CHEAP HOUSES IN THE USA ARE ACTUALLY MORE EXPENSIVE.

 CHEAP HOUSES IN THE USA ARE ACTUALLY MORE EXPENSIVE.

These "cheap" houses are flooding the market in the USA, particularly because they are attractive to foreign investors.

At first glance, you can acquire and generate income with less initial capital.

However, they are actually the most expensive way to achieve and maintain financial freedom.

Here are 5 reasons to understand why.

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Cheap homes in the USA and appreciation potential.

The first point is that cheap homes in the US often mean low appreciation potential.

Here are two (of many) indicators of a place where rents and prices are likely to appreciate over time:

Significant and sustained growth in the metropolitan population: Only when the population grows rapidly will there be sufficient demand for housing to increase prices and rents at a rate exceeding inflation.

Low crime: On average, a company lasts 10 years, while an S&P 500 company typically survives 18 years.

From a purely factual point of view, there is a good chance that the non-government jobs held by your tenants will disappear in the foreseeable future.

For your tenants to maintain their current rent levels, new businesses must establish themselves in the city, offering jobs with similar wages and requiring similar skills. Cities with high crime rates are generally not chosen for new business operations. Without these replacement jobs, your tenants may be forced to accept lower-paying service-sector jobs. This could lead to lower rents or, at best, limit potential rent increases.

Rental properties remain a good investment (despite high rates).

Maintenance and repair costs.

Low-cost properties often have hidden problems that require extensive renovations and repairs.

Whether it's outdated plumbing and electrical systems or structural issues, the cost of fixing these problems can quickly add up.

In the worst case scenario these costs exceed the initial purchase price.

Neglecting these repairs can lead to further deterioration and increased expenses in the long run.

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Higher rental vacancy rates.

Lower-cost rental properties tend to attract tenants with limited financial stability or uncertain income streams.

As a result, vacancy rates may be higher, resulting in a loss of potential rental income.

Extended periods of vacancy can have a significant impact on your cash flow and restrict your ability to cover your mortgage payments and living expenses.

Fortunately, there are several tools available to mitigate this risk. Starting with a reliable, on-site partner who can handle the selection and management of your tenants.

It is very important to emphasize in this specific case that collaboration with rental management is almost obligatory.

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Cheap Houses in the USA: What About Maintenance ?

Low-cost properties often require more frequent and thorough maintenance due to their age, outdated infrastructure, or lack of proper maintenance by previous owners.

These ongoing maintenance costs can impact your profit margins and affect your budget.

This can easily negate the “initial savings” of buying a cheaper property.

It's also worth mentioning the poor care your tenants will give to the property, which inevitably leads to significant maintenance and costs (which even the security deposit won't be enough to cover).

As a reminder, in the USA there is a classification of property type: Class A, Class B, Class C.

The limit related to liquidity and choice of tenants.

Lower-cost properties tend to attract a smaller pool of potential buyers or tenants, as they may not meet the requirements or preferences of a broader market segment.

This limited demand may make it difficult to sell the property or find suitable tenants, extending the time needed to generate positive cash flow and potentially resulting in additional holding costs.

Knowing this element will help you make a more informed and profitable investment decision. Above all, it is important to understand that each type of investment can meet certain objectives that only the investor can identify.