Investing in Bad (D+) Neighborhoods?

[Brian Caulfield]

I have a deal where the numbers are good (11-12% cash on cash) but it is in a rough neighborhood of Philly. I am confident in my screening abilities, but still concerned about the tenants and neighborhoods of this area. Does anyone have advice for investing in rough areas? Should I stay away? 

To add, I have been looking all year for properties in better neighborhoods, but with the rates and prices, the numbers don't work in my area. 

[Andrew Freed]

@Brian Caulfield - Proceed with caution. Properties in bad areas always look sexier from a return standpoint but you will be making up the additional return with your time managing the property. Properties in D class areas have tenant bases with more personal issues such as jail, not being able to keep jobs, bad credit, and evictions. Yes, on paper the returns look better but I guarentee you are undershooting vacancy, repairs and capex as a result of this rougher tenant base. I personally would rather own in a nicer area, have more reliable and consistent tenants, and take a 2-3% lower cash on cash return. 

One of my best deals from a price per unit was in a bad area.... this one property takes more time than most of my portfolio to manage hence following the numbers without looking at the property holistically was a mistake on my part.