Moving into better areas. Tired of the lower income hassles.

[Mike A.]

Ever since I finally sold our four complexes in a C/D area of New Haven County, I've been refocusing my efforts into better areas. I know the rents will not be be as strong, but I am hoping for better tenants and less BS from the lower income properties. I am also trying to get properties within 30 minutes of our office so we can manage them directly. I've relocated to Stamford, so I am trying to stay in Stamford, CT, Greenwich, CT, Norwalk, CT, Yonkers, NY, and New Rochelle, NY. It's hard to find good deals, but the one I am working on now is 1.9m and throws off 170k gross. I am hoping for a Freddie Mac SBL, and it should net around 5.5k after expenses.  The biggest way I am cutting costs is if they are in my area, I will manage directly, so no PM. That saves me nearly 20k a year in Stamford. I've sold Ansonia, New Haven and Hartford; but keeping the Bridgeport, CT properties. 

I've tried to management with our small team, but since they are in downtown Bridgeport, it's a struggle. One of our team members had a gun pulled on him, and I've had to stare down some groups too. The only difference was that I have a legal concealed carry in CT, but my other team members do not want the responsibility of a firearm. I was in the Army for a number of years, so Bridgeport is a cakewalk compared to Iraq. I could sell our Bridgeport properties, they've appreciated around 60%. However, even with the PM in place, they clear a decent profit most months (knock on wood).

What do you guys think? Do you keep any C/D area properties? Or, are they just not worth the headaches even though there's more profit in those units? Or, do you strictly stick with A/B areas? 

[Michael Noto]

@Mike A. As you outlined the lower C/D class properties in the markets here in CT are a bear to deal with and it takes experiencing what you have to come to the realization that they are just not worth the risk to your safety and/or your time to deal with them. 

This is a pretty easy conclusion to come to for most people, but I think the lack of inventory in the solid B/strong C class areas in the state keep people going back to these bad areas. They get antsy to land a deal and end up compromising on the standards for a deal that they originally set. I am not saying this is what happened to you, but it is something I see happen a lot. Seems like you purchased when the market was really down and you've got some appreciation at your back which is saving you right now, which is great. Having options from that standpoint is never a bad thing of course.

The goal for most investors is to get into better areas as their investing career progresses and i think that is what you are going through here. 

Also, something to consider is that long term your paper projection numbers (pre-purchase) more closely match your real life numbers from a cash flow perspective the better the area you are in from what we see from over a decade of tracking these things in local markets. Even buying in a solid C as compared to a lower C-end area can make a huge difference over the course of time.

So I say take the time and be patient to find something in the better areas you are looking in because you know now from experience what the alternative is.