Possible issues with neighbors

Buying & Selling Real Estate
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Possible issues with neighbors

Bienes Raices
Orlando, FL · Member since 2009 · 2k+ posts · 282 votes

I looked at an REO on Monday. I could probably get the bank down to a decent price. It had one offer on it on Monday, but the bank just lowered the price $5000 yesterday, so I guess that potential buyer dropped out.

The house next door had two large vehicles parked on it's front lawn and a huge piece of machinery thrown on the lawn (it may actually have been on the REO''s property, it was right on the line). When I was there seeing the house, the guy was doing work on one of the cars, and another guy across the street was doing work on a car too, revving the engine loudly. I'm wondering if one or both are running a mechanic business from home. It''s not something I''d ever want to live next to, but I don''t know if I''m projecting my own middle class biases, and a low income tenant wouldn't mind it. Would this affect your buying decision? I drove by there again today and all the cars, etc. are still there, so it wasn't a one day thing.

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Brian LevredgePro Member
Investor · Chattanooga, TN · Member since 2009 · 1k+ posts · 903 votes
16y

I think you somewhat answered your own question. If you would be uncomfortable living in such a place (so would I) then that means most quality tenants would as well. The type of tenants who don't care about living in a neighborhood like that probably won't care much about your property either.

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  • Brian LevredgePro Member
    Investor · Chattanooga, TN · Member since 2009 · 1k+ posts · 903 votes
    16y

    I think you somewhat answered your own question. If you would be uncomfortable living in such a place (so would I) then that means most quality tenants would as well. The type of tenants who don't care about living in a neighborhood like that probably won't care much about your property either.

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  • Account Closed
    OR · Member since 2008 · 1k+ posts · 845 votes
    16y

    I'm picky about the neighborhood. I don't have any control over the neighbors and they can bring down my property's value. So I like to buy in neighborhoods where people take care of their places.

    If 2 neighbors spend their time revving engines and have lots of cars in their yards, your only possible tenants will be the type who want a couple of dead cars up on cinder blocks in their own yard. They will feel right at home in that house.

    Or else youi'll get a blended undocumented immigrant family with 10 adults and 14 children. They will own 10 cars, so will be happy to find a place in a neighborhood where it is OK to park bunches of cars on the street and up in the front yard.

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  • Jim Wineinger
    Real Estate Investor · ten mile, TN · Member since 2009 · 1k+ posts · 374 votes
    16y

    But on the other hand, If it cash flows with the 50% rule and you also are prepared to properly screen tenants plus do not mind the "lower income" areas (not war zones) then what does it matter in the end? Their money spends as well an anyone else's money, doesn't it?

    If it is against zoning laws then you can always report it and the county will do the dirty work for you in stopping their work on the cars as a business.

    You wont be living there, your tenant will and if they do not mind and you have guaranteed rent payments (section 8) and damage deposits, does it really matter?

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  • Bienes Raices
    OP
    Orlando, FL · Member since 2009 · 2k+ posts · 282 votes
    16y

    jawsette,

    I guess my nightmare scenario is being able to find NO tenants and not being able to rent it at all, and then having to sell it, perhaps at a loss, after the realtor commission, etc.

    I don't know how realistic that fear is, or if I'm blowing it out of proportion.

    I don''t personally care if my tenant puts cars on the lawn too, if that's what everyone else is doing to.

    If it matters, I should add that this is one of those neighborhoods with a strange mish mash of architectural styles, some of them jaw-droppingly ugly, although the house I'm looking at and those immediately surrounding it are okay.

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  • Mark N.A
    Real Estate Investor · North Carolina · Member since 2008 · 1k+ posts · 483 votes
    16y

    Your 'nightmare' says a lot.

    If your purchase price isn't low enough that you _know_ you can find tenants at a profit, or low enough that you _know_ you can sell at a profit, then move on. It's a buyer's market out there.

    Myself, I'm very selective with a neighborhood, even in low-income areas. No need not to be.

    1Reply
  • Luis F.
    Tampa, FL · Member since 2009 · 24 posts · 1 vote
    16y

    Better off saving your money for another deal in a better place.

