Investing in low income areas
I know local investors are investing in these areas for the cash flow and don't care about appreciation as much. I believe there is an opportunity here for investors with strong systems and the patience to deal with lower-class tenants. Some investors will tell you a certain location is a warzone when in reality the location is beginning to turn around and could be promising in the future. Where do investors go wrong investing in these areas? I am looking to start a discussion where investors can talk about their horror and success stories in these types of locations.
Thank you for your time!
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#1 BRRRR - Buy, Rehab, Rent, Refinance, Repeat Contributor
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- Buffalo, NY
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#1 BRRRR - Buy, Rehab, Rent, Refinance, Repeat Contributor
- Real Estate Agent
- Buffalo, NY
Usually the neighborhoods with the best return have the most risk. Most investors go wrong by over estimating rent and under estimating repair costs and vacancies.
What looks like a great investment changes quickly if your revenue goes to $0. You have to actually collect the rent, you can't just project it. If you can't collect and you have to evict you can find yourself out 2-4 months of revenue.
If the tenant trashes the place, your repair costs go way up as well. If that happens once or twice in a 5 year period you have gone from a 18-20% cash on cash return to a 10-12% cash on cash return.. Which you could have gotten in a B class neighborhood, and had a shot at appreciation.
The C class investments are all about execution.
- Matthew Irish-Jones
