Assessing Deal in midst of Gentrification

[Clifton Grady]

As the calls start coming in from my first decent marketing campaign (500 postcards), I am struggling to make offers that are a win-win. Some properties are in rental areas where crime is the highest in the city of Lexington, KY. I've driven the area and have met with a couple sellers who mention over the phone one ballpark price. Upon entering the dilapidated shell-of-a-home that needs to be gutted and cleared of debris, I find 30 year old insulation covering the floor of each room, warped floors, no ceiling, a leaking roof, a destroyed kitchen and an owner attempting shop his home for the highest bidder to hopefully get ARV for his hunk of junk.

What I'm finding is a common theme since full blocks are being bought out and the natives being forced out to make way for hipsters, swanky little coffee shops, and inflated real estate prices. With sellers debating sell for Cash vs. hold out since their hunks of junk are "a goldmine", how can a new wholesaler know what a truly fair but profitable offer is?

Some gurus state that if your offer doesn't embarrass you, then it's not low enough. But, does this get you laughed out of great deals due to the potential equity due to pending gentrification?

[Richelle T.]

Hmm this is a great question. I struggle with gentrifying neighborhoods also. My problem is that the new owner has to deal with the reality of the neighborhood the way it is. The seller wants to sell based on speculation. Gentrification in my opinion, is only profitable AFTER it has happened. Anything before is pure gambling. Some of these neighborhoods have been dubbed as the "next big area" for the last 20 years! Yeah... I'm not in the market to spend the equivalent of an investing career to be on the cusp of what really is nothing tangible.