Real Estate Investor · Marysville, OH · Member since 2014 · 242 posts · 196 votes
I would love to hear from investors who, exclusively or nearly so, focus their SFH investments on properties in "A" or "B" neighborhoods. Why do you do this? It seems like the primary trade off is a quality of tenant base for ROI on your money (less hassle).
My two properties so far were probably in a C and C- neighborhoods, and those were mixed result. The C turned out OK, but required a lot of effort from me. The C- was just a mistake (maybe it was a D).
Most of the area near me would be considered A or B at the least. Housing and rental markets are very tight and prices and rents have been going up and up with little inventory of either because everything gets scooped up immediately.
I'm not necessarily asking a question other than wanting to understand those who focus on these nicer areas and what motivates you to do that.
You more or less answered your own question, really. Currently I do B/C neighborhoods and I'm looking to move towards A/B for the reasons you listed: quality tenant base, less maintenance costs, and less volatility (hopefully) in management. With the A neighborhoods especially you'll have tenants who are willing to pay higher rents because there are high-quality schools in that zip code; some tenants here pay $1000/month or more for a 2/1 in a zip with good schools.
Cool. That was my intuition, but I figured there may be a variety of other reasons people have.
One of the areas I'm looking at is my local area because, well, it's local, and it's A/B and people really want to rent here. Unfortunately it's hard to get a house right now. People are bidding up everything over ask price on day 1. Things tend to slow down in Ohio when the weather turns cold, so I'm hoping to be able to pick something up then. Also looking at some areas in Cleveland I am going to visit next time I make a trip up there.
It all depends what you are looking for; high risk high reward, or safe and steady. When it comes to C neighborhoods you are obviously going to see higher COC rates, but you are going to see more headaches than a B or A neighborhood. If you are worried about tenant turnovers, A and B neighborhoods are much better for you do to the better school systems. Cleveland is a great investment area and if you decide to buy into the neighborhood, I wish you the best of luck!