The Other Side of Town - Investing in a Bad Neighborhood

[Todd Dale]

Hello Bigger Pockets Community:

I was wondering if I could get your thoughts and opinion regarding investing in a bad neighborhood.

I've been searching for my first property since September. I was moving along nicely(seeing approximately 5 properties a week) but then I got slammed pretty hard by Hurricane Sandy (I live in Hoboken, NJ). I just got back on the hunt after being derailed for about a month or so. I recently found a nice short sell property that I might be able to buy for very cheap. The only problem is that it's in an awful (stress on awful) neighborhood! It's such a shame because the house is so nice but when you step outside to the street it is frightening...It's a like a beautiful disaster.

I've read a few articles and responses on here from seasoned investors on this topic and the general consensus seems to be that there is nothing wrong with buying property in a war zone. The common philosophy seems to be that just because I wouldn't live in a certain neighborhood doesn't mean someone else wouldn't. This is true because the short-sell property that I’m looking at is currently completely rented out with tenants.

My question is, should I get involved in something like this on my first go around? Or should I hold off, and because I've already been approved for a FHA loan, wait and buy something nicer and more expensive in a better neighborhood? I've been approved for a $600K FHA loan. The "Warzone" property could be purchased at $200-$225k. I feel like I'm not fully leveraging this 1x FHA opportunity of using Other People's Money to its full potential. Plus I'm a little nervous to deal in such a distress neighborhood without having any landlord/property investor experience.

Any help and advice would be greatly appreciated.

Thank-you,

Todd