Investing in the Hood

[Mike Nielsen]

I made an offer on a duplex property in a tough part of Saint Paul today. I offered about 20% lower than the asking price so I'm guessing it won't get accepted. It's in a neighborhood that has some houses with boarded windows. Most of the cars around the neighborhood are beaters. I believe the crime rate is high in the area... I will investigate this in more detail before I start making offers that are closer to the asking prices.

My plan is to use the same systems I use for the 100 units I manage (I own only 4 of those units) which is: 

*Heavy screening on the front end and creating hoops to jump through prior to showings 

*Only showing properties to qualified people (people who meet my rental standards of no felonies, no UD's, and must make 3x rent)

*Making bullet proof leases that spell out what is expected of me and what is expected of the tenant (so I don't have to do things that aren't in the lease such as changing lightbulbs and treating for bugs if it isn't a building issue--if the tenants don't keep the apartment clean). 

*Doing a thorough background check for every tenant and making sure I never make exceptions for things like UD's 

*Marketing the property heavily so I can get the most rent possible

*Waiting for the right tenant while adjusting rent accordingly in order to fill vacant space

What I am considering adding to this plan:

*Installing a security system for the tenants to use to make good tenants more likely to lease in this area

*Purchasing heavy duty deadbolts and doors

*Putting signs in yard that say the property is under surveillance and has a security system

*Requiring every tenant to obtain renters insurance

DOES ANYONE HAVE ANY CRITICISMS OF MY LIST OR BULLETPOINTS TO ADD TO THE LIST (I am mostly looking for answers from someone who has experience being a landlord in tougher areas but if you lack experience and have an educated response then by all means)???

Thank you very much for any stories, tips, tricks, or warnings... I've pretty much got my mind set on investing in this area due to the huge potential return 30+% cash on cash (assuming 8% for repairs and 3% vacancy) if my offer gets accepted. But if someone can convince me otherwise I'd be happy to reconsider or chat through it. THANK YOU