The upside of D class neighborhoods ?????
Investor · Charlotte, NC · Member since 2017 · 321 posts · 157 votes
The upside of D class neighborhoods ?????
Most Popular Reply
Investor · Minneapolis, MN · Member since 2015 · 252 posts · 263 votes
9yD area? Why not?
- 1. Worst the neighborhood, better the cash flow. Here, around Minneapolis, house in D neighborhood can be purchased, fixed and rented for under 100k. Same house in A would be 400k. In D, I'd get $1300 and in A $2200. Rent increase in going from D to A doesn't justify a price increase.
- 2. The only way you have to go is up
- 3. Appreciation: Pick a neighborhood up with the chance of gentrifying. Or work just outside a little better neighborhood. If you get it right and if you stay long enough, benefits can be huge.
- 4. Inspect a property you are purchasing for the bullet holes. Don't worry about BB holes, some people ignore .22s. Personal rule - house with the bullet hole(s) is nothing i want to hold long term. Thats a joke with the hint of truth btw.
- 5. Resilience. 4 100k properties will do way better in case of crash / correction then 400k property
- In the crash, people who can't afford their homes rent. People who can't afford rent - move to lower tier. Low tiers are safe as there is always a demand. At times landlords resort to incentives to fill expansive appartments, but there is always a section 8 waiting list.
- 6. You will learn quick
- Not for everybody. They will scare you with "professional" tenants. They got nothing on professional landlords :)
It is all about finding your comfort zone ... Some people are outside of the comfort zone the second they leave Manhattan :) Good luck.
92 Replies
- Professional · Parsippany, NJ · Member since 2013 · 384 posts · 262 votes9y
I love "D" neighborhoods, don't let other investors deter you. Up in Jersey we have a lot of inner cities with potential to make cash from Section 8. I personally have a home on a better block within a D area, it's a D area but not the war zone of a D area. I sorta knew the neighborhood but confirmed with some local investors, police and farmed the area thoroughly. So far (thank the lords) it has been great. Section 8 is Guaranteed and is secured by backgrounds check. Even better my city has a direct deposit 1st of the month. No better felling than waking up On the 1st and getting paid for being the lord of your land. If you do cash month rent in D area well than that is Risky AF. But then again A neighborhoods are a risk as well, you can have somebody with a high paying job lose their salary job, get hooked on dope or even worse declare bankruptcy. The key is hire a property management company that has experience with section 8. First read the Section 8 bible and Section 8 is great very important books
- Contractor · Indianapolis, IN · Member since 2016 · 267 posts · 144 votes9y
Originally posted by @Joe Splitrock:
Originally posted by :
Be thankful for the section 8 people who never work and live off the government. In a capitalist society where people compete to have better or more than the next person, you need someone with a lower socioeconomic status to make the higher one possible. If we all worked as hard and achieved equally we'd be "gasp" a socialist society! You can't have big, high and bright without small, low, and dark. Those folks that frustrate you are the reason your house and car are considered "nice"... because there's isn't!
The idea that someone must win for someone to lose and that there is limited wealth is called scarcity mentality. It is the most common limiting belief that people hold. I believe it is the main cause of poverty. It is reinforced through welfare programs which tell people they are not good enough, therefore the government will provide for them. The truth is that the poorest among us could become wealthy if we stopped holding them down.
I have talked with single moms who feel trapped by Section 8. If they try to get a better job and make more money, the program is taken away. The benefit becomes too good to give up and making more money only harms your family. Tell me how that is NOT holding people down?
Capitalism is the private exchange of goods and services. It is a system that seeks balance in supply and demand. The system could exist with all parties exchanging equally and enjoying an abundant life. The reason for inequality is that people don't contribute equally. Capitalism encourages production. Socialism discourages producing any more than the lowest producer. It doesn't cause people to work harder, it discourages working harder.
The reason governments own businesses in socialist economies is that there is no incentive to start or run a business.
We ALL do better when less people are on government programs. Look historically at every dip in welfare expenses and it directly correlates to a more prosperous economic time for everyone.
We should never be thankful for people not working. It does NOT help our economy. Countries with the worst economies in the world all have the highest unemployment.
Joe nailed it
- Investor · Minneapolis, MN · Member since 2015 · 252 posts · 263 votes9y
@Jay Hinrichs, @Joe Splitrock, @Joshua Howaniec and others
D class predictable turns in social policy debate. I usually stick to real estate transactions leaving policy to professionals, but what the heck. Here is my two cents: Sure it is annoying. I am paying taxes and they are living on government handouts, paid by me. But you turn off welfare and you get increase in crime. Cost of housing somebody in jail, on average is 31k a year. Add a cost of insurance, policing, legal system and what not - it is way cheaper for us a a society to house somebody on section 8 for 800 + 400 for food stamps + 300 in other handouts, buy them beer then have them steal a beer and then have them in jail .... I believe welfare is needed. System is not perfect, no system ever is. And people will always gamble it.
