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Tips On Investing In Real Estate in The Inner City

by Lisa Phillips on December 15, 2013 · 19 comments

  
Inner city Investing

When Googling tips for investing in the inner city, you get more horror stories from investors who were unsuccessful, rather than solid tips on how to profit without losing it all.

Today, Al Williamson and I will share practical tips on navigating this investment strategy successfully, and when taking into account no nonsense tenant screening advice found on here BiggerPockets, this process can be recreated again and again. Here, I’d like to share how to succeed rather easily with a clear head and long vision.

There are different first steps to take when investing in a higher end neighborhood versus an inner city neighborhood. Being able to scale your methods based on each strategy can be a key difference in getting through this with your investment safe and sound.

*Lisa: Lock Yourself In*
I say this tongue in cheek, but my very first purchase going into this neighborhood was to contract out the installation of security doors on the front and back. I mean, The.Very.First.Thing. I did this because it was my first time in an inner city investment vehicle, and I knew I was dedicated to making this work and I had to show up everyone who said “you’re making a big mistake!” Also, because I knew I was a single female, I wanted that protection so if I was working inside late at night, there would be no surprises. This also served as a huge deterrent, as I suddenly became the home where you would have to cause too much trouble than its worth to try to get copper pipes (which remained safely in my basement throughout the entire renovation). It costs about $1300 for the installation of 2 doors both front and back, but considering the house cost $13,599, this is a relatively minor cost for the exponential amount of peace of mind it delivered.

*Al: Light It Up!*

No need to hang an “under new management” banner when you buy an inner city rental. Put those words into action by improving the night lighting. Lighting changes the atmosphere around your rental faster than anything else. It make rental safer and push those with questionable intension outside your cone of light.

*Lisa: Check Online Crime Reports!*
This was a huge part of my success in finding my little cash cow. When vetting a property, I can put the address within CrimeReports.com or SpotCrime.com. These two websites are immeasurably important when investing in these areas, because these are the indicators that describe what kind of community exists within the neighborhoods. Finding out if the property is in a low crime area makes the possibility of investing in your real estate without theft or vandalism huge. These neighborhoods throw you off at first, but within minutes of them finding out I am fixing the place up, the neighbors in these areas were MORE than happy to tell you if they see anyone messing with the house they’ll call the cops. That’s the neighborhood you want to invest in.

Al: Make Small Community Donations

What’s smart for large corporation is also smart for small landlords; donate to the community surrounding your business. You’re never too small of a landlord to seek the favor of your neighbors. Start with $5 donations to the closest neighborhood organizations. Also consider Boys and Girls clubs and sports teams as well. Don’t underestimate the power of a small monthly donation’s impact on a struggling community.

In higher end neighborhoods, you may immediately invest in landscaping and curb appeal, and in inner-city neighborhoods, you may have to scale your methods and first invest in good lighting and bars. You can invest profitably in both, but understanding the different first steps can make a huge difference in how smooth your ride will be. Tenant screening still is a must (I turn down applicants all the time, only putting in tenants who make 3x my monthly rent) to ensure success. If you let a deadbeat in from not doing your due diligence, its not because of the inner-city, its because you may need to improve your tenant vetting advertising reach and processes. Investing in these neighborhoods safely can be profitable, and help spark more change than any government program. Line your pockets with cash, and create a more welcoming neighborhood. It can be the ultimate two for one.

Photo: mohammadali

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{ 19 comments… read them below or add one }

Dawn Anastasi December 15, 2013 at 2:50 pm

Great article! I don’t invest in the “inner” city but I do invest in working class neighborhoods. A few more tips:

1) Go to events held by the local police department and get to know the officers. If they can greet you by name, you’re doing well. In my area, the police hold youth/cookout events in the summer and crime & safety meetings during the year.

