Rehabbing property in a lower class area

[Michelle Dong]

I was introduced to the FHA 203k loan. I currently live in south Florida and looking at properties that need some TLc and rehab. If I plan to house hack and live in an area that is lower class. What advice would you give about safety or if this is a good idea?

[Douglas Mcqueen]

@Michelle Dong  First and formost you have to be comfortable and safe where you live.  If you can accomplish this in the neighborhood that you are looking in then continue forward.  If not then move on and Keep looking, your safety and security should never play second fiddle to profit, it simply will not work long term.  If you don't feel safe and secure  in an area there is little chance you will find quality tenants that will either, which will ultimately cause you to lower your standards, and when house hacking you will be living in close proximity to your tenants at least for a time.

As far as the re-hab goes you have to be careful when planning the project in lower quality area's.  To often especially in the beginning of your investment career the plan for re-hab is to make the property as nice as you can, even more so when house hacking.  You put in the best of everything you can afford.  In lower rent area's you have to make sure that whatever improvements you make are justified by the rent you can reasonably expect to collect.  If you are in an area that gets $500 dollars in market rent and you build out a unit that needs to bring in $1000 to be profitable, or even demands $1000 due to the quality you can still only reasonably expect to bring in $500 because they will just move in next door.  Do not out build the neighborhood or you WILL lose 99% of the time, ensure your finishes and features are in line with the area.  For example if the rentals in the area have standard counter tops and low end appliances, you will not recoupe the cost of putting in stainless steel and granite.