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  • Will BarnardPro Member
    Moderator
    Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
    16y

    With any purchase, LOCATION is very important. Even if it hits the 50% rule or any other rule, it may need to do better than the rule as you may have to accept lower rent or have higher vacancies.

    I try to buy the ugliest home on the nice street and neighbors and junk in the yards matters quite a bit in my book.

    Podcast Guest on Show #130
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  • Bienes Raices
    OP
    Orlando, FL · Member since 2009 · 2k+ posts · 282 votes
    16y
    Originally posted by nationwidepi:
    With any purchase, LOCATION is very important. Even if it hits the 50% rule or any other rule, it may need to do better than the rule as you may have to accept lower rent or have higher vacancies.

    I try to buy the ugliest home on the nice street and neighbors and junk in the yards matters quite a bit in my book.

    This one is more like the nicest house in the worst neighborhood. Which is another thing that bothers me.

    I've found another one that looks like a better prospect. It looks like a bunker from the outside, but it appears to be rent ready on the inside. It's not a nice 'hood either, but it doesn''t appear to have the obvious neighbor nuisances the other one has. Plus it's closer to where I live than the car mechanic house.

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  • Eddie Ziv
    Investor · Mableton, GA · Member since 2009 · 1k+ posts · 465 votes
    16y
    Originally posted by Bienes Raices:
    This one is more like the nicest house in the worst neighborhood. Which is another thing that bothers me.


    Move on Bienes. You will probably overpay for it too... I am not as selective when it comes to the neighbourhood, but I am selective with the street and the houses I buy. There are big differences from one block to another where I buy. I don't usually aim at the "ugliest" one on the block because,most of the time it means too much work for not enough return...

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  • Will BarnardPro Member
    Moderator
    Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
    16y

    I'd move on too, although the more work needed, usually the better my profits, but most of the time, profits are lcked in at purchase by getting the best deal.

    Podcast Guest on Show #130
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  • Robert Mayo
    Real Estate Investor · Mountain View, CA · Member since 2009 · 49 posts · 16 votes
    16y

    How much of this is hidden when you use a property manager?

    Sure, you need to verify that there are rentals in that sort of area, the vacancy rates, and what the rents are.... but if the cash-flow is fine is the extra hassle all on your property manager's plate? Or does it rise up and bite you?

    I'm most comfortable buying houses in nice neighborhoods but, thanks to this forum, I now know that low-income areas have better cash flow. Running the numbers myself has convinced me, too. But how much hassle comes along with it?

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  • Will BarnardPro Member
    Moderator
    Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
    16y
    Originally posted by Robert Mayo:
    I'm most comfortable buying houses in nice neighborhoods but, thanks to this forum, I now know that low-income areas have better cash flow. Running the numbers myself has convinced me, too. But how much hassle comes along with it?
    You ask a very valid question. Here is the thing: Each investor has their own plan, goal, expertise, systems, etc. While it is true that the lower income properties and more accurately, lower priced properties, have more cash flow, they also have less market appreciation and less tax deductions.
    If you are a buy and holder and your main business model is cash flow, you need to consieer having systems in place to handle the hassels of the lower income/lower valued properties. Other investors may choose to go the route of higher valued properties in better neighborhoods with lower cash flow, or even break even cash flow and go for the better market appreciation over time.
    As a flipper, one would want to go after the worst house in the best neighborhood as that constitutes the highest profits in most cases.
    It all depends on your business model! :D
    Podcast Guest on Show #130
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  • Eddie Ziv
    Investor · Mableton, GA · Member since 2009 · 1k+ posts · 465 votes
    16y
    Originally posted by nationwidepi:
    I'd move on too, although the more work needed, usually the better my profits, but most of the time, profits are lcked in at purchase by getting the best deal.


    Will, you are in a different market. If you buy a house for $100K where the on going prices are at $250K-$300K, you have a lot of leeway because the cost of construction are given. Spending $60K in construction in California maybe $45K somewhere else, but return could means negative where the houses cost $35,000 in $70,000 neighbourhood
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  • Eddie Ziv
    Investor · Mableton, GA · Member since 2009 · 1k+ posts · 465 votes
    16y
    Originally posted by Robert Mayo:
    How much of this is hidden when you use a property manager?