On the lighter note, a few years ago I made our sheriff chock on his drink. He asked me somewhat similar question. At the friends party he asked me what can they do to help me. I replied with the few suggestions. I suggested a free ammo reloading stations in some areas, stocked with free ammo in popular calibers. Turning a few parks into a target practicing ranges, because as a matter of fact they are. I thought sheriff should assume a leadership role in providing a weapons training for the local gang members, sponsored by sheriff and local business of course. My rational was - 1/2 of the problems we are having is due to the poor marksmanship of our gangs. If they kill each other then they shoot, there will be less people to shoot at tomorrow. But because a lot of them are from disadvantaged areas, they may not had a chance to master their weapons. Hence shots fired miss targets but hit bystanders and cost expansive property damage. I think my proposals where too liberal, since non got implemented yet. But I am still hoping.
@Dan Bryskin Let's not forget that the majority of rental assistance recipients are either elderly, disabled, or WORKING at low income jobs.
http://www.cbpp.org/research/most-rental-assistance-recipients-work-are-elderly-or-have-disabilities
- Contractor · Indianapolis, IN · Member since 2016 · 267 posts · 144 votes9y
@Dan Bryskin
In the end this is barely even a political issue. This is an issue of character. Poverty does not = crime any more than rich = greedy. Sure, poorer neighborhoods are riddled with crime but it's a red herring. This is ultimately a character (dare I say spiritual) problem.
I have been broke. As broke as broke is. I have slept in parking lots waiting for the next morning to get my pay check because I couldn't pay for the gas to get home. Yet I did not steal, I did not kill, I didnt seek government assistance.
I am very well acquainted with the worst of these people (once at gun point) and saddly they lack work ethic, they have little mortality and those lacks that destroy their homes also tears down the community.
Also paying them to behave is like teaching a child if he throws a fit you'll give him what he wants.
Anyway, they need a change from the inside.
Can someone explain to me why my "@ mention" never works? It's really irritating.
- Contractor · Indianapolis, IN · Member since 2016 · 267 posts · 144 votes9y
None of this matters unless there is a solution to said problem so if any one has thoughts on that I would be interested.
- Rental Property Investor · Cleveland, OH · Member since 2016 · 69 posts · 108 votes9y
You seem to be headed in this direction so here are a few tips:
1. You need to be motivated and commit a significant amount of time for property stabilization.
2. Tour before you buy
3. Don't trust anyone 100%, don't accept excuses or think emotionally
4. Find a contractor that does quality work at a low cost, keeps you informed and understands your vision. Most likely, you won't find the ideal candidate until a few months in.
5. Have cash or credit reserves on hand for unforeseen repairs (For Cleveland war zone investing, I recommend $4K/unit...your market may be different)
6a. If possible, purchase a property with a longstanding tenant.
6b. Don't be afraid to increase that longstanding tenant's rent.
7. Be hands-on with paying all expenses and ask questions when clarification is required.
8a. If you employ a Property Manager, talk with them frequently so they understand your vision.
8b. Do not hire a contractor as your Property Manager
9a. Discuss repairs directly with your contractor.
9b. Discuss repairs directly with your Property Manager.
10. Be prepared to start out as a solo journeyman and know others will assist along the way.
11. Recognize there will be many highs and lows.
Best of luck with your journey!
- 9yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
@Joshua Howaniec you have to hit the @ sign and the ? sign then a drop down menu will pop up and you then highlight the person you want to tag .. if you only use the @ that will start to line up those your connected with ( I think) I am the last one for website navigation but I do know this much.
@Jay Hinrichs Thank you! I didn't know about using the '?' to get the list of names
- 9yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
@Jill F. NP its just pretty funny that I am giving others advice on how to navigate the site .. my rep of not being able to do basic computer functions is well established and absolutely true.
- Real Estate Broker · Chicago, IL · Member since 2014 · 2k+ posts · 1k+ votes9y
Originally posted by @Isiah Ferguson:
Hey, BP family. I've notice as a new investor that it seem like everyone is trying too avoid D class hood. I hear a lot of negativity about it. Is their any upside with theses neighborhoods ? What's on the positive end of things ?
As a new small investor there's no upside to investing & holding property in a D class neighborhood unless you live or have lived in the neighborhood & know the locals well enough to ensure your investment can be protected & continue to cash flow.
A few upsides:
- There are usually a few, what I'm going to call A/ B class blocks, in D class neighborhoods. But you need to make sure you put A/B type people in your property to protect your investment
- When there's significant development in an A/B or C area sometimes that development spills over into a D class neighborhood. As prices go up & people start looking for other choices developers try to provide those choices. This isn't for new investors though.
- Isiah Ferguson I agree with the poster who mentioned that definitions of "D" vary widely. My first purchase was in Harlem, which most considered a D area at the time. I saw past the dirt and folks on corners and FELT the value...2 blocks to multiple transit options, nice new Bldg, huge lovely apt with park views, etc. I was baffled that others didn't see what I saw...paid $100k for a 2bd and 2 years later folks were offering me $440k, I decided to hold on instead... My point for sharing that is: one man's D is another man's (or woman's) treasure. Don't buy in a war zone but run your numbers and trust your gut/instincts. If you see unrecognized value (close to transit or a major hospital, lovely housing stock, close to hip city center) trust that others will likely eventually see those things too and that your value will go up. Last, but equally important - screen carefully. Wait for the right tenant as the wrong one can be a huge headache. My first 2 Harlem tenants stressed me out big time, but I still made money...focus on good credit, income, references/rental history. Post a dummy ad on Craigslist with photos and general location before buying to get a feel for the type of people you will attract and the price that you can charge. Good luck with it!