2) Get to know and join local landlord organizations in the area. In my area, they are free to attend and the local police are also there as well. Through these I’ve met people from the Department of Neighborhood Services, the Section 8 office, the local district police captain, among others. Plus I’ve gotten to know other local landlords and residents in the area that have a vested interest in the community.

3) Always keep your buildings in good repair. Avoid anything that turns you into a “slumlord”.

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Al Williamson December 17, 2013 at 10:30 am

Dawn,
Your tips are spot on! Coundn’t agree with you more.

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Lisa Phillips December 15, 2013 at 5:03 pm

Thanks Dawn! Between you and Al, I am definitely going to step up my local landlord/neighborhood association game. If $60 a year or showing up a few times a year can engender good will, its well spent. However, same thing applies; You just have to scale and recalibrate what you do, but it can end very well.

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Dawn Anastasi December 15, 2013 at 9:38 pm

I just paid to go to a local neighborhood association awards banquet earlier this year and got to learn more about what’s going on in the community. I can’t be everywhere at all times so it’s helpful to know what people are doing. Then also there is networking with others in the area and again with some of the key people who are really doing things and making a difference.

I actually consider these local meetings even more important than my local REIA (and since they’re held on the same night I have to choose one or the other).

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Geoff December 15, 2013 at 7:33 pm

Thanks Lisa and Al, great information, nice presentation.

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Lisa Phillips December 15, 2013 at 8:11 pm

Thank you! I hope it can help people you or anyone else who’s been thinking about it, but didnt know how to start.

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perry December 15, 2013 at 9:10 pm

Great information Lisa, I live in Chicago and there are plenty of inner city neighborhoods with potential for investment properties and these are great tips.

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Lisa Phillips December 15, 2013 at 10:23 pm

Exactly. We all know where the profit is, all we need is more conversation on how to navigate this profitably for everyone.

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Al Williamson December 17, 2013 at 10:32 am

Perry,
Have you started buying inner city rentals yet or are you still considering jumping in?

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Sergio December 16, 2013 at 1:51 am

Thanks a lot Lisa

Great tips

You are doing a great job

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Lisa Phillips December 16, 2013 at 12:30 pm

Thank you Sergio, Im glad you liked today’s content!

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Ben December 16, 2013 at 7:53 am

Thanks for the great post, Lisa and Al. Lisa, you’re absolutely right about finding a place where the neighbors want you to succeed – it’s a win-win situation, especially if you’re renovating a problem property that was dragging down the block.

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Ken Cardillo December 16, 2013 at 11:20 am

Agree. In a lot of cases, you are purchasing an empty house that could be in disrepair. Many of you neighbors will be happy to see you are improving the neighborhood, but there will inevitably be some who see this as an opportunity to steal or vandalize. I couldn’t agree more with your thoughts around “Light it up!”. A little light will go a long way in deterring those who are up to no good.

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Lisa Phillips December 16, 2013 at 12:31 pm

You’re right. Its funny how its basic things that can really make it go more smoothly. Buy Low, Rent High, right?

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Mike December 16, 2013 at 2:26 pm

Great comment! Just don’t tell too many people, about the good deals.

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Lisa Phillips December 16, 2013 at 4:52 pm

Mike – I got ya. As a video blogger, there’s always this conflict between your own desires, versus helping other people who’ll mark up your territory. I have decided to err on the side of helping others on this endeavor. Thus, the secret sauce of locations will be given up as I find them. But, that’s another topic…

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Al Williamson December 17, 2013 at 10:35 am

Mike,
I would love it if we could flood the inner city market with BiggerPockets landlords. That would only make those neighborhoods stronger.

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Shaun December 25, 2013 at 4:15 pm

Great video guys.
Lots of good tips about this niche.
Hopefully people will drop some preconceived notions about working those areas.
While not something I’m looking into at this time but as Dawn showed these types of things can translate to other neighborhoods as well.

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Lisa Phillips January 28, 2014 at 12:20 pm

Thank you, I appreciate your comments Shaun!

Lisa

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