Low Income Areas
Does anyone have any experience investing in low income areas. I am talking about areas that are a notch above the war zones. My impression is that when people are buying junkers for 50K it is hard to justify rehabbing a house and trying to get 65K out of it. What drew me to these neighborhoods was that I could mostly work with cash and wouldn’t have to deal with getting loans etc. I’m wondering if I dealt with homes that sell in the 120K to 150K range if I would have more margin to work with and if my prospective buyers would expect more and pay for something that has been through a quality rehab. Any comments would be appreciated.
Doug
I know a GREAT DEAL about low income areas mainly because I've lived in them my whole life its easy to get "No Money Down" deals in these areas but you have to know how to deal with different types of people. Which I am pretty good at! email me anytime I'll help you I just moved out of the "GETTO" about three years ago after 20years of hell zone areas
I just came back from a road trip looking at property in the type of areas you refered to.
I met an investor on this web site who is runnig a turn key opperation. He buys these distresed properties, does some rehab on them (he has a contractor he works with), he can aford to, they are so cheap, and then sells them whole sale, in his town and also advertises them here on this web site.
i went to look at them and they are exactly what he said they were and we are working out some deals. i'm interested in multi unit rentals.
the key here is to not be greedy, if you make afew thousand, and leave some equity on the properties for your buyers, you will move a lot more units.
another way to do it is buy them and resell them as is.
hope this helps John
I invest in all areas, but I prefer low income. These are excellent areas for long term cash flow rentals, but I wouldn't consider trying to make any money on quick rehabs. The people in these areas can't buy, and most landlords in these areas are like myself. They know there are tons of people who invest in these areas, and then they will dump their properties at a large loss to get out. It is difficult to make money trying to sell a property when you are competing with desperate www.sellers.They don't want to stick it out long enough to figure how to do it.
Hey,
For me, I would not touch the low income (war zones) near me.
This is for several reasons, that have already been mentioned.
Oddly enough, the main reason I would not buy houses there has not been mentioned: WAY TOO MUCH COMPETITION.
These $40k to $50k houses are snapped up as fast as people can sign the paperwork by experienced wholesalers. In turn these guys sell them to inexperienced rehabs, at highly inflated prices.
Stick to $120-$180k house (in my area) and you can't go wrong.
That's interesting Bruce. I've heard other people mention that wholesalers are doing what you mention. I'm not sure what the difference is, but in the areas that I consider war zones where I live, the houses sit on the market forever, with the owner continuely dropping the price until they basically give them away. That's because an empty property in the areas I'm thinking of are continously vandalized, if not burnt to the ground before you can sell it.[ Edited by davmille on Date 03/18/2004 ]
How about rentals in low income areas as opposed to flipping? I would think it would be easier to rent property in low income areas than to try and rehab.
I bought a couple of properties in a low-income area in CT for rental. It is a different world. I had problems that I didn't have with other properties, a few problem tenants, who complain a lot and on't want to pay. But I have evicted a few and now putting families in there and things are getting better.
As I said, it could be a very different ball game. I understand why people want to throw up their hands and get out of there.
Hey Davmille,
It is weird stuff.
In Atlanta, I truly believe there are 10 to 20 "wholesalers" selling houses to 100 to 1000 "wannabees". The prices are insanely high.
The best way to visualize it is to think of 5 tigersharks tearing apart a big fish and a couple hundred little fish swimming around picking up the droppings.
I am buying low income homes for rentals as we speak, I think it's a great way to generate some pos cashflow every month, but as far as the quick resale after rehab....probably not what you're looking for, although...if you look at quantity over quality...You'll just have to work harder for your money.
JB
[addsig]
I had never done low end rentals until just reciently.
I saw one listed and thought it must have been a typo.
After my realtor confirmed that the asking price was correct I said I have to see what a 39K house looks like.
There was nothing wrong with the house to speak of but it was located about 1/8 of a mile from a paper plant. Which of course I already knew.
This is a modern plant so thank God there is no smell but you cant miss the plumes of steam coming out of the stacks.
After buying it and having the interior painted I started running ads and had an unbelievable responce.
I know that if I ever try to resell this property I will have to be patient or give a large discount like the seller gave to me, but it should more than pay for itself in under 6 years.
JohnNH