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Updated about 5 years ago on . Most recent reply
20% ROI in bad area - what should we do?
I am interested in a duplex in a bad area in Arizona - Eloy. Many of the residents are low-income. However, there is a monthly cash flow of $400. Each unit rents for $750 and the purchase price is $165k. What should we do? Has anyone had issues with low income areas?
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Mitch Messer
#3 Classifieds Contributor
#3 Classifieds Contributor
- Rental Property Investor
- Playa del Carmen, México
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Mitch Messer#3 Classifieds Contributor
#3 Classifieds Contributor
- Rental Property Investor
- Playa del Carmen, México
Hi @Keegan Darby and welcome to BiggerPockets!
The only reason your spreadsheet calculation shows 20% ROI is because you're not taking into account all the additional expenses you'll likely incur, such as:
- Higher turnover and vacancy
- Greater repair costs (both due to more repairs and also from being charged a premium for contractors to serve your property, if they do at all)
- Higher property insurance premiums
This is not to say you can't make money in the 'hood; you just can't apply the rules and assumptions of the suburbs there.