I've been investing in a 'war zone' and I don't regret it.
As Jay Hinrichs mentioned above, I'm doing it because there're several major developments happening right next to this neighborhood.
I started buying end of '08, when houses there were sold for 10K (now those houses have reached about 50K), so, the risk was small.
Would I want to do this longterm? No. It's difficult. There's much turnover. Every eviction requires a certain amount of renovation. The nicest people turn nasty, when they're facing an eviction.
But I can say that I'm glad I've done this. I bought all cash and I can live off my rental income. Whatever I've put in I've already gotten back out with the rents. It's been a great learning experience. The properties have increased in value and the developments still haven't fully started, so, there'll be even much more of an upside coming.
I have collected several assemblages, that will be even more valuable in the near future.
I've done it long-distance, being in California and having bought in Atlanta, but I knew every street in that neighborhood, because I used to wholesale vacant lots in the area. I've spent about 250K on buying and renovating and own 5 SFH and 7 duplexes free and clear. That's the best money I've ever spent.
So, I would say that it really depends on the neighborhood and if there's potential for other development, where a low value can only go up. But be prepared, that it can be very labor intensive and you will need to have some cash available to redo the properties between tenants.
