32 unit (Lower Income) in up and coming neighborhood

[Nate Culkin]

I am looking at a 32 unit right now in Milwaukee, the buildings (there are 3) and units are older, but the place could be spruced up a bit.  It is right on the edge of a neighborhood that is up and coming, median incomes are on the rise, and it seems that the demographics for the surrounding single family homes are beginning to change for the better.  However the apartment complex is in kind of a bubble - its surrounded by a school, police station, and social security office, and is right next to another lower-income apartment complex.  What we are trying to determine is if the surrounding neighborhood continues to improve, how much will this impact (i.e. rents, and the kind of tenant living there) the 32 unit we are looking at.

My question is: has anyone had experience with a lower income multi-family building that had its tenants improve over time as the surrounding neighborhood did as well?  Or do these types of complexes stay 'stuck' as the surrounding area changes?

[Darren Budahn]

@Nate Culkin

I am fairly certain I know the property that you are referring to.  I don't have any experience in a deal that large so I'll leave that to others.

As far as the neighborhood, it's definitely on the fringe.  It's kind of on the wrong side of the fringe at present day.  It certainly doesn't hurt that the large police administration building is right there though. 

Definitely a tough call.  If you go west 9 blocks, you are in Tosa, which is an A area.  If you go South of North Ave, you are in Washington Heights and it gets progressively better as you head south--at least a B type area.  The problem is if you go North of North Ave, the neighborhood definitely gets worse, although the further west you head it gets better almost block by block.  And if you go East of 51st and North, the area starts deteriorating as well.  It doesn't turn into what I consider a D area until you head east of Sherman Blvd (about 43rd st.).  

Very tough call.  Hopefully the area transitions into a diverse, vibrant area like the east side of Tosa.