Bread and Butter Neighborhoods....and the CONTEST

The Bread and Butter Neighborhoods

In my experience, 'bread and butter' neighborhoods where we do most of our deals, have a lot of these traits:

  • Houses in perfect shape will sell for about $75,000 - $150,000
  • Foreclosures and other run-down property will go on the market, and usually sit for a while, at $40-$50,000.
  • Occasionally properties will appear on the market, or be seen in the "sold" area, for as low as $15,000 - $20,000 but probably not more than 1 or 2 per year.
  • When you list your property, typically the cheapest property for sale in the whole area will be about $35,000-$45,000
  • You'll want to list for $20-$25k and you will probably get an offer within 2-3 days if not sooner.
  • This easily leaves $10k for profit in most cases - sometimes several offers will come in and you work the price higher.

Let's look at a deal that a student did in my area a couple years ago - this is a 'bread and butter' neighborhood.

South Hammond, IN (46324)

jefferson

So first we look at the sold properties (yellow) around the subject property.  This area is on the edge of this part of town, and "not in a good way".  The area above this screenshot is one where we'd be careful before buying anything (though not nearly as bad as Detroit or Gary!).

But I'm seeing all the signs of this being a place I'd like to do some deals:

  • "For Sale" Sale Houses (red) are available for $75k-$85k, and there is a retail sale the next block over for $99k.
  •  I'm seeing several properties that have sold a little lower than I'd like to see at $19k, 21k, and 24k.  But then they go on up in price from there.
  • Most importantly, I'm not seeing ANY "for sale" houses in the $25k range where I'd like to try to price this one. So it will get attention and sell quick - and I know based on the sold properties that this property can really retail at $70-90k.

In this particular case, there were about $13k of taxes, closing costs, and purchase price to pay to the owner when the property sold, so even if it could only fetch $18,000 (a really worst-case scenario given the prices I'm seeing), a solid $5k profit could still be had.

And in fact, there was a minor bidding war for the house, and it sold for $32,500 and made the student almost $20,000.

A Couple Other Quick Checks

Instead of looking at the map, take a look at the listings on the side of the screen.  There are several sales that don't report a price or report $1 - these are usually HUD homes or other properties that haven't sold on the open market.  There are a couple properties that sold for $1500 - $4000.  But upon checking the GIS map I see they were teardowns sold for land value only (or already demolished but showing as a house).

Then there are 9 houses that sold from $18k-$30k.  If this house got at least as much as the lowest-priced sale of the year, we'd make money.

So I know my property can potentially fetch at least $18-$30k because other sales have sshown it has been done, and there are not legitimate sales below this amount (or very few).

But what I like the most, by far, is that nothing is available right now for less than $39,900 and this is a foreclosure.  This means if I price the house at $29,900 it will get a LOT of attention.  And it did!

Contest Time!

Three people will win a new Kindle Fire 6 HD today - will it be you?

Fire-HD6Here's all you have to do - find a "bread and butter neighborhood" and post the zip code in the comments section below!

  • One entry per person - so choose your zip code carefully!
  • First 3 people to post a "bread and butter zip code" will win a Kindle Fire (I am the sole judge of whether a zip code qualifies)
  • I will try to respond to as many entries as possible, even if you're not one of the first 3 to correctly post
  • Your entry will not appear to others for 24 hours, only to you - then I will unlock all of the entries.

Good luck, and post with the email address where you received today's email.  Winners will be announced in a day or so!


Thanks for your submissions everyone - contest is now closed. Congratulations to the 4 winners (we added one prize due to confusion on one of the submissions)-

  • Sarah Marlar

  • Patrick Smith

  • Keith Speer

  • Doug Markley

Keith Speer November 5, 2014 at 4:32 pm

37115

Rick Dawson November 9, 2014 at 9:29 pm

This is a "bread and butter" zip code, and you're our first winner!

Mack McCarty November 5, 2014 at 4:36 pm

19145

Rick Dawson November 9, 2014 at 9:31 pm

This zip code has only properties starting at $132,000 - and goes up rapidly from there. Workable? Sure. But not a bread and butter zip code.

Doug Markley November 5, 2014 at 4:40 pm

How 'bout 64133?

Rick Dawson November 9, 2014 at 9:32 pm

Yes sir! Perfect. You are our second winner.

Hugh November 5, 2014 at 4:42 pm

This is a good bread and butter area in Washington, DC, 20011

Rick Dawson November 9, 2014 at 9:33 pm

We've done a deal in Washington DC and we made a lot of money on it...but I doubt there is a bread and butter zip code in DC due to the universally high prices. This one has properties that start at $280,000 - a bread and butter zip code has properties that start at about 1/10th of that.