    Sure, you need to verify that there are rentals in that sort of area, the vacancy rates, and what the rents are.... but if the cash-flow is fine is the extra hassle all on your property manager's plate? Or does it rise up and bite you?

    I'm most comfortable buying houses in nice neighborhoods but, thanks to this forum, I now know that low-income areas have better cash flow. Running the numbers myself has convinced me, too. But how much hassle comes along with it?

    Robert, I am away above the 50% rule mainly because the houses I buy and the rehabs, are cash. Yes, those are mostly older houses and maintenance may be more frequent, but at the end of the day I get a very nice chunk of change. I can tell you that if I meet my goal of 12-15 houses which I hope to get in the next five to seven years, I can retire comfortably. Do I expect great appreciation? No, but because of the unique market, I doubt if I ever lose on the initial investment.
    Houses I buy for $7.5K-$15 sold only few years ago for $55K or more.
    0Reply
  • Bienes Raices
    OP
    Orlando, FL · Member since 2009 · 2k+ posts · 282 votes
    16y
    Originally posted by Robert Mayo:

    I'm most comfortable buying houses in nice neighborhoods but, thanks to this forum, I now know that low-income areas have better cash flow. Running the numbers myself has convinced me, too. But how much hassle comes along with it?

    Robert, I haven't bought a property yet, but from what I've seen so far at the REOs I've been to, one of the big risks with low income area properties is someone stealing the AC unit, or anything else they want, during vacancy periods.

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  • Eddie Ziv
    Investor · Mableton, GA · Member since 2009 · 1k+ posts · 465 votes
    16y
    Originally posted by Bienes Raices:
    Originally posted by Robert Mayo:

    I'm most comfortable buying houses in nice neighborhoods but, thanks to this forum, I now know that low-income areas have better cash flow. Running the numbers myself has convinced me, too. But how much hassle comes along with it?


    Robert, I haven't bought a property yet, but from what I've seen so far at the REOs I've been to, one of the big risks with low income area properties is someone stealing the AC unit, or anything else they want, during vacancy periods.





    Yes, it is a big problem, especially in the south east. There are some remedies though. I put cages around my AC units. It cost me about $350 but it is a good insurance policy. My PM is exploring a low-cost tracking device to hide in the unit so at least you can get the guy who stole it.
    The problem is the insurance companies. If you have a landlord policy that has a vandalism clause in it, it will cover the damage if the unit has been vandalized, but if it was taken as a whole, you are out of luck.

    Another remedy for smaller house (1,200 sqr/ft or less) is window AC instead of a central unit. A good window AC can cover most of the house. May low income family prefer to use fans anyway to keep the cost down.

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  • Bienes Raices
    OP
    Orlando, FL · Member since 2009 · 2k+ posts · 282 votes
    16y
    Originally posted by Eddie Ziv:
    Originally posted by Bienes Raices:
    Originally posted by Robert Mayo:

    I'm most comfortable buying houses in nice neighborhoods but, thanks to this forum, I now know that low-income areas have better cash flow. Running the numbers myself has convinced me, too. But how much hassle comes along with it?


    Robert, I haven't bought a property yet, but from what I've seen so far at the REOs I've been to, one of the big risks with low income area properties is someone stealing the AC unit, or anything else they want, during vacancy periods.





    Yes, it is a big problem, especially in the south east. There are some remedies though. I put cages around my AC units. It cost me about $350 but it is a good insurance policy. My PM is exploring a low-cost tracking device to hide in the unit so at least you can get the guy who stole it.
    The problem is the insurance companies. If you have a landlord policy that has a vandalism clause in it, it will cover the damage if the unit has been vandalized, but if it was taken as a whole, you are out of luck.

    Another remedy for smaller house (1,200 sqr/ft or less) is window AC instead of a central unit. A good window AC can cover most of the house. May low income family prefer to use fans anyway to keep the cost down.

    Eddie, that sounds like a good idea for the condensor, especially if you can reuse the cage for different properties. The only thing is, at the house I viewed, they stole the outside condensor unit and then broke in through the back door of the house and stole the inside unit as well.

