School quality or crime rate...or something else? What's important?

[Edith TenBroek]

Hey all!

So while we are paying down debt, saving money, and getting ourselves situated to start buying property I've been reading, learning, researching etc. So many SFH's that are "affordable" are in areas with higher crime and or lesser schools. I know these should be avoided, but what about "lowest crime" areas (according to Trulia) that have "not so great" schools. Are these good bets, or do I really need to look at better areas. Also, are Trulia's estimates of crime and school quality accurate?

I've been nosing around the Kansas City areas and it looks like there are lots of good options, but the good school areas are EXPENSIVE with low cash flow numbers The areas with better cash flow have higher crime and/or poor schools. What's good in KC?

[William Robison]

Hello @Edith TenBroek

Thanks @Account Closed

Well, most of you have hit the nail pretty well in the conversation. There is a happy medium that can be achieved. My belief is that there is a hefty a.k.a. expensive premium to pay for A props over B props.

In your research about Independence for one thing, it has to do more with the high school. Part of the Independence school district is a fairly recent acquisition from the KCMO school district (unaccredited). Independence has three high schools and a wide range of neighborhoods. There is an area I like to call the fringe, which is immediately parallel to the urban core. This fringe area goes to Van Horn HS. To the east, there is Christman on the north central side and Truman on the south central side. These schools are average and good areas to invest. To the north east, there is Fort Osage which has slightly above average schools and solid demand. Within Independence, there are houses that range from 10k to 200k. The "sweet" spot, as mentioned before is about 50-60k for rent in the range of about 750-900.

Raytown is another solid market area with two high schools. There are some "no buy zones" that I have in this market area also...mostly included in the fringe side (closest to KCMO). Outside of that, there are houses from 30s to 180s in Raytown. Its all about the neighborhood. Zillow and Trulia do not get specific enough data to really find out that much about a neighborhood. I have zip codes in Raytown that have great areas that I would want to live and areas that I would not want to own rentals. There are only 15 blocks separating these two.

Its one thing to sell an investment property, but its another thing to inherit a headache property. With my management company, I do not want a headache, therefor, I work hard to keep my investors out of these areas. I have a lot invested in helping them get to the right decision also. In the end, its about happy clients that buy more and refer, so finding partners in market areas of interest that have a long term focus of quality service and products will have a major impact on success.

Here are some Independence examples:

Sold a HomePath house today with a 10% down loan. Price 77k. Rehab 16k. Rent about 1100. Best part is the ARV of 128k so the upside is built in for the long term.

Contracted a wholesale with a price of 73k turnkey. 88k ARV. Rent at 925. North East corner of Independence in Fort Osage schools, which is a bonus. At 15k in equity, you have plenty of strategies available if you need to exit.

Long story short, avoid the urban core and the fringe. They offer good cash flow numbers on paper, but they do not account for the significantly increased risk of bad tenants, vandalism, make ready costs, etc.

All the best with your investments. Feel free to ask specific questions if I can help you with answers.