Multifamily investment in war zone, call me crazy

[Glenn Espinosa]

I'm looking to invest in a 4 unit multifamily smack dab in the middle of a warzone area. Hear me out. I'm banking on the fact that this property is in the outskirts of a growing college community. The college has gone through 5 years of consistent expansion and is currently in a legal battle to acquire more properties around the area for even more expansion. The school successfully reimplemented their football program and will soon be thrust into the national spotlight when they transition over to the FBS in 2014. Basically, what I'm trying to say is that the school is growing in popularity and in student population every year and that there is an opportunity here for a prime rental market and appreciation IMO. Now this is all speculation on my part but here are the numbers:

Asking price: 55k (I will start at 30k but am prepared to pay close to full price as this will be a buy and hold with good cashflow)

Rehab: Estimating 50-60k (It is an old building in a historical area. I plan to do premium apartments marketed towards mainly graduate students)

Rent: $625-700 is what I can expect per unit. I'm hoping premium finishes can attract renters in the $750 range.

ARV: THERE ARE NO RECENT SOLD COMPARABLES IN THIS AREA FOR 4 UNIT MULTIS. SCARY! There are, for what its worth, 4 unit multis on the market priced anywhere between $200k - $280k. A nicely rehabbed brick duplex sold quick for $127k in 2011 a few blocks down. Another duplex sold for $92k in early 2012 but that one wasn't rehabbed. My best guess would be $140k.

Now I plan to make these apartments really hip. Im talking about exposed brick, mini bars, etc. The kicker is that I can apply for tax credits as these are in a historical area. I haven't researched too much into this but from what I have read, you can qualify up to 25% of your rehab price as a federal tax credit and another 20% as a state tax credit. This would increase my rehab costs as I would have to appeal to certain requirements but it should be worth it. I would have to do more research and crunch more numbers but that is just another factor to consider.

In total, this would be 4-5 year play on my part. I am hoping this becomes an emerging market and I would be able to sell it for a decent payday later on. If not then I will just keep it for cashflow.

Oh and warzone = string of car break ins, recent armed robberies, a murder or two. They did, however, catch the bare foot bandit who did a string of in home robberies the past year or so. They caught him after he cut his foot on some glass and led a blood trail straight into his home of residence! Lastly, I went to this school and graduated in 2010. I know first hand that they are expanding and growing!

Sorry for the long post. Please be blunt with your thoughts!

Thanks.