Anyone else in the lower C class rentals?

Question

Been buying C- rentals for the past few years. I know everyones definition of the classes is different. My definition of C or C- is not anywhere near a war zone. But an area where 35% of the tenants are on some sort of social assistance, higher turnover, occasional drama that you would never get in a B or A neighborhood. Out of 12 rentals, each month I always have 1 that has a "story" why the rent will be 10 days late etc.

I love the cash flow, I have rentals where I am getting 30% cash on cash returns, but it often wears on me. I have friends with rentals in A areas and it seems like a dream.

Account Closed · Answer

After years of trying different things on that side of town, one thing that seems to work well (vs neighboring apartment complexes that don't do so) is requiring that one tenant in each apartment be 55 or over. Drama, evictions, etc has gone way down.

Fair housing act allows this type of age discrimination as long as 75% of units are restricted as such.

In this rental market, I haven't noticed increased vacancy as a result.

Kathleen Leary · Answer

Mine might be C+, but definitely on the "wrong" side of town. I've totally upgraded the property, from new siding to tile backsplash (nothing crazy - I'm not made of money!) & have set the rent accordingly. A nicer house (with correspondingly higher rent) attracts a better tenant pool & I screen carefully. I do not want $500 tenants, so I don't have a $500 property. And I haven't had as much trouble with damage, late rents, evictions, etc. This may not be the way to go for a lot of, shall we say, "less desirable" neighborhoods, but it has been successful for me.

Gail K. · Answer

I'd rate a fair number of ours in the C class.  Got started with these because I love older houses and initially I wanted to "save" these beauties.    There were a group of us trying very hard to improve the area these houses were in.   Some of us are still hanging in there although we're all a bit more jaded.  I still love our houses but sometimes hate what tenants can do to them.   I can walk into some and the odor of old grease just lingers in the air.

On the other hand they've all been purchased with cash so no mortgages and often tenants do stay for a while so unless I have to evict them because they lose their jobs at Krispy Kreme or Walmart they tend to stay for a while.

Also many aren't afraid to live in these areas as a "Melissa" or a "Sarah" might be.

Gail

Christine Swaidan · Answer

We have a senior C class complex. Very little turnover, thankfully. We lose more to death than a change of address. It's a rare event when someone leaves because they bought a house. About 15% on section 8. Sometimes the adult kids stash their parents there. We do very modest rent increases and bigger jumps at turnovers.

Keith Jourdan · Answer

Good point on it is what it is . High risk high reward. I want to continue to buy in these areas, but put systems into place to make things run smoother.

Rick P. · Answer

I am currently on both sides of this.  I have probably 60% of my rentals in C/C-  areas (of those, about 1/3 are section 8) and 40% in A/B locations.  At a certain point you just have to accept it for what it is.  I would say the first year to 18 months I was always stressed out.  At a certain point I just kinda came to terms with the fact that there was going to be the occasional eviction and that the same people were gonna be a week or two late with rent every month.  For instance, we have a couple units where people are 1 1/2 or 2 months behind over the course of 3+ yrs.  Is what it is.

Wilson Jing · Answer

Are your rental out of state?

Yvette M. · Answer

I would class my property in the C range.  Working class tenants with median income of $40k-ish. Not much turnover because rents are high in San Diego and if a tenant finds a good place they want to stay. Two tenants are on leases from the PM I had and the tenants I have personally placed are on m2m. I have one section 8 tenant and she is great.

Yvette M. · Answer

@Wilson Jing

I took over from my PM too.  I am lucky enough to have found a good handyman through a recommendation from my plumber who I found on Next Door.