Do you invest in high crime areas?
Rental Property Investor · San Clemente, CA · Member since 2019 · 160 posts · 34 votes
Do you invest in high crime areas?
Most Popular Reply
Rental Property Investor · Milwaukee, WI · Member since 2019 · 15 posts · 35 votes
7yI purchase in high crime areas. I usually get duplexes in decent condition for about $22k and put a couple of Grand into it with myself doing the work. I make $700 per unit per month.
I have all long term tenants who pay on time all the time and they take care of my places. I find most landlords in high crime areas just want the cash but don't duo their due diligence when screening tenants.
Ultimately if you screen properly, have a well taken care of property and you are a good landlord, you will get good tenants.
145 Replies
- 7yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Originally posted by @Thuy Pham-Satrappe:
@Mike M. I am also investing in the "better areas" just keep coming across properties in the higher crime areas so figured it was worth exploring
better to explore to actually buy them.. leave those to the locals who s lifes work is to buy and operate in those areas.
- Rental Property Investor · San Clemente, CA · Member since 2019 · 160 posts · 34 votes7y
@Quincy Lockett what do you mean "use these properties to add value"? As in fix them up in an effort to attract better tenants?
- Contractor · San Jose, CA · Member since 2018 · 262 posts · 407 votes7y
Originally posted by @James Wise:
Originally posted by @Junior Soares:
@Thuy Pham-SatrappeHi Thuy,
If you can stomach alot of headaches, then who are we to tell you where and where not to invest?
Check out @James Wise "Tenants From Hell" on YouTube. James tells everyone how it is and he is as honest as it gets!
These areas have alot of cashflow yes but just not worth the headaches. I own one in my portfolio so I know how it is first hand. Lots of money every turnover which eats your profits.
If I may make a recommendation, I recommend buying a low cost franchise such as Subway, FedEx, or a Mission tortilla. About 100k investment that will net you 40k ish yearly like clockwork. I own one so I can vouch for them. Then you increase your cashflow to buy better ABC rentals that will give you less headaches.
Best of luck!
Thanks for the shout Junior.
The franchise stuff you spoke about is pretty interesting. I've got a Farmers Insurance office that does well & have considered doing a few other franchise type investments. I've heard a lot of operators need to own at least 3 Subways before netting any profit as Subway sells so many of them you get a lot of cannibalization. Any 1st hand experience on that you can shed? Cool topic.
You're very welcome brother!
And yes, I don't own a Subway personally. I co-own Fedex routes with a partner. He has 2-3 Subways and he was telling me that you do need at least 2 to get the instant cash-flow because of Subway's payment plan. But once Subway is paid off, that net nearly doubles and you're in the money! Still all in of about 100-120k assuming you split the down payments with subway on 2 facilities. I'm in the market for one of these currently because they're finally doing some much needed re-branding that will keep them in the game for much longer. (more menu items, mobile order, delivery, Door dash, etc)
That's awesome that you mentioned the Farmers agency because I am currently in the market for one as I prepare to move to Texas as there are a couple of them for sale in the area i'm moving to. Mind sharing some of your experience with the agency/ies through email?
Best,
Junior
- Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes7y
Originally posted by @Junior Soares:
Originally posted by @James Wise:
Originally posted by @Junior Soares:
@Thuy Pham-SatrappeHi Thuy,
If you can stomach alot of headaches, then who are we to tell you where and where not to invest?
Check out @James Wise "Tenants From Hell" on YouTube. James tells everyone how it is and he is as honest as it gets!
These areas have alot of cashflow yes but just not worth the headaches. I own one in my portfolio so I know how it is first hand. Lots of money every turnover which eats your profits.
If I may make a recommendation, I recommend buying a low cost franchise such as Subway, FedEx, or a Mission tortilla. About 100k investment that will net you 40k ish yearly like clockwork. I own one so I can vouch for them. Then you increase your cashflow to buy better ABC rentals that will give you less headaches.
Best of luck!
Thanks for the shout Junior.
The franchise stuff you spoke about is pretty interesting. I've got a Farmers Insurance office that does well & have considered doing a few other franchise type investments. I've heard a lot of operators need to own at least 3 Subways before netting any profit as Subway sells so many of them you get a lot of cannibalization. Any 1st hand experience on that you can shed? Cool topic.
