Smaller Housing Markets Lure Individual Investors

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After Andrew Bahr, a structural engineer, lost a bidding war last fall for a two-bedroom apartment in Queens, he decided he was done trying to buy real estate in New York.

“I was tired of looking around me and seeing all the home prices shooting up and I’m not getting a piece of that pie,” said Mr. Bahr, 26, who was stunned when a buyer offered $15,000 more than his $345,000 bid on the apartment in Jackson Heights.

Rather than wait for another apartment to come along, or save more money, he turned his gaze well beyond the city limits, all the way to Atlanta. On March 1, he bought a four-bedroom house there for $100,000.

In doing so, he traded in the dream of living in a home he owns for a chance to turn a profit.

A tenant lives in his Atlanta house, paying $1,050 a month — enough for Mr. Bahr to pocket $400 each month after paying his mortgage, taxes and property management fees. Mr. Bahr lives in Jackson Heights, in a studio he rents for $1,467 a month. “We live in the wrong state, we definitely do,” he said.

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The article is about HomeUnion, which lets investors buy rental properties all over the country. It’s not crowdfunding, as you own the house 100%. I am a fan of that model, but their fees are steep:

Mr. Bahr found his house through a California-based company called HomeUnion, a one-stop shop for small-time investors that helps people buy, renovate and rent properties in 11 markets around the country. HomeUnion charges an acquisition fee of 3.5 percent of the purchase price; management fees of up to 10.5 percent of the rent; and a 10 percent fee for renovations over $2,500.

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Those fees are way too high.