Would you buy in a "sketchy" area with positive cashflow?

[Mia Trasolini]

Any and all opinions are much appreciated!! 

So here's the situation...I'm an aspiring investor looking to make my first deal, focusing on multi unit properties (mostly duplexes). ... I live in San Diego. Prices and competition are through the roof so breaking into this area as a new investor is challenging. 

The only properties I've found so far that cashflow in my price range are in areas that are "sketchy" aka high crime, gang presence, etc. However, they are improving (crime is declining and rents are increasing). And for those not from San Diego, these areas southeast of the city are a 10min drive to the heart of downtown. 

The same was said about similar neighborhoods like North Park and Normal Heights 5 years ago. Now, the areas are booming and 400k properties back then are now selling for upwards of 600k. 

I'm tempted to make the leap of faith knowing the financials work and I would be very strict with tenant screening. To reiterate, I'm NOT banking on appreciation (although it would be nice). This is real rental cash flow. 

What do you think??

[Sean Murphy]

I recently bought in about as "sketchy" an area of SD as you can find and have owned nearby for years. I would be happy to discuss the experience. Good tenants can be found but it may require patience.

[Oralia Alvarez]

Hi I am also an investor in SD and hell ya I would invest in a sketchy area all day long for rentals, both single and multi-family. I and many people that I know have made the most money on rentals for sketchy areas. But you need to know your market and where is going. And you have to decide what type of landlord you want to be.

Possible Strategies:

1) Buy and do a good job as a landlord. If you show the property well and advertise well, you will get good tenants. Please show the property almost like a flipper will show his. Hold open houses and announce and advertise on zillow, hotpads, craigslist etc with professional photos, and some staging (kitchen and living room partially staged will do). Art frames will do all the work and bring you so many good prospects. Since you will manage yourself, suit up for the open homes and present it just like a realtor would, with info packets and applications attached. You will be able to ask top dollars. My rentals are always the highest in every area (20% more) , but I show them just like a flipper would (staged, professional photos, home open every week, and I also get some of the best renters ever. 

2) Buy where the neighborhood will be turned around in a couple years only (Escondido, Linda Vista, Lemon Grove), and in the meantime be a slumlord, but make sure to rent out to Section 8 people, because Section 8 will always mail you the check. Make sure that 90% of rent comes from Section 8 (where 2K comes from the voucher and they only pay $200. If they don't pay rent, you can start the eviction process and even if it takes you couple months, Section 8 will continue paying as long as they are occupying the property. * When home prices increase in that area, you now have a lot of equity. You can either kick out tenants and rehab property to hike rent OR sell at the North Park prices

3) Be conservative and do something in between. As long as your expenses get covered and some (4-6% cash on cash), then appreciation of the general SD market will allow you to sell for a good gain later on.

My rule of thumb is to be able to rent close to .08 of purchase price (I am very conservative). All of my buy and hold investors of duplex and quads are picking up in these sketchy areas solely for the appreciation potential