Investing in War Zones

[Jimmy H.]

You hear alot about avoiding "war zones". Investing in low income is not some peoples cup of tea, but some people do focus their strategy in such areas. My issue is that even these low income investors, along with everyone else, generally always warn against and avoid "war zones".

I wanted to start a thread not just to discuss what constitutes a war zone, (the number of murders, violent crimes, drugs in one area may constitute a war zone to one investor but not another) but more specifically to see if anyone out there on BP thrives in this "niche" market.

Someone owns those house in war zones, and with as much as you see/hear/read about avoiding them there is potentially money to be made.

I'd like see if anyone is willing to defend such an investment strategy, and I understand the issues that come along with it. But if you can buy in such an area with a 40%+ CAP - who cares if the vacancy is 50% because you are still getting a 20% CAP at that (I know it's rudimentary math, just go with me here). But some of these areas (especially here in Lexington, KY there are crime ridden areas but not comparable to the ghetto of some larger cities) that provide enough margin to hire property managers, fix up, account for vacancies/property manager incompetence, and the like, and still make a good return without ever really setting foot in the area.

I would approach such a strategy very simply by choosing an area and city that isn't headed for total vacancy. But vacancy and turnover is to be expected and if your tenant sells drugs for a living - IMO who cares if he pays the rent and maintains the place. (Drugs will stay in demand, drugs will be sold, and drugdealers and criminals do need a place to live)

Opinions?