All Forum Posts by: Suman Kumar

@Carlos Quiros

I own properties in both A/B and C neighborhoods. There is a very clear difference in the quality of tenants you receive in these two types of neighborhoods as well as the amount of work that you will be required to do. The general rule of thumb is that lower class neighborhoods should have high cash flow, this is because an investor will need a higher return on their investment to justify the increased time and attention that will need to go into providing housing in these neighborhoods. The increased cash flow is also with the assumption that your tenants will provide on time payments. From my experience, my tenants in my C class neighborhoods are late or behind on payments far more often than tenants in A/B neighborhoods and vacancy rates are also higher since evictions also become more common due to these same reasons. This winds up lowering the cash flow in these neighborhoods so the projected cash flow does not always match reality. While there are checks you can do to increase the likelihood of getting a good tenant, the probability of having issues is higher. This is all from my personal experience so you might have better luck in your area. If gunshots and police involvement is very common, then I would personally walk away from that neighborhood. It's simply not worth the stress and time-requirement for me and while there is higher upside for getting a higher return on your investment if the area is improving; the revitalization of an area is a multi-year process. My preferred strategy is purchasing the lowest quality house in a higher quality neighborhood rather than the highest quality house in a lower quality neighborhood. While large renovations come with their own headaches, its still much easier to fix a single house than an entire neighborhood and the upside potential for both strategies is similar as far as a return on investment is concerned. 

Try to buy one of the first new builds in a new development. Avoid communities that are already almost built out.