Investing in a C- area

[Seth Lind]

Many of the properties in my home market that appear to be good deals tend to be in an area I would consider "C-".  Far from inner-city but in the rougher area of town.  

My question for the experienced investors, what would be the downside to investing in these areas if I'm using a property manager?  I've heard investors recommend staying away from these types of properties, but if there is a property manager involved to use as a buffer from tenant issues, why not?  I understand my appreciation would be less than other areas, but if the numbers work to make it cash flow, appreciation isn't my focus.  I would be using a management company that does not charge for filling vacancies so turnover isn't a concern.  

The properties I've been keeping my eye on are staying available much longer than similar properties elsewhere so it appears other investors are staying away.  I'm afraid there must be something else I'm missing.

Thanks for your input.

[Kusmayadi Djunaidi]

Hi guys,

In my opinion, these are the concerns that is working at C- area.

- There's more crime in the C- area. You are risking your property at risk.

- The insurance will be more reluctant to give coverage, even if they do, the insurance will be higher premium.

- You have to be careful who you put in your property, if you got people that is doing bad stuff (selling drugs, etc) you can get your property held up by the authority for investigation (just what happened to my neighbor a couple of weeks ago and the property is in B area).

- Yes, you can get a property management that will not charge for filling vacancies (even though it will be hard), be careful that they will not just put any tenant just to fill in the gaps. And you can (and most likely) get lower rent since they will not use real estate agent to market the property (believe me the free ones will not screen the tenant properly)

- Your property can also be empty for longer than other area because of the condition of the area.

- When you want to cash out, it will be more difficult to find buyers. Good investors always think about exit strategy.

- You can get more damages and maintenance cost to repair the properties from the unqualified tenants.

- The rent can either late or not paid in full. Yes, you can evict them, now eviction cost money and the tenant can just damage your property when they get evicted.

There are other factors that prevent investors to invest in those areas unless they know that the area will be better area in the future. Even then, they will be very careful in choosing the street, area, houses, etc.

Hopefully that can help.