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  • Robert Mayo
    Real Estate Investor · Mountain View, CA · Member since 2009 · 49 posts · 16 votes
    16y

    Eddie, you manage these from out of state, right? I see you live in CA but invest in Birmingham.

    Do you also do your rehabs without being personally present? I wonder how that works. Do you visit often? Is it all delegated to your PM?

    0Reply
  • Jose R.
    Real Estate Investor · Kahuku, HI · Member since 2009 · 148 posts · 25 votes
    16y

    My Aunt is in the same situation. She keeps her property in tip top shape. Her house looks like something out of Better Homes and Gardens.

    Unfortunately her neighbor is a mechanic and his house looks like a body shop. Needless to say, this is a BIG problem.

    Personally...After seeing all the headaches my Aunt went through with her neighbor, I would walk from the deal. The last thing I need to do is spend my time playing neighborhood cop.

    I hate to think what type of tenant would be ok living next to that dirt bag!

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  • Bienes Raices
    OP
    Orlando, FL · Member since 2009 · 2k+ posts · 282 votes
    16y
    Originally posted by Jose Rodriguez:
    My Aunt is in the same situation. She keeps her property in tip top shape. Her house looks like something out of Better Homes and Gardens.

    Unfortunately her neighbor is a mechanic and his house looks like a body shop. Needless to say, this is a BIG problem.

    Personally...After seeing all the headaches my Aunt went through with her neighbor, I would walk from the deal. The last thing I need to do is spend my time playing neighborhood cop.

    I hate to think what type of tenant would be ok living next to that dirt bag!



    Yeah, I've moved on. That neighborhood also has other negative features--burglar bars on windows, weird, inconsistent architectural styles, and did I mention it's in a hundred year flood zone? :roll:
    0Reply
  • Jose R.
    Real Estate Investor · Kahuku, HI · Member since 2009 · 148 posts · 25 votes
    16y

    I think you made the right decision.

    0Reply
  • Eddie Ziv
    Investor · Mableton, GA · Member since 2009 · 1k+ posts · 465 votes
    16y
    Originally posted by Robert Mayo:
    Eddie, you manage these from out of state, right? I see you live in CA but invest in Birmingham.

    Do you also do your rehabs without being personally present? I wonder how that works. Do you visit often? Is it all delegated to your PM?

    Yes, I have a full team in Birmingham. I have my PM, contractors, subs, etc. I also find properties for other investors. A sort of "Hand holding" service from selecting the right property, in the right area, rehab, and rent. It's not like a "turn key" but by helping them do it, they save tons of money.
    0Reply
  • Eddie Ziv
    Investor · Mableton, GA · Member since 2009 · 1k+ posts · 465 votes
    16y
    Originally posted by Bienes Raices:
    Eddie, that sounds like a good idea for the condensor, especially if you can reuse the cage for different properties. The only thing is, at the house I viewed, they stole the outside condensor unit and then broke in through the back door of the house and stole the inside unit as well.

    Bienens, When selecting a property, make sure that both houses on the right and of the left of the property are occupied. It make huge different. I had a crew working on one of my houses the other day and the neighbor called the police on them. That kind of neighbor I'm looking for. The nosier the better... :wink:
    1Reply
  • Bienes Raices
    OP
    Orlando, FL · Member since 2009 · 2k+ posts · 282 votes
    16y

    That sounds like a good idea, Eddie, thanks.

    I'm not planning to use a PM or invest out of area at this time, but was it difficult to put together a team you could trust, from remote? I would be concerned about people trying to rip me off.

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  • Eddie Ziv
    Investor · Mableton, GA · Member since 2009 · 1k+ posts · 465 votes
    16y

    Well, it wasn't difficult but it took time. I've been to Birmingham nine times since September last year. I always ask people I know about referrals, (My real estate agent, my PM, through other professionals, etc) My contractor is from California and I got him so much work that he practically move to Alabama. (Got him a house for $8,000. He fixed it to the nine and now he is putting it up for sale for $65,000). But I have lots of other professionals (Great roofer, plumber, AC guy, a fence guy, etc)

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