Downtown / Bad Area - Rent or Flip or Run?

[Mark Breaux]

I was wondering what people think about buying houses in an area where most likely the occupants are section 8 and the area has high crime. The house prices seem to be really low...like $8k. It seems crazy you wouldn't be able to turn around and sell that for more but clearly others are staying away from it. Any insights into this?

[Michaela G.]

It very much depends on your personal risk-threshold and definition of 'high crime'.

For some people 'high crime' is when there's an occasional drug deal going on, for others it's 'drug deals on every corner'. The definition is usually depending on what you know and are used to living.

I personally have been investing in what some people consider 'high crime' neighborhood. Yes, there are crack deals, yes, there are prostitutes, and yes, there are pockets that I avoid. Overall, I don't regret it. I cash flow nicely and I've learned a lot.

But I also lived in one of my houses for 1.5 years. White, blonde, with red convertible, walking and driving all over in a 99% low income black neighborhood. While I've had the occasional person spit on the street in front of me or yelling at me to go back to my own neighborhood, I have learned that most residents are pretty decent people, who try to live their life in the best way they can. And most respected me.

Would I have done it, if there wasn't potential icing on the cake waiting? Maybe not, since I don't want to hold forever. My area is close to a particular city venture that will make a bid difference in the next 5-10 years.

So, take a look at the neighborhood that you have. Is there something that you might see coming up in the future that might change the neighborhood?

Do you have enough cash to buy more than 1 property? If you buy maybe 3 on one block, you can potentially change the block. Other, more timid, investors will follow and buy between your homes. Or get a few investors together and buy a bunch of homes at the same time. You might be able to change things. Nobody then has to do it alone.

Usually properties around 10K are stripped of anything valuable: plumbing, wiring (walls torn open for that), heating system, water heater, kitchen cabinets.

In those neighborhoods you'll want to have a wireless alarm system, or they will tear out overnight anything that you've put in during the day.