The Cheapest Houses for Sale?

The following is a look at some of the cheapest houses for sale in the U.S. as of mid-2011. To compile the list here I went to Realtor.com and entered the following two criteria: under $30,000 list price and at least two bedrooms. I searched around the country, and the options will probably surprise you, but in the case of Detroit they will simply shock you. Here is what I found...

Alpena, Michigan has 18 houses listed for less than $30,000 at the moment, and isn't such a terrible place to live if you like things quiet (I have visited a couple times).

Altoona, Pennsylvania, a town of about $35,000 in the Allegheny Mountains, has 20 listings under that 30K mark. But of the four listings that were priced at $10,000 or less, two showed the square footage of the lots rather than of the homes, which I believe indicates an expectation that they'll be torn down and the property used for a new home. You can see a photo of the town on the page Places to Buy a Cheap House.

Independence, Kansas used to have some of the best examples of the cheapest houses for sale, but it seems that people are buying them up. Still, there are about a dozen homes left that are listed for less than $30,000, with the cheapest at the moment a 3 bedroom one for $11,000.

Pueblo, Colorado has a nice downtown, with the Arkansas River running through it. We shop there regularly, and it is one of the few places in Colorado that is cheap and near the mountains. There are 21 houses for less than $30,000 at the moment, and my friend - a real estate agent - tells me that investors are regularly buying rental houses for around $15,000.

Birmingham, Alabama is not quite as hard hit as Detroit by the recent real estate crash and rough economy, but close. It has almost 500 homes that are selling for less than $30,000 (not a typo - and wait until you get to the Detroit info). Some are under $5,000, and there are currently 140 that are listed for less than $10,000.

Little Rock, Arkansas is another southern city where homes are very affordable, to say the least. I counted 100 listings at or under or $30,000 target, and there are several fixer uppers under $10,000.

Bay City, Michigan is where I was born, and it looks like the prices have gone nowhere in my 47 years. I found over 50 houses listed for less than $30,000, 28 of those for under $20,000, and a few under $10,000. Michigan has been hit hard, as we shall see...

Bradenton, Florida has condos, houses and mobile homes on lots for under 30K - 21 in all.

Tallahassee, Florida has about two-dozen listed for less than $30,000, and one fixer upper for $9,000.

Erie, Pennsylvania has over 40 listings at or below $30,000, with the cheapest house priced at $8,000.

Detroit, Michigan is dying - it has been for generations. There are thousands (and yes you read that right) of homes for sale for $30,000 or less here. I counted 100 that were priced under $1,500 (again, this is not a typo). I scrolled through from low to high and by the time I was at 500 listings they were still under $5,000.

My wife and I then searched a few of them on Google maps and looked at the neighborhoods. Some of these look okay, with lawns that are cared for and streets in good repair. People have been leaving and there are apparently empty houses everywhere, but the story is more dramatic in some cases. We looked at a home that sold for $90,000 in 2006, and is listed for sale for $4,500 now. We looked at others that have fallen 80% or more in value in four years.

Part of the reason - in my opinion - is that the city is chasing people away with high taxes. The owner of that $4,500 home paid over $2,000 in property taxes last year. Where we live here in Colorado, you would have to have a property worth $400,000 to pay that much. Add to that the lack of jobs and perhaps the worst crime rate in the country, and there is little hope of prices going up anytime soon.

That brings us to this question:

What to Do with the Cheapest Houses For Sale in the U.S.

It is nice to buy a cheap home to live in, and that's a real possibility as you can see. But on the other hand you might not want to live in some of these cities and towns (I won't say which to avoid nasty emails from local politicians). So what do you do with information like this?

To start with there are few towns on the above list that aren't so bad. If you have the ability to move and take your income with you, you might buy a home for $10,000 somewhere. Many of these cheaper listings are fixer uppers, of course, but another $10,000 might be all it takes to make it home.

Investing in the cheapest houses as rentals is another option. This can be difficult when the prices are down primarily because of population loss. On the other hand, if you put just $20,000 into a rental and get just $400 in monthly rent, you might have cash flow even if it is empty half the time (especially if they don't try to choke you on taxes as they do in Detroit).

Investing for resale is perhaps the best option, but not if you do it the usual ways. Fixing and flipping houses in areas where there are hundreds of other homes selling cheap is not the best plan. Instead, buy the cheapest livable place you can get, and sell it for twice as much by offering easy payments. Let's consider one example...

Suppose you buy a house in Detroit for $3,000 and after closing costs and cleaning it up a bit you have $5,000 into it. Now, if there are families in the area renting similar homes for $400 per month, is it possible they would like to buy a house for $14,000 with just $300 down payment and monthly payments of $250? I think so - and this is what some investors have been doing. Defaults are common, but selling it all over again might not be that difficult. And you have none of the headaches of a landlord.