How to shift an entire block from a D area to a C area
Since the last day of 2014, I officially qualify as a slumlord. That was the day that I closed on my first fourplex in a rough part of my home city, Austin, Texas. By the time Valentine's day rolled around, Austin police had broken four windows, kicked in five doors, thrown three flashbangs, and arrested three people in the building. My first ever forum post was about this event : https://www.biggerpockets.com/forums/52/topics/168... It is currently my best cashflowing property by far.
My building is in a three-block area that is populated entirely by fourplexes, duplexes, and a few SFR trailers. There are probably about 25 fourplexes, 15 duplexes, and 6 SFRs altogether, but the surrounding area is entirely brick-and-mortar SFRs populated by working-class families. Most of the landlords are from out of state, and use one of two TERRIBLE property managers. I ended up buying another fourplex in 2016, and realized that it might actually be possible to single-handedly bring the area up to the standard of the surrounding area.
Here's the gist of the plan: I've fixed up my units to be better than most, and am gradually removing the problem tenants and moving in a better tenant group by keeping my units above average but charging average rates. The next phase (which I am currently attempting to start) is to start doing the same with property management in the area. I've been approached by a few owners about whether I'd like to manage their properties for them, and have always said no because the pay is not really worth my time, but once I factor in the potential for appreciation and rental increases, I think I can make it worthwhile. I've also joined the local homeowner's association and am attempting to encourage other good landlords to buy in the area to speed up the process.
This is where you come in, dear reader: I'd like to make this a monthly post, and get reader feedback on the plan. Is it feasible, ethical, legal? How would you do it differently? Have you done something similar in your town?
But I'm sure you read through all the boring stuff just to hear the rest of the story about the raid on my building, so I'll tell you the rest. I had just closed, took care of some of the deferred maintenance on the building, and collected the first months rent. After that it's time for a vacation, right? Wrong.
I went to visit my sister in Florence, Italy, and had a great first few days drinking cappuccinos during the day and wine at night while enjoying the historic city and its people. Then one morning I woke up with 12 missed calls, and you know the rest. From 2000 miles away I had to organize new doors and windows to be installed in three of the four units, which cost me my first three month's profit. I found out later that one of the units had a crack dealer in it, but the police didn't know which one it was, so they just got a warrant for all of them and kicked them all in. They actually used the exact same tactics that we used when I was a Marine in Fallujah, Iraq, but this was against a a few single moms and an elderly crackhead. In retrospect, they saved me the effort of kicking out an old addict on my own, but I wish they'd been a little less destructive in the process.
In the following two years my life has become very interesting, and I look forward to sharing some anecdotes while I update all of you on my "blockshifting" project.
Comments (1)
We haven't done anything *QUITE* this large scale but I have definitely bought a great priced house in a not so great area of town (in our college town of 15K +students, you can drive down the same 2 mile road and every few block changes from "good" to "bad", without any rhyme or reason) and worked on getting other investors, landlords, and people looking for a home in the same area. There are a few people, especially around the college, who are known in our area for buying run down properties, tearing them down, and building nice duplexes or SFR.
It takes time, energy, and a little bit of luck the way I have done it, but I would say it is worth it. Especially if you can fix up and maintain your own rental in good shape without breaking the bank.
We originally purchased this triplex in 2010 and have more than doubled our rent in that time frame. Luckily, one of the last major eye sores in the area has just been purchased with plans to tear down by June and rebuild. (Although even an empty lot would look better...)
Jennifer E., almost 8 years ago