Hugh November 5, 2014 at 4:43 pm

I wish I had a lot of money to close is this area

Patrick November 5, 2014 at 5:41 pm

30033

Patrick November 5, 2014 at 5:47 pm

It wasn't a typo; I'd chosen 30033 first, but did more research and decided 30334 was more in line with a bread and butter. I'd already typed in 30033 and when I went to submit 30334, I'd accidentally clicked submit before changing my final answer.

Rick Dawson November 9, 2014 at 9:36 pm

30034 is indeed a bread and butter zip code - we will come up with a fourth and final prize for you Patrick.

Rick Dawson November 9, 2014 at 9:34 pm

Another workable zip code, but with properties starting at 98,000, it's not "bread and butter".

Patrick November 5, 2014 at 5:41 pm

30334

Rick Dawson November 9, 2014 at 9:34 pm

One entry per person, please!

sarah marlar November 5, 2014 at 5:43 pm

08096, deptford nj

Rick Dawson November 9, 2014 at 9:35 pm

Yes! This is perfect. You're our third and final winner!

Jay Davis November 5, 2014 at 5:53 pm

30008

Rick Dawson November 9, 2014 at 9:37 pm

Yes - this is a bread and butter zip although I like to see properties in the 20's or 30's as a starting point. Good job.

Joe November 5, 2014 at 5:54 pm

Zip Code 34691

Rick Dawson November 9, 2014 at 9:37 pm

Absolutely - great zip code.

Donna Thompson November 5, 2014 at 6:05 pm

The zip code I am submitting is 46226

Rick Dawson November 9, 2014 at 9:38 pm

Great job! I like this one.

Enola Reynolds November 5, 2014 at 6:09 pm

zip code 01083

Rick Dawson November 9, 2014 at 9:39 pm

This one is a bit high-priced with houses starting at $69k - but may be about as good as you can do in New England. So I'll give it a "yes".

Catherine Reid November 5, 2014 at 6:22 pm

Zip Code 30088

Rick Dawson November 9, 2014 at 9:39 pm

Very good!

Brian Wollerman November 5, 2014 at 6:33 pm

Zip Code 44077

Rick Dawson November 9, 2014 at 9:40 pm

I'm seeing 4 houses for sale at under $15,000 - so this one has prices that are a bit too low - possibly workable though!

Gayle Peltz November 5, 2014 at 7:02 pm

zip code 38128

Rick Dawson November 9, 2014 at 9:40 pm

This could be - but there are 3-4 properties for sale below $15k - so be careful here.

Heather Dunlop November 5, 2014 at 7:29 pm

"bread & butter" 30122

Rick Dawson November 9, 2014 at 9:41 pm

Very good

Larry Conniff November 5, 2014 at 7:30 pm

32168

Rick Dawson November 9, 2014 at 9:42 pm

A little high-end Larry - we like to see zips that have some offerings in the 20-40k range, this starts at $52k. However this could be a very workable area - and if you get something, you know you have real value in this neighborhood.

Anna Reynolds November 5, 2014 at 7:49 pm

28315 bread n butter neighborhood

Rick Dawson November 9, 2014 at 9:43 pm

A little on the higher end, Anna. Lowest property is $45k then property asking prices rapidly ascend to $90k. Could be a great zip code to work in though.

Ivy November 5, 2014 at 8:03 pm

Hello,

I'm not sure if you were only looking in any particular state, however I will respond any way. I am new to real estate investing. My goal is to find a mentor who is willing to help me overcome the fear of the first deal. The neighborhood I have in mind is in the area of 33805, a middle class hood in Lakeland, FL. Thank you for posting this trivia. It was interesting and a big motivation to get started.

Ivy

Rick Dawson November 9, 2014 at 9:44 pm

I can tell you this Ivy - you know how to understand our recommendations. Because you picked a near-perfect neighborhood to submit.

Sun-Chow Chan November 5, 2014 at 8:18 pm

TN, 38127

Rick Dawson November 9, 2014 at 9:44 pm

Sun-Chow, this is a neighborhood you'll probably want to avoid - WAY too many properties for sale below $15,000 and you might have trouble selling a tax sale property there at any price.

Ayana Johnson November 5, 2014 at 8:32 pm

20785, 20706,20774

Rick Dawson November 9, 2014 at 9:46 pm

20785 is the most like a bread and butter zip code...the others have properties starting at 85-95k which takes those out of the "bread and butter" definition. However, with these being in MD, they may be the closest to a bread and butter neighborhood outside of Baltimore, as prices in MD are almost universally higher than other areas.

karen November 5, 2014 at 8:41 pm

zip c ode: 30047

Rick Dawson November 9, 2014 at 9:47 pm

Prices start at $68k - a very workable neighborhood but not bread and butter as I've described it.

David Remington November 5, 2014 at 8:43 pm

Look at 49509, for Wyoming, Michigan, a suburb of Grand Rapids, Michigan. Largely still blue collar and industrial, with pockets of mixed industrial development. Home sales metrics per City Data website metrics parallel the South Hammond example.

