Buying in run-down neighborhood

[Rob Na]

I have been lurking here for a while however this is my first post and I decided to follow it up with a question for all you hard core PMs.

I found a neighborhood that is relatively close to home for my first rental purchase. I have been keeping tabs on it for a couple of weeks now to see who rents and for how much. I watch what is for sale and what has sold, for how much.

The homes are close together and not much more than 1000sq ft. Most are either 3/2s or 2/1s. It looks like 90% of them are in poor shape and have noticeable wood rot from the street along with a platter of other items that scream unmaintained. Just about every house has the standard toys/bikes strewn across the yard. Some even have a lovely landscape of broken trash bags. If you're lucky, the backyard will have grass. If you're unlucky, you're stuck with dirt and some cars.

I looked at a HUD home (attached) that was in poor shape. It needs many WDO repairs. The rear french doors were broken in with a brick and it looks like all the sheetrock has been vandalized. Were they looking for copper? I do not know why they would put holes between every stud!! I'm not interested in this house for that price, there is no way it would flow after all the work it needs; I'm just using this as an example of the hood.

The weird thing is, this is probably the only neighborhood (100 homes) that is like this. Every other one has nice $200k+ homes. I drive by places that are $400k+ just a few miles down the road. They are building a new subdivision of 50 or so homes right down the street. They are still clearing out all the trees (sad) so no telling what type of homes. This is out in the burbs and close to the local schools.

When I drove through today, I did so slowly and with a pen/paper. I must've written down 10 places either FSBO or MLS listed. It was 9:30am and most of the driveways had cars. Dont these people work? I'm going to call on all 10 of them this afternoon looking for a distressed seller. All the FSBOs also had "for rent" signs as a show of desperation. These homes seem to be renting for $700 (2/1) to $800 (3/2).

My question is, would you buy a rental here?