You're very welcome brother!
And yes, I don't own a Subway personally. I co-own Fedex routes with a partner. He has 2-3 Subways and he was telling me that you do need at least 2 to get the instant cash-flow because of Subway's payment plan. But once Subway is paid off, that net nearly doubles and you're in the money! Still all in of about 100-120k assuming you split the down payments with subway on 2 facilities. I'm in the market for one of these currently because they're finally doing some much needed re-branding that will keep them in the game for much longer. (more menu items, mobile order, delivery, Door dash, etc)
That's awesome that you mentioned the Farmers agency because I am currently in the market for one as I prepare to move to Texas as there are a couple of them for sale in the area i'm moving to. Mind sharing some of your experience with the agency/ies through email?
Best,
Junior
Farmers makes sense if you've got a good infrastructure built up to drive sales. For us it was perfect as it fits in like a glove with our other up & down stream businesses. It looks very tough if it's a whole new venture for someone. Like if you follow their marketing & start up plans they project that you will be cash flow negative for the 1st 5 years. As it's a pretty small business to operate I imagine they don't attract too many other folks with multiple ventures going on so looks very tough. But again if you've got other like businesses it's very profitable. We were cash flow positive in like 90 days.
Which Fed-Ex do you guys do? Freight? Ground? Express is corporate ran correct?
- 7yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Originally posted by @Junior Soares:
Originally posted by @James Wise:
Originally posted by @Junior Soares:
@Thuy Pham-SatrappeHi Thuy,
If you can stomach alot of headaches, then who are we to tell you where and where not to invest?
Check out @James Wise "Tenants From Hell" on YouTube. James tells everyone how it is and he is as honest as it gets!
These areas have alot of cashflow yes but just not worth the headaches. I own one in my portfolio so I know how it is first hand. Lots of money every turnover which eats your profits.
If I may make a recommendation, I recommend buying a low cost franchise such as Subway, FedEx, or a Mission tortilla. About 100k investment that will net you 40k ish yearly like clockwork. I own one so I can vouch for them. Then you increase your cashflow to buy better ABC rentals that will give you less headaches.
Best of luck!
Thanks for the shout Junior.
The franchise stuff you spoke about is pretty interesting. I've got a Farmers Insurance office that does well & have considered doing a few other franchise type investments. I've heard a lot of operators need to own at least 3 Subways before netting any profit as Subway sells so many of them you get a lot of cannibalization. Any 1st hand experience on that you can shed? Cool topic.
You're very welcome brother!
And yes, I don't own a Subway personally. I co-own Fedex routes with a partner. He has 2-3 Subways and he was telling me that you do need at least 2 to get the instant cash-flow because of Subway's payment plan. But once Subway is paid off, that net nearly doubles and you're in the money! Still all in of about 100-120k assuming you split the down payments with subway on 2 facilities. I'm in the market for one of these currently because they're finally doing some much needed re-branding that will keep them in the game for much longer. (more menu items, mobile order, delivery, Door dash, etc)
That's awesome that you mentioned the Farmers agency because I am currently in the market for one as I prepare to move to Texas as there are a couple of them for sale in the area i'm moving to. Mind sharing some of your experience with the agency/ies through email?
Best,
Junior
Like anything that is worth having the subways are a nice route for a simple business. I have a friend that has 3 of them and exactly with 3 he makes a living .. when they are paid for which comes fairly quickly you start making bank.. Far more than the same money in rentals with debt.
- Contractor · San Jose, CA · Member since 2018 · 262 posts · 407 votes7y
Originally posted by @James Wise:
Originally posted by @Junior Soares:
Originally posted by @James Wise:
Originally posted by @Junior Soares:
@Thuy Pham-SatrappeHi Thuy,
If you can stomach alot of headaches, then who are we to tell you where and where not to invest?
Check out @James Wise "Tenants From Hell" on YouTube. James tells everyone how it is and he is as honest as it gets!
These areas have alot of cashflow yes but just not worth the headaches. I own one in my portfolio so I know how it is first hand. Lots of money every turnover which eats your profits.
