BiggerPockets

4 Success Factors For Profitable Inner City Investments

It used to be that inner city investors could count on a local redevelopment agency providing cover for them. We could draft off their efforts like the last goose in a V formation. However, the game changed with the December 2011 ruling by the California high court claiming the state could raid money set aside for community revitalization and use it for general fund purposes. You can bet other cash-strapped states will follow suit.

But even without this dummy-proof investment tactic, there are other principles to help you pick profitable inner city investments. The more your investments exhibit these features, the easier it will be to elevate burdened property values to normal market rates.

Here are four principles a double bottom line investor, interested in both financial and social gains, should use while selecting an inner city investments:

1. Buy on the Boundary. Strong opportunities exist along the fringe of the "good" and "bad" neighborhoods. The goal is to profit from improving the "bad" edge and connecting it to the "good" area of town.

REALITY NOTE: This will require your presence. A new owner needs to spend time "magnetizing" the property to create an atmosphere that attracts tenants interested in contributing towards the area's revitalization.

2. Buy into an active community group. Future profits are directly tied the effectiveness of a neighborhood association or grassroots advocacy groups. These groups provide passion, credibility, emotional support, media connections, political influence and more. A landlord should work to grow and strengthen this group, but not concoct one from scratch.

3. Buy near mass transit options. A wise strategy is to create inner city housing that appeals to echo-boomers who we predict will be moving to inner cities over the next few years. As the cost of oil increases, so will the demand for walkable and transit-supported communities.

4. Buy something large enough to make your efforts worthwhile. Try to transform the largest blighted property on the block. You should be able to pick it up at a deep discount. Once you're a dominant player, it's much easier to work with neighboring owners to rebuild the community.

Just like anywhere, purchasing the right property in the right location goes a long way towards ensuring a profitable investment. Use these principles to identify inner city investments with high profit potential then use simple best practices to revitalize the neighborhood. In a few years, with diligent effort, you'll realize your investment is in the "good" part of town.

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