Apartment Building in a Low Income area

[Matthew Mucker]

I'm a fairly novice investor, with one rental house (and perfect tenants!) that I've had for three years.

At a local REI meeting, during the 'deals' part of the meeting, a broker stood up and announced that he has a 15 unit apartment building available at what appears to be a good price.

The building is in a low-income area of Dallas. The few financials I was able to get from the broker support his claim that the current owner isn't very good at keeping records.

It appears to me that the building would cash flow well, if managed properly. I have no experience managing tenants in a low income area. I discussed this with the wife and she thinks, "Maybe the current owner is renting to nonpaying tenants because there are no other tenant prospects in the area." I believe that with proper management it should be possible to find paying tenants in any area.

What do I need to look out for when buying an apartment in a low income area? NOI would support the debt service even if I use very pessimistic occupancy and cap rates.

How can I tell if this is a potentially profitable deal, or something to avoid at all costs?