Investing in Low Income (Potential for High Growth) Area

[Benjamin Sykes]

So I am newer to the Real Estate investing side, but work as a Realtor®. My question is directed toward seasoned investors, or people who might have some experience investing in what is right now is a low income and depressed area but is essentially being squeezed in between two large and growing, active areas. My guess is that in 3-5 years this will actually be a somewhat desirable area. 

A deal that I analyzed last night: 

Purchase Price: $38,000 (Duplex)  2 - 2/1's

Rehab: $22,000 

ARV: Only $70,000

Rent Potential: $699 (Each) ($1398)

The problem I have is that my guess is vacancy is going to be a huge factor maybe 15+%, but with the cash flow potential and low investment point, is this a good investment? Especially with the potential that the area has? I don't mind playing a long game. Just curious if anyone has any experience with this kind of investing and how there experience was? 

Blessings,

[Linda S.]

@Benjamin Sykes,

We focus on low income, and actually have very similar numbers for a duplex!     IMO it 100% depends on your screening, and the quality tenant you get.    I wouldn't assume because it's low income it will be 15%-- if it's priced correctly, it should be minimal and you will fill it quickly.   There is very strong demand for high quality, cheap rentals.    Only turnover we've had is because of military/deployments, and they get filled quickly!     People want cheap rent-- low income people, but also people just trying to save money-- very strong demand!

Figure out what will make your rentals better than the others-- we include W/D, and people see that as a huge perk!    Think from their perspective-- why would you pick your duplex over another house?    

Also-- only do M2M leases with low income.   We stress the flexibility, my favorite thing to say is "say, you get a promotion in another city, you shouldn't be held back or stressed by a a lease to do better"... it's a nice twist to, "if you don't pay-- i take your security deposit and get someone in there ASAP."    You get rid of the whole eviction process, strongly recommend M2M!