Fourplex in rough area

[Darius Lipsey]

I'm a first time investor considering putting an offer on a four plex that location on a solid street in what I'd call a semi-rough area, I wouldn't really want to live there, but as far as I know there isn't a ton of violence, drugs, etc in the immediate area, but definitely more such than a more high income area. At a little below market rents and over conservative numbers it cash flows quite a bit. I know a lot of investors wouldn't invest in lower income areas especially war zones or places that questionable because high evictions, tenants destroying property and all types of hell. So I'm wondering a few things from an experienced point of view what are the differences between investing in SFR Versus MFRs in semi rough areas. Is it possible to get decent tenant with a reasonably strict application process and lease that's enforced? Has making an effort to care without being soft or lax on policies mad differences in landlord/tenant relations in these areas? Or is it a lost cause?

[Steve Rozenberg]

At one time I owned over 35 of these types of properties. Looooong story short I ended up selling all of them. It was not that they were bad properties, I just could never create a sustainable business model around them so that I could truly run them hands off. There was always an issue with the properties. Either tenants not paying, not paying on time, skipping, 3 times the make ready costs because the tenants lived so hard in them or when they left the took "Parting gifts", continual maintenance issues because they were older properties... after 5 or 6 years I never saw it getting better and never a way to be fully automated and stress free... The good thing was that we created one of the fastest growing property management companies in Texas because of all the problems we had with these homes, we ended up selling these properties to other investors and whats interesting is that we still manage many of these homes that we once owned... and these guys are having the same issues we had. So I just think that they can be great "On paper" Cashflow deals, but I did not see that realized and I could never create a scalable hands free/ Stress free business model. My company now manages over 750 homes in Houston and Dallas and we do not take on low income properties because it is almost double the staff hours then a mid-level rental.. those are true facts that we tracked..

If you were wanting to self manage and be in the guts of it all and be willing to let rents / late fees slide, are ok dealing with the daily drama etc.. then this could be good model for you to pursue