If I may make a recommendation, I recommend buying a low cost franchise such as Subway, FedEx, or a Mission tortilla. About 100k investment that will net you 40k ish yearly like clockwork. I own one so I can vouch for them. Then you increase your cashflow to buy better ABC rentals that will give you less headaches.
Best of luck!
Thanks for the shout Junior.
The franchise stuff you spoke about is pretty interesting. I've got a Farmers Insurance office that does well & have considered doing a few other franchise type investments. I've heard a lot of operators need to own at least 3 Subways before netting any profit as Subway sells so many of them you get a lot of cannibalization. Any 1st hand experience on that you can shed? Cool topic.
You're very welcome brother!
And yes, I don't own a Subway personally. I co-own Fedex routes with a partner. He has 2-3 Subways and he was telling me that you do need at least 2 to get the instant cash-flow because of Subway's payment plan. But once Subway is paid off, that net nearly doubles and you're in the money! Still all in of about 100-120k assuming you split the down payments with subway on 2 facilities. I'm in the market for one of these currently because they're finally doing some much needed re-branding that will keep them in the game for much longer. (more menu items, mobile order, delivery, Door dash, etc)
That's awesome that you mentioned the Farmers agency because I am currently in the market for one as I prepare to move to Texas as there are a couple of them for sale in the area i'm moving to. Mind sharing some of your experience with the agency/ies through email?
Best,
Junior
Farmers makes sense if you've got a good infrastructure built up to drive sales. For us it was perfect as it fits in like a glove with our other up & down stream businesses. It looks very tough if it's a whole new venture for someone. Like if you follow their marketing & start up plans they project that you will be cash flow negative for the 1st 5 years. As it's a pretty small business to operate I imagine they don't attract too many other folks with multiple ventures going on so looks very tough. But again if you've got other like businesses it's very profitable. We were cash flow positive in like 90 days.
Which Fed-Ex do you guys do? Freight? Ground? Express is corporate ran correct?
Right on James, I very much appreciate that insight, I may look into Mission Tortilla routes as i'm more familiar with this style of business model from the Fedex routes. We are Fedex Ground/Home Delivery. Express I believe is corporate.
I haven't done any research into the Fed-ex Freight/Custom Critical routes because it's hard enough recruiting prospects with squeaky clean records that the company would qualify with a standard C class License. I couldn't even imagine trying to locate someone with a Commercial license that Fed-ex would qualify.
It's honestly 1 out of 10 driver applications that they accept. It's very hard especially in California where Pot is legal. 5 out of 10 applicants cant pass a urine test, and the other 4 had some sort of traffic violation on their record within the last 5-7 years. But when you find them, you take care of them to keep them! lol
Junior
- Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes7y
Originally posted by @Junior Soares:
Originally posted by @James Wise:
Originally posted by @Junior Soares:
Originally posted by @James Wise:
Originally posted by @Junior Soares:
@Thuy Pham-SatrappeHi Thuy,
If you can stomach alot of headaches, then who are we to tell you where and where not to invest?
Check out @James Wise "Tenants From Hell" on YouTube. James tells everyone how it is and he is as honest as it gets!
These areas have alot of cashflow yes but just not worth the headaches. I own one in my portfolio so I know how it is first hand. Lots of money every turnover which eats your profits.
If I may make a recommendation, I recommend buying a low cost franchise such as Subway, FedEx, or a Mission tortilla. About 100k investment that will net you 40k ish yearly like clockwork. I own one so I can vouch for them. Then you increase your cashflow to buy better ABC rentals that will give you less headaches.
Best of luck!
Thanks for the shout Junior.
The franchise stuff you spoke about is pretty interesting. I've got a Farmers Insurance office that does well & have considered doing a few other franchise type investments. I've heard a lot of operators need to own at least 3 Subways before netting any profit as Subway sells so many of them you get a lot of cannibalization. Any 1st hand experience on that you can shed? Cool topic.
You're very welcome brother!