Respectfully submitted,
David L. Remington
November 5, 2014, 3:43 EST

Rick Dawson November 9, 2014 at 9:48 pm

YEP - this is perfect to get started in.

Heather Beavers November 5, 2014 at 8:49 pm

Zip code 38401 Columbia, TN

Rick Dawson November 9, 2014 at 9:48 pm

Excellent!

Rick Horton November 5, 2014 at 9:04 pm

43232

Rick Dawson November 9, 2014 at 9:48 pm

I like this one.

Judy Pierce November 5, 2014 at 9:22 pm

78249

Rick Dawson November 9, 2014 at 9:49 pm

This one's a little too high on the front end with properties starting at $65k. But CERTAINLY workable.

Donald Waters November 5, 2014 at 9:36 pm

60612

Rick Dawson November 9, 2014 at 9:49 pm

Yes, this is a good Chicago zip code to get started in, though on the whole prices start a bit high here.

Glenn November 5, 2014 at 9:49 pm

60805

Rick Dawson November 9, 2014 at 9:50 pm

Excellent - it's tough to find zips in the Chicago suburbs that fit the bill, but you have done it.

Christopher November 5, 2014 at 9:51 pm

19147

Rick Dawson November 9, 2014 at 9:51 pm

This neighborhood starts at $275k and quickly shoots to $500k - so way too high-priced. You could do deals here but they might be few and far between...but when you do they will have a lot of room for profit.

pete leyva November 5, 2014 at 10:14 pm

I like the way you use market comps to show investors what things are selling for. In addition to adding rehab and closing cost for a final purchase price.

Brad lee Fuller November 5, 2014 at 10:25 pm

85043

Rick Dawson November 9, 2014 at 9:52 pm

A little on the high end - $45k for lowest property then quickly up to $85k and up - but very workable neighborhood nonetheless.

Jeffrey November 5, 2014 at 10:56 pm

Try this zip 34689 FL Thx

Rick Dawson November 9, 2014 at 9:52 pm

Yes! Very good.

Elvis Edwards November 6, 2014 at 12:20 am

01830

Rick Dawson November 9, 2014 at 9:53 pm

Values start too high here to be a bread and butter neighborhood as described - but for New England maybe closest you can come. Deals can be done in neighborhoods with these prices for sure.

Kelley November 6, 2014 at 12:39 am

I believe that the 30311 zip code is a bread and butter neighborhood.

Rick Dawson November 9, 2014 at 9:54 pm

I believe you're right! Just watch the bottom end of the market for more low-priced properties to possibly appear - if you see more than 5 properties under $15k available, be careful.

Roger Ryan November 6, 2014 at 12:56 am

06450

Rick Dawson November 9, 2014 at 9:55 pm

Pretty good - SLIGHTLY higher priced than I described but in CT this may be about as close as you can get. Lots of deals to be done here I bet.

Tom Doyal November 6, 2014 at 3:09 am

33612, 33613

Rick Dawson November 9, 2014 at 9:55 pm

Perfect!

Sharon Thompson November 6, 2014 at 4:43 am

34142

Rick Dawson November 9, 2014 at 9:56 pm

THis is bit higher than I'd like to see, one house at $30k then up to $60-70k...and FL is full of bread and butter neighborhoods that have some cheaper offerings you might want to try to locate.

glenn November 6, 2014 at 2:27 pm

33764

Rick Dawson November 9, 2014 at 9:57 pm

Pretty good - a few properties in the 30's though it quickly ramps up to $70k+. Very workable zip.

terry walton November 6, 2014 at 8:12 pm

WHERE to find and look up zip codes?

Rick Dawson November 9, 2014 at 9:57 pm

Realtor.com. Start by looking up a city, then you'll get one or more zip codes in the results you can then enter to drill down.

Frank Gonzalez November 8, 2014 at 1:56 pm

32837 Hunters Creek FL

Rick Dawson November 9, 2014 at 9:59 pm

These start at 70k, making it a workable, but not "Bread and Butter", neighborhood.

Lori November 8, 2014 at 6:11 pm

98012

Rick Dawson November 9, 2014 at 10:04 pm

I recognize prices in WA state among the highest in the country - but this starts at $250k so I can't call it a bread and butter neighborhood.

Dianne November 9, 2014 at 12:59 am

I think that 32763 in West Volusia County Florida may be a bread and butter neighborhood.

Rick Dawson November 9, 2014 at 10:02 pm

Yes it is - good submission

Carolyn November 9, 2014 at 5:05 pm

Zip code 36110

Rick Dawson November 9, 2014 at 10:00 pm

Too many properties for sale below $15k - I'll be concerned about not being able to sell a property quickly here.