Purchasing Duplex's in lower income area (Need Help)

[Matthew Reid]

Hello,  I am a new real estate investor from Arkansas. I am considering purchasing a property in a neighborhood that has a history of drugs and some other crimes.  Rent, in this neighborhood is in the lower 50% but this property will provide great cash flow.  I have never purchased an investment property in a lower income area such as this and would like some insight as to what I should expect for tenants, repairs, and capital.  How do you collect rent?  With my other property people just pay me online while with these some people may or may not have bank accounts to pay me directly with.  What are some things I can do to really add value to the neighborhood and bring in good renters? I don't want to not purchase the property just because it is in a bad neighborhood.  I'd like to add value to the neighborhood, while also being prepared for the worst.

[Andre Taylor]

@Matthew Reid if the numbers make sense go for it! I own multi families in low income areas here in STL and I even grew up in a low income area when I was growing up in Chicago. There are a fair amount of good people that will do right by their units, pay on time and take care of the property...the reason why they are in those areas because they dont make enough money to live in other good areas; it does not mean they are bad. There is nothing wrong with renting to section 8 tenants. I have a section 8 tenant whom section 8 pays a portion of her rent but she works a job that she has been at for 10 plus years.....everything comes down to doing proper screening of your tenants that is the biggest thing. Last year i bought a 4 family on a state street in South City STL...now if you ask anybody that is from here they will tell you state streets have a bad rep from a decade ago which right now the area is in a transition but none the less this property was in horrible shape and had all the wrong tenants. I bought it for $85k...moved everybody out.. put about $90k into it and im doing a refi right now and it appraised for $230k... I have two graduate students renting one unit, a nurse renting the other, a dental hygienist in the other and a t-shirt business owner and the other. I have some great tenants in place....because during showings I let people know I am not the landlord they can walk over and inform them of how intense i screen and my deposit is pretty high which filters alot of tenants out. I don't look at credit score only concern with them not having recent evictions within the past 5 years and they don't have utilities in collection agency. I do a search through the court system and a social media search as well...oh boy the things you find on peoples facebook accounts. I also incentivize my tenants... once they are accepted I inform them that if they dont miss a payment and pass the quarterly inspections that if I ask them to renew they become part of my rewards program where I get them a renewal bonus.. for instance one of my tenants just renewed and I gave her a 55 inch smart TV... cost me $299..... I don't have to spend money on turning the unit around and i am going to continue getting the $1000 a month coming in on time and no headaches not to mention I can write the TV off. All in all you can minimize your risk of getting bad tenants by being firm on your screening process and providing really good quality units. trust me it will stand out when you list your place vs all the other run down places.