Renting in a bad neighborhood

[Jennifer Fernéz]

The market in our city, Reading, PA, is great to buy a 'great deal'.   There is an abundant properties available for cheap, and the rent is high.   The school district isn't so great and neither is the neighborhood.   Some streets are better than others.   Does anyone have experience renting in a not so good neighborhood and have any tips or advice?

[Deborah Smith]

I do.  I had a couple rentals in South Phoenix near the airport - which isn't exactly known as being a great area.  Terrible schools.

There are, of course, pros and cons to this. 

PROS:

- Decent rent to purchase price ratio

- While I definitely took care of my properties, the tenants were less picky about little appearance things (i.e. - one house was painted pink by the previous owner, paint was good, I never redid it.  Or counters were laminate, a couple floor tiles had chips, one house had no dishwasher).

- Usually the neighbors were nice and would look out for the house while vacant, they just wanted decent people to move in next to them and would often refer friends as potential renters (this can also be a negative).

- At least in my market, easy to sell if you decide you want out.  The buyer pool for a nicer, lower-income level home is big and the homes sell quickly if priced fair.

CONS:

- Usually hard to find a qualified tenant.  Everyone has a sob story, you have to have thick skin and realize it's a business for you, even if it means evicting someone you really believe is on hard times.

- I often had to get creative with structuring move in as I rarely had an applicant that could afford deposit AND first months rent all at once.

- Potential vandalism is higher, especially when vacant.

- Higher turnover.  I found when I did get good tenants, they usually liked the house, but didn't want to stay in the neighborhood.  It was a definite stepping stone.

- Tenants are less sophisticated - don't expect that they will ever remember anything from their lease, including where to send payment.  Most paid by money order as they don't have checking accounts and could not pay online.

- Tenants will often NOT tell you if something breaks, for fear they will be charged or what not and will either let it be or try to fix it themselves.  Doing inspections is important!

I am sure I overlooked lots of things, this is what came to mind right away.

End of story - I sold mine in the lower income areas.  I did my own property management, and with other things in my life I didn't have the time to dedicate to filling vacancies or telling tenants every month what the payment address was.  I was able to sell for decent appreciation, so it was a reasonable exit strategy for me at the time vs hiring an outside PM.