: N/A
  • Traditional Rental Listings: 0
  • Traditional Rental Income: $581
  • Traditional Cash on Cash Return: 5.67%
  • Traditional Cap Rate: 6.48%
  • Price to Rent Ratio: 8
  • Days on Market: 101
  • Walk Score: 35

2. Cahokia, IL

Cahokia is the largest city ever built north of Mexico before Columbus. The city boasts 120 historical earthen mounds, many of which were massive, square-bottomed, flat-topped pyramids.

At the vast plaza in the city’s center rose the largest earthwork in the Americas, the 100-foot Monks Mound. Unfortunately, in such a fascinating historic city the population is slowly declining, but tourism still lives. The average house there would cost you around $68,000, with traditional cash on cash return of 5.48%.

Key metrics:

  • Listings for Sale: 11
  • Median Property Price: $67,809
  • Average Price per Square Foot: $62
  • Traditional Rental Listings: 5
  • Traditional Rental Income: $699
  • Traditional Cash on Cash Return: 5.48%
  • Traditional Cap Rate: 6.17%
  • Price to Rent Ratio: 8
  • Days on Market: 86
  • Walk Score: 40

3. Creve Coeur, IL

Situated on the bluffs overlooking the Illinois River, Creve Coeur is a village in central Illinois. The town is perfect for a family and comfortable for cinematic solitude. In other words – great for anyone!

Investors are not an exception, as the cost of the property in Creve Coeur can hardly reach $89,000, which is really convenient. The return rate of 5.45% is not that attractive but is decent enough. Don’t hesitate to learn more about the neighborhood as it can become your new treasure.

Key metrics:

  • Listings for Sale: 5
  • Median Property Price: $88,720
  • Average Price per Square Foot: $69
  • Traditional Rental Listings: 6
  • Traditional Rental Income: $755
  • Traditional Cash on Cash Return: 5.45%
  • Traditional Cap Rate: 6.04%
  • Price to Rent Ratio: 10
  • Days on Market: 93
  • Walk Score: 38

4. Wood River, IL

Wood River is located just minutes from downtown St. Louis, making it the perfect location for commuters. The town is also home to a variety of businesses and restaurants, making it a wonderful place to live and work.

If you’re looking for cheap rental property in the area, be sure to check out the listings on our website and use the real estate investment calculator to get the bigger picture. We offer a variety of properties available, and we’re always updating our inventory.

Wood River offers traditional cash on cash return rate of 3.83% and gives an opportunity to buy one of the cheapest properties in the US for a little more than $92,000.

Key metrics:

  • Listings for Sale: 16
  • Median Property Price: $92,375
  • Average Price per Square Foot: $80
  • Traditional Rental Listings: 19
  • Traditional Rental Income: $668
  • Traditional Cash on Cash Return: 3.83%
  • Traditional Cap Rate: 4.22%
  • Price to Rent Ratio: 12
  • Days on Market: 77
  • Walk Score: 53
Cheapest Places to Buy a Home - Mashvisor's Real Estate Investment Calculator

Use Mashvisor’s Real Estate Investment Calculator to find cheap but high-performing traditional rental properties in a particular location or neighborhood.

5. Anadarko, OK

Anadarko is one of the cheapest places to buy a home in Oklahoma. It is the county seat of Caddo County and is home to a mix of industries, with the most prominent being agriculture and oil production.

The city is loved by families and attracts a high demand for rental properties for young couples. You’ll need around $95,000 to buy a house in Anadarko. The city’s traditional cash to cash return is 7.25%.

Key metrics:

  • Listings for Sale: 8
  • Median Property Price: $95,475
  • Average Price per Square Foot: $77
  • Traditional Rental Listings: 0
  • Traditional Rental Income: $880
  • Traditional Cash on Cash Return: 7.25%
  • Traditional Cap Rate: 8.01%
  • Price to Rent Ratio: 9
  • Days on Market: 103
  • Walk Score: 63

Related: What Is a Good Cash on Cash Return?

6. Harrisburg, AR

If you are looking for cheap rental property investment, Harrisburg in Arkansas is the place to be. The cost of living in Harrisburg is relatively low, and the rental market is growing quickly. In fact, the traditional cash on cash return in the town is 5.67%, plus there is a high demand for rental properties.

Investing in a rental property in Harrisburg is a smart way to get started in the real estate market. The town is growing rapidly, and there are plenty of opportunities for investors to make a profit. So check it out and mind that you’ll be able to buy a house there for about $96,000.