And yes, I don't own a Subway personally. I co-own Fedex routes with a partner. He has 2-3 Subways and he was telling me that you do need at least 2 to get the instant cash-flow because of Subway's payment plan. But once Subway is paid off, that net nearly doubles and you're in the money! Still all in of about 100-120k assuming you split the down payments with subway on 2 facilities. I'm in the market for one of these currently because they're finally doing some much needed re-branding that will keep them in the game for much longer. (more menu items, mobile order, delivery, Door dash, etc)
That's awesome that you mentioned the Farmers agency because I am currently in the market for one as I prepare to move to Texas as there are a couple of them for sale in the area i'm moving to. Mind sharing some of your experience with the agency/ies through email?
Best,
Junior
Farmers makes sense if you've got a good infrastructure built up to drive sales. For us it was perfect as it fits in like a glove with our other up & down stream businesses. It looks very tough if it's a whole new venture for someone. Like if you follow their marketing & start up plans they project that you will be cash flow negative for the 1st 5 years. As it's a pretty small business to operate I imagine they don't attract too many other folks with multiple ventures going on so looks very tough. But again if you've got other like businesses it's very profitable. We were cash flow positive in like 90 days.
Which Fed-Ex do you guys do? Freight? Ground? Express is corporate ran correct?
Right on James, I very much appreciate that insight, I may look into Mission Tortilla routes as i'm more familiar with this style of business model from the Fedex routes. We are Fedex Ground/Home Delivery. Express I believe is corporate.
I haven't done any research into the Fed-ex Freight/Custom Critical routes because it's hard enough recruiting prospects with squeaky clean records that the company would qualify with a standard C class License. I couldn't even imagine trying to locate someone with a Commercial license that Fed-ex would qualify.
It's honestly 1 out of 10 driver applications that they accept. It's very hard especially in California where Pot is legal. 5 out of 10 applicants cant pass a urine test, and the other 4 had some sort of traffic violation on their record within the last 5-7 years. But when you find them, you take care of them to keep them! lol
Junior
Yea I hear ya on that. My pops has been driving for Fed-Ed express for last 20+ years. Very strit Marijuana & driving regs over there for obvious reasons.
- Contractor · San Jose, CA · Member since 2018 · 262 posts · 407 votes7y
Originally posted by @Jay Hinrichs:
Originally posted by @Junior Soares:
Originally posted by @James Wise:
Originally posted by @Junior Soares:
@Thuy Pham-SatrappeHi Thuy,
If you can stomach alot of headaches, then who are we to tell you where and where not to invest?
Check out @James Wise "Tenants From Hell" on YouTube. James tells everyone how it is and he is as honest as it gets!
These areas have alot of cashflow yes but just not worth the headaches. I own one in my portfolio so I know how it is first hand. Lots of money every turnover which eats your profits.
If I may make a recommendation, I recommend buying a low cost franchise such as Subway, FedEx, or a Mission tortilla. About 100k investment that will net you 40k ish yearly like clockwork. I own one so I can vouch for them. Then you increase your cashflow to buy better ABC rentals that will give you less headaches.
Best of luck!
Thanks for the shout Junior.
The franchise stuff you spoke about is pretty interesting. I've got a Farmers Insurance office that does well & have considered doing a few other franchise type investments. I've heard a lot of operators need to own at least 3 Subways before netting any profit as Subway sells so many of them you get a lot of cannibalization. Any 1st hand experience on that you can shed? Cool topic.
You're very welcome brother!
And yes, I don't own a Subway personally. I co-own Fedex routes with a partner. He has 2-3 Subways and he was telling me that you do need at least 2 to get the instant cash-flow because of Subway's payment plan. But once Subway is paid off, that net nearly doubles and you're in the money! Still all in of about 100-120k assuming you split the down payments with subway on 2 facilities. I'm in the market for one of these currently because they're finally doing some much needed re-branding that will keep them in the game for much longer. (more menu items, mobile order, delivery, Door dash, etc)
That's awesome that you mentioned the Farmers agency because I am currently in the market for one as I prepare to move to Texas as there are a couple of them for sale in the area i'm moving to. Mind sharing some of your experience with the agency/ies through email?
Best,
Junior
Like anything that is worth having the subways are a nice route for a simple business. I have a friend that has 3 of them and exactly with 3 he makes a living .. when they are paid for which comes fairly quickly you start making bank.. Far more than the same money in rentals with debt.
