Low income rentals? Pro/Cons?

[Nathan Duncan]

Anybody have advice on buy and holds in lower income areas? I've listened to the podcasts concerning it but want to hear other people's stories. The town I live in is a small community (<5000 people) and the majority of folks are in lower income brackets. The individual/mentor I purchased my home from also owns 36 rental properties. He and his wife have been in the business more than 50 years and they are wanting to eventually sell the entire portfolio and retire. He approached me about buying him out but I don't have the kind of capital to buy the entire lot right away but could buy several lots over time which he is fine with. He would owner finance the deal which is a plus. What have been the advantages/disadvantages to this type of market other than the obvious? One added benefit is that I'm a letter carrier in town and know if somebody skips out where to find them.

[Tyron McDaniel]

The biggest drawback for most investors is dealing with the tenant's in the lower income bracket and for many this drives them out of real estate. The flip side, is you can understand that the lower income market is derived of people to and if handled accordingly can be profitable. 

It's not for the faint of heart and you have to have a BULLETPROOF management system that ensures you get payment and your properties are taken care of! For instance, in certain areas rather than pay a property manager we have paid an off-duty cop to pick up rents for $30-50 month (depending on location) and have documentation signs which puts the FEAR of GOD in the tenants and even if they skip out on 1 months rent they NEVER trash the place because they are scared of the law! 

This one strategy has been a game-changer for people that I have shared it with!