Key metrics:

  • Listings for Sale: 5
  • Median Property Price: $96,320
  • Average Price per Square Foot: $71
  • Traditional Rental Listings: 0
  • Traditional Rental Income: $742
  • Traditional Cash on Cash Return: 5.67%
  • Traditional Cap Rate: 6.22%
  • Price to Rent Ratio: 11
  • Days on Market: 46
  • Walk Score: 28

7. Concordia, KS

Concordia may be far away from Kansas City, but it’s not far from being the cheapest place in the US to invest in. Situated on the Republican River and home to a living history museum, the 5,000-strong town even boasts an airport of its own.

There are a lot of excellent reasons to invest in Concordia rental properties. The town is growing rapidly; there are a lot of opportunities for investors to get in. The other reason to invest is the low cost of living with the high potential for return on investment.

In Concordia, KS, there are a lot of cheap rentals available for investors. The properties can be acquired for around $112,000, and they offer a great 3.79% traditional cash on cash return, making this one of the cheapest places to buy a home in Kansas. Investors who are looking for a safe and profitable way to invest their money should give this town a look.

Key metrics:

  • Listings for Sale: 6
  • Median Property Price: $112,950
  • Average Price per Square Foot: $101
  • Traditional Rental Listings: 7
  • Traditional Rental Income: $715
  • Traditional Cash on Cash Return: 3.79%
  • Traditional Cap Rate: 4.10%
  • Price to Rent Ratio: 13
  • Days on Market: 100
  • Walk Score: 69

8. Atwood, TN

Atwood is a town in Carroll County. With a population of about 1,000, Atwood is a charming small town with a lot to offer visitors. It is home to several restaurants and shops, as well as a few historical attractions.

Despite being such a tiny spot on the endless map of the US, Atwood sees no end to its charms. It may be small, but the community is quite tight-knit and new generations might need more space. Perfect time for you to enter the game!

For a little more than $114,000, you’ll be able to change the area for the better by giving people what they want – space. The traditional cash on cash rate is also quite pleasant at 6.78%. Give it a try and go learn more about such a stunning region.

Key metrics:

  • Listings for Sale: 7
  • Median Property Price: $114,214
  • Average Price per Square Foot: $76
  • Traditional Rental Listings: 0
  • Traditional Rental Income: $764
  • Traditional Cash on Cash Return: 6.09%
  • Traditional Cap Rate: 6.74%
  • Price to Rent Ratio: 12
  • Days on Market: 111
  • Walk Score: 7

9. Dupo, IL

Dupo is a village in St. Clair County. It is located on the east bank of the Mississippi River, opposite St. Louis, Missouri. The village was settled in about 1750 and was incorporated in 1876. Its interesting name is derived from Common Fields of Prairie du Pont (French: Bridge Prairie).

You’ll also be pleasantly surprised to know that the crime rate is really low, making Dupo as safe as the Illinois state average and safer than the national average. Newly-formed merry families will be more than happy to get a cozy countryside house in the area.

The average price of the property in Dupo is around $138,000, which may be higher than the other towns in this list. The return rate is not cosmic, but it is still not bad – 2.35%.

Key metrics:

  • Listings for Sale: 8
  • Median Property Price: $137,950
  • Average Price per Square Foot: $99
  • Traditional Rental Listings: 38
  • Traditional Rental Income: $730
  • Traditional Cash on Cash Return: 2.35%
  • Traditional Cap Rate: 2.54%
  • Price to Rent Ratio: 16
  • Days on Market: 72
  • Walk Score: 34

10. Rantoul, IL

Rantoul is a town in Champaign County, Illinois. With a population of about 13,000, it is part of the Champaign–Urbana metropolitan area. Rantoul is best known as the home of Chanute Air Force Base and its Chanute Aviation Museum.

If you are looking for a cheap place to invest in rental property, Rantoul, IL is an excellent option. The average rent for a one-bedroom apartment is only $550 per month, even though the vacancy rate is rather low. It makes it a great market for investors who are looking to buy and rent out the property quickly.

Key metrics:

  • Listings for Sale: 15
  • Median Property Price: $148,453
  • Average Price per Square Foot: $90
  • Traditional Rental Listings: 0
  • Traditional Rental Income: $1,029
  • Traditional Cash on Cash Return: 4.92%
  • Traditional Cap Rate: 5.34%
  • Price to Rent Ratio: 12
  • Days on Market: 78
  • Walk Score: 66

Is Buying a Cheap Property Worth it?

Monthly earnings with the property that is on the cheaper side aren’t going to be that huge. However, a cheaper asking price means investors with smaller starting amounts of money can compete for the property. That’s a great chance to start off with real estate investments and potentially get a decently priced home when the mortgage is paid off.

So if you have a modest starting capital and are dead set on the real estate market, finding cheap property in a growing town is an excellent opportunity.

To find the cheapest properties for your real estate investing needs, sign up for a 7-day free trial of Mashvisor, followed by 15% off for life.




Source link

Turn leads into sales with free email marketing tools (en)

Join Us

Subscribe Us

Related Post