Low income neighborhoods?

[Mario Cuartas]

Does anyone have an investing strategy of buying and holding property in low income neighborhoods?

I have heard the saying, “the poor” need housing too. I am curious if anyone has made a niche out of this type of investment strategy? If so, what should I watch out for? Do you just estimate more for caps x, maintenance, and other reserves?

The other day I walk through a property in a not so nice neighborhood, and it was absolutely disgusting. I could not believe those people lived in such horrible circumstances in the USA. I also thought, “how shameful on the property owner who allows his tenants to live in such terrible circumstances”. After seeing that, I got this over whelming desire to provide affordable housing in low income areas and actually take care of tenants. Maybe low income tenants do not take care of their rentals because the landlords don’t take care of them. I am a big believer in the invisible hand, so I fill like if great land lords treat people great, they will return the favor. Is my thinking flawed? What do you think?

[Jill F.]

@Mario Cuartas I have some properties in "D" neighborhoods. My first 8 units were in the second poorest neighbor hood in Akron. I have found that by-and-large people do treat nice, well maintained properties better than dumps and there are plenty of very nice people and good tenants that are poor (My average length of tenancy in the 53 months that I've owned these properties is 41 months) BUT... especially if you are buying places to renovate, you will meet some fundamentally broken people. I hear people all the time gripe that the government should not give handouts to able bodied people but the sickest tenant I ever inherited was able bodied and he was very creepy and utterly unemployable. The maximum SSI disability check is $750 per month-- you know a person can't live on that so they'll have to be doing something else or have some other kind of support. Many of these disordered people can't manage to keep a roommate so that's not often an option-- family support is usually non-existent (That's probably how many of them got so broken.) I get calls all the time from caseworkers trying to get their client out of a rooming house situation. You the landlord can't fix broken people and you can't fix the whole neighborhood. My advice would be to study up on cluster-B personality disorders and avoid them like the plague. Look for a long term work history (the nuttiest ones can't hold jobs longer term). I don't think I'd buy a fixer building with in place tenants in a "D" neighborhood in the middle of this eviction moratorium you might get stuck with a crazy train.