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?

[Joel Owens]

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

I am telling you from what your experience level is you will not like it.

Once I tell people the work involved to generate the yield they don't want it.

The stuff throw out at the investor meetings is usually the also ran stuff.Seasoned investors passed on it and the broker is hoping to find a newbie investor to jump on this DEAL of a property.