Dangerous Neighborhoods

[Jonathan Loynaz]

Hey BPers, I did some market research in my area (Miami) and found where all the houses are being foreclosed or have been bought with cash in the last 6 months. I knew they were in bad neighborhoods but I went out and out bandit signs out last night anyways. While out, there were a couple times I would pass by houses with 3 or 4 cop cars outside and the cops outside in the pouring rain. Do investors buy in places like this? Also, if anybody else has had any experiences to share or advice to give, it would be appreciated. Thanks guys!

[Joel Owens]

The only property managers that generally touch these high crime areas live there and understand the dynamics of making it work.

They are specialists and will want a premium of say 13% or more to take it on. Some investors might balk at the percentage but when you factor these are low income areas and the rents are low the PM isn't making much for all the drama.

If you were a PM and could manage an asset in an upscale area instead for say 8% of 2,000 rent that is 160 a month.

13% of 600 rent is 78.00 a month and you are dealing with double bookkeeping, high frequency of damage and evictions, multiple trips and constant monitoring of the asset to keep it performing etc.

So it's easy to see why many PM companies will not even consider these places.