I couldn't agree with you more
- Contractor · San Jose, CA · Member since 2018 · 262 posts · 407 votes7y
Originally posted by @James Wise:
Originally posted by @Junior Soares:
Originally posted by @James Wise:
Originally posted by @Junior Soares:
Originally posted by @James Wise:
Originally posted by @Junior Soares:
@Thuy Pham-SatrappeHi Thuy,
If you can stomach alot of headaches, then who are we to tell you where and where not to invest?
Check out @James Wise "Tenants From Hell" on YouTube. James tells everyone how it is and he is as honest as it gets!
These areas have alot of cashflow yes but just not worth the headaches. I own one in my portfolio so I know how it is first hand. Lots of money every turnover which eats your profits.
If I may make a recommendation, I recommend buying a low cost franchise such as Subway, FedEx, or a Mission tortilla. About 100k investment that will net you 40k ish yearly like clockwork. I own one so I can vouch for them. Then you increase your cashflow to buy better ABC rentals that will give you less headaches.
Best of luck!
Thanks for the shout Junior.
The franchise stuff you spoke about is pretty interesting. I've got a Farmers Insurance office that does well & have considered doing a few other franchise type investments. I've heard a lot of operators need to own at least 3 Subways before netting any profit as Subway sells so many of them you get a lot of cannibalization. Any 1st hand experience on that you can shed? Cool topic.
You're very welcome brother!
And yes, I don't own a Subway personally. I co-own Fedex routes with a partner. He has 2-3 Subways and he was telling me that you do need at least 2 to get the instant cash-flow because of Subway's payment plan. But once Subway is paid off, that net nearly doubles and you're in the money! Still all in of about 100-120k assuming you split the down payments with subway on 2 facilities. I'm in the market for one of these currently because they're finally doing some much needed re-branding that will keep them in the game for much longer. (more menu items, mobile order, delivery, Door dash, etc)
That's awesome that you mentioned the Farmers agency because I am currently in the market for one as I prepare to move to Texas as there are a couple of them for sale in the area i'm moving to. Mind sharing some of your experience with the agency/ies through email?
Best,
Junior
Farmers makes sense if you've got a good infrastructure built up to drive sales. For us it was perfect as it fits in like a glove with our other up & down stream businesses. It looks very tough if it's a whole new venture for someone. Like if you follow their marketing & start up plans they project that you will be cash flow negative for the 1st 5 years. As it's a pretty small business to operate I imagine they don't attract too many other folks with multiple ventures going on so looks very tough. But again if you've got other like businesses it's very profitable. We were cash flow positive in like 90 days.
Which Fed-Ex do you guys do? Freight? Ground? Express is corporate ran correct?
Right on James, I very much appreciate that insight, I may look into Mission Tortilla routes as i'm more familiar with this style of business model from the Fedex routes. We are Fedex Ground/Home Delivery. Express I believe is corporate.
I haven't done any research into the Fed-ex Freight/Custom Critical routes because it's hard enough recruiting prospects with squeaky clean records that the company would qualify with a standard C class License. I couldn't even imagine trying to locate someone with a Commercial license that Fed-ex would qualify.
It's honestly 1 out of 10 driver applications that they accept. It's very hard especially in California where Pot is legal. 5 out of 10 applicants cant pass a urine test, and the other 4 had some sort of traffic violation on their record within the last 5-7 years. But when you find them, you take care of them to keep them! lol
Junior
Yea I hear ya on that. My pops has been driving for Fed-Ed express for last 20+ years. Very strit Marijuana & driving regs over there for obvious reasons.
That is a FOR SURE! haha
Have a good day out there today brother
Junior
- Rental Property Investor · Odessa, FL · Member since 2017 · 145 posts · 113 votes7y
OK so I'm just gonna put this out here:
In a macro prospective, do you guys think that the more investors come into a crime area the healthier it gets ?
I feel like if you take the rough neighborhoods and start buying them and investors also start being more selective about qualifying their tenants, in the long run these neighborhoods will become nicer places. It's just a thought I have. - Investor · Milwaukee, WI · Member since 2013 · 1k+ posts · 1k+ votes7y
Originally posted by @Jay Hinrichs:
Originally posted by @Mareno Rathell:
I purchase in high crime areas. I usually get duplexes in decent condition for about $22k and put a couple of Grand into it with myself doing the work. I make $700 per unit per month.