- Investor · Singapore · Member since 2013 · 1k+ posts · 3k+ votes9y
Originally posted by @Jay Hinrichs:
@Rodney Sums I hear what your saying.. if you ever travel out of the US..
you may end up in a place like Singapore... NO social welfare at all. you either make it or you don't
and of course not every one is really rich in Singapore.. but they pretty much ALL work.
and there is govmit housing but you have to buy them 500k and up... for a condo.
I know Singapore well and have many friends there. It is based on Chinese culture. There is a strong obligation for family to care for each other. For example if you are single under 35 you are expected to live at home. You dont even qualify for a HDB flat. But when you do, there are enough incentives and programs that almost anyone can get a flat. Also they take 25% of your paycheck and into CPF which is a forced savings plan. You can use that money for medical, education, housing and retirement. Something like that may be good for Americans who earn a dollar and spend two! - Real Estate Investor · Arlington, VA · Member since 2012 · 302 posts · 277 votes9y
@Dan Bryskin don't tell everyone about your goodies!!
@Isiah Ferguson I think you said exactly what needs to be said. Look, BP is not the place to have the discussion on lower income neighborhood. The people here just can't stand them! Yes, you and i both come from these neighborhoods, but they dont know me or you from adam and so - they still keep their viewpoints and opinions that our neighborhoods are just plane horrible - and for them and where they may have come from, it probably makes sense that they don't get it - ad others do.
If you want to see people killing it, there is a sub30k mastermind group (my profile has the details), and there are posts and videos every single day of people doing this and only this. I like how you're trying to change perception and your story, but its not for everyone and everyone posting against it - good. It keeps a natural barrier to entry.
- Investor · Orange County, CA · Member since 2015 · 2k+ posts · 3k+ votes9y
One benefit would be that if you are in need of a drug dealer, then you won't have to look very far ... your tenants will know one, or they might be one themselves. If you don't use drugs or need a drug dealer, then nevermind ... not much other benefits that I could think of.
- Rental Property Investor · Chappaqua, NY · Member since 2015 · 1k+ posts · 947 votes9yIsiah Ferguson have you read Garret Kellers book millionaire real estate investor? My favorite part of the book is where he talks about finding an investor that is successful and try to find out what the model they used was. Then repeat what they did. I'm not too sure how people come up with A-D. A is probably easier to figure out. I think I live in an A area. I grew up in bad neighborhoods, my family moved a lot and later we lived in a better area. When I left home I went right back to the bad neighborhood. I always think the nicest areas have some tremendous risk in them long term. I know my dad used to say that areas in the Bronx were so nice when he was a kid. Then when we were living there it was bad. So I know good can go bad. My model is too buy in a bad area that can turn around. It takes along time we're not talking 3-5 years. I am ready to hold for 20 or 30 years. The numbers have to make sense today and next year as an income property. What I like about buying in places no one( or less anyway) wants to buy is there is room to go up. I also like to be part of turning stuff around. As a small real estate investor I don't pay too much attention to RE market in general or other areas except as polite conversation. I need to be an expert were I buy and sell and an expert on what I do. I look to exploit the inefficiency of small markets. Look for deals that scream money maker that others overlook bc they need a gun to be comfortable on that street. People get shot all over the country everyday. Sometimes it happens near houses. Someone has to own those houses. I have a house countless people have gotten shot near. House didn't shoot anyone but I made more than a million of hay house in ten years. Put 3.5 down on fha. I'm not saying I buy just anywhere, but I'll go anywhere to look. Great thread Isiah. When I was skid I remember going to the supemartket and my mom had food stamps. Cashier yelling for a manager to check something. Waving the food stamps. One of the things that keeps my goals so high.
- Investor · Atlanta, GA · Member since 2013 · 3k+ posts · 3k+ votes9y
@John Hickey,
I agree with your post and I also enjoy being part of the change.
I live in this neighborhood and people know me. I go to the neighborhood meetings and keep up with what's going on here and around us.
I don't buy anywhere else, but the neighborhood I'm in, even if a deal in another area jumps my way. I rather spend my money local and with each additional house I buy here, I help the other houses that I already own. The total is bigger than the sum of its parts.
I also don't like competition, so I've always found/created niches that nobody else was doing. So, when I started buying in this D neighborhood every other investor was terrified to set foot here. So, I was able to make lowball offers, because nobody else bought (except for some long-distance investors that kept their houses boarded up, waiting for the turn around).
Now I'm creating some niches within this neighborhood and again I don't have to deal with much competition, even though the area is now full of 'I buy houses' signs. ;-)
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