Class B versus Class C neighborhoods

[James Olympia]

Hello everyone. I hope all are doing well in this cold cold weather. I'm from California and I have spent the last 6 months researching Columbus Ohio to buy multi-family units, 4 plex to be exact. I did connect with a few property managers and realtors. I am financially stable and pre-approved to buy. My only hold up choosing either in Class B or Class C neighborhoods. My conservative side tells me to choose B, while my financial brain says choose C. Hilltop, Linden, Franklinton have alot of MLS postings, probably for a reason. Is it still possible to get 8-10% CoCR and/or $200-$300 per door after all expenses (mortgage, insurance, tax, capex, vacancy, maintenance, property