I have all long term tenants who pay on time all the time and they take care of my places. I find most landlords in high crime areas just want the cash but don't duo their due diligence when screening tenants.
Ultimately if you screen properly, have a well taken care of property and you are a good landlord, you will get good tenants.
your the success story. frankly you can do it.. but i highly doubt others without your knowledge of the area an abilty to mange yourself could do anywhere near as good as you.. congrats..those are fab numbers.
Those numbers are gross rents per unit.
- Griffin, GA · Member since 2017 · 63 posts · 82 votes7y
I have 38 units in what most would consider a high crime area, although i will say after spending a lot of time in these neighborhoods it doesn't really seem that bad. The tenants are just poor, not necessarily criminals, although some are.
PP range from 10-22k a unit, a mix of houses and duplexes... rents range from 375 for a small 1 bed to 650 for a 3 bed house.
I don't really have many problems to be honest, screening becomes more important and it helps if you can really stay on top of them, do maintenance yourself, and look at it as a job. I would never try it from out of state.
- Developer · Cincinnati, OH · Member since 2018 · 1k+ posts · 3k+ votes7y
Originally posted by @Thuy Pham-Satrappe:
For those of you who actively choose to invest in high crime areas, what do you make sure to factor into your numbers?
-higher vacancy
-higher possibility of turnover
-hiring a property management company with skill and experience in that area
-more repairs/maintenance during and after
-tell me more [please and thank you!]
Hi Thuy,
You can invest in high crime areas.
That's how I got started.
It is tough though and I recommend that if you do it, that there's no debt on the property and you self-manage it.
I made good money with the properties in bad or high crime areas. Here's a property in a "D" area (not quite war zone - I call that an "F" area) and I made over $1 MILLION profit on it.
- Investor · Milwaukee, WI · Member since 2013 · 1k+ posts · 1k+ votes7y
All of the pitfalls you cite are controllable and not really any worse than anywhere else, in my opinion. The reason people fail, again in my opinion, is the inability to control those things. The inability can stem from numerous sources.
I guess one of the main questions I would have for you, if I were to consider managing a property for you, is what do you expect to get out of it? The answer to that, in combination with your purchasing power, would determine if this sort of thing is a good idea for you or not.
I strongly suggest you go to the Morris/House Of Cards thread and read it over. It has become quite lengthy and in-depth.
- Investor · Milwaukee, WI · Member since 2013 · 1k+ posts · 1k+ votes7y
Jimmy Johns still has franchise opportunity.
- Specialist · Paradise Valley, AZ · Member since 2018 · 3k+ posts · 2k+ votes7y
Originally posted by @Thuy Pham-Satrappe:
@Mike M. I am also investing in the "better areas" just keep coming across properties in the higher crime areas so figured it was worth exploring
I guess I didn't realize San Clemente has "high crime areas".
- Developer · New York City, NY · Member since 2015 · 812 posts · 718 votes7y
If you like stressing over crime, evictions, non-payments, financial and code-enforcement issues, go ahead. It's best to be avoided if possible.
- Investor · Oak Park, IL · Member since 2014 · 307 posts · 150 votes7y
Another aspect is to invest in a high crime area that will appreciate in value. The problem is, it is often difficult to know what will actually appreciate. I invested in Wicker Park in Chicago in the '80's when it had a high crime rate. The area actually did appreciate, and now the crime rate is much lower. On the other hand, I invested in other areas, Humboldt Park, Pilsen, etc. which I thought would appreciate, and did not - or would take much longer to do so.
The problem is I have had a hard time being honest with myself, and basing my decisions on wishful thinking, not cold hard facts. There is also the aspect of manageability. I had to deal with a lot of bad tenant situations. It was difficult back in the day to attract good tenants and keep them. I am glad I invested in the rough areas, but do not have the patience for these tough management challenges any longer. For me, the attraction was the anticipated appreciation, not the cash flow. High cash flow is typically key, which is more my approach now.
- Investor · Severna Park, MD · Member since 2016 · 32 posts · 39 votes7y
I would only considering investing is low income/high crime areas if you are buying with cash, and you are a local that knows the area really well. I personally would not buy in low income areas out of state. I own some in Southwest Baltimore (near downtown) and they can be very high maintenance at times. Also, I only buy in areas with potential price appreciation in the future. I would never buy in a complete war zone with no price appreciation in sight. I would also stay away from this sector if you are a new real estate investor.
- 7yJennifer T.Pro MemberInvestor · New Orleans, LA · Member since 2014 · 1k+ posts · 944 votes
Originally posted by @Account Closed:
Originally posted by @Thuy Pham-Satrappe:
@Mike M. I am also investing in the "better areas" just keep coming across properties in the higher crime areas so figured it was worth exploring
I guess I didn't realize San Clemente has "high crime areas".
You got that right! I love San Clemente. Born and raised there. But it is pretty much a chichi resort town, lol. Though I left Southern CA after college to escape the HCOL.
It is tickling my funny bone also, but I know @Thuy Pham-Satrappe is talking about "higher crime areas" elsewhere.
- Investor · Chicago, IL · Member since 2009 · 1k+ posts · 1k+ votes7y
My City has plenty of tough areas. What makes the investments riskier for the lower income areas is more about the tenant quality. Crimes to properties usually occur when they are vacant.
Break-ins surprisingly have happened only a few times. You'll lose your tenants quickly if they don't feel safe.
In today's yield-challenging environment, I find more capital streaming into lower income areas. It is almost a certainty that the novice investors will have a high failure rate with their investments.
It can be done, but you have to be local, experienced and prepared to do the extra management for these properties. The best low income operator I've met, knows his business inside-out.
- Rental Property Investor · Dallas, TX · Member since 2017 · 60 posts · 20 votes7y
Nope. Investors are problem solvers; you can fix issues with a property, but you can’t fix people ;)
- Rental Property Investor · Durham, NC · Member since 2014 · 1k+ posts · 1k+ votes7y
Originally posted by @Thuy Pham-Satrappe:
For those of you who actively choose to invest in high crime areas, what do you make sure to factor into your numbers?
-higher vacancy
-higher possibility of turnover
-hiring a property management company with skill and experience in that area
-more repairs/maintenance during and after
-tell me more [please and thank you!]
Thuy, this is a segment that can work for investors with the proper skillset. For those who don't know and don't have what it takes, it will likely be a failure.
IMO, one huge factor is the investor/landlord must be comfortable with the intended customer base. If the thought of walking around the neighborhood at dusk strikes you as preposterous, you should not invest there. If you can envision yourself knocking on a random door on the street and talking to whoever opens it, that's a good start.
I don't say this to indicate the neighborhood in question is not a quote-unquote "high crime area." I say this to say that whatever the socio-economic make-up of the neighborhood, an investor must feel comfortable interacting with the residents of that neighborhood. If you don't understand your customer base, it's going to be hard to effectively communicate with your customer base. It's going to be difficult to "read" each applicant. For instance, if you have never lived in such a neighborhood, if you have never had friends/classmates/co-workers that you were close to who were from such neighborhoods, then you probably don't have the experience necessary to invest in such neighborhoods.
You must know yourself well enough and be honest enough to know that you can feel comfortable interacting with the people who will be turning your investments into money. If the answer is you can't, then you should pass and invest in a different segment.
- Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes7y
I looked into buying Subways before. Most businesses under 100k profit per location are owner operator models. If you put in managers and food cost goes up you are not making much money maybe 40k to 50k gross with high volume stores.
I had a friend I have not talked to in years that owned over 20 of them. He would wait for people retiring with IRA type money and no food experience. He would let them spend hundreds of thousands with a store buildout and then after 6 months they would come to him to buy them out. So he would pick up a new store buoldout for 40 to 50 cents on the dollar. Then he would put in management and his processes to drive sales up.
Food profit margins of 10% do not excite me. i can exceed that easily being a syndicator of retail properties and have the businesses pay me the money. Food for me has to be over 100k profit per location, established for decades with multi-generational customers so just a freshening up of the space is needed and not a massive turn around, and gross profit margins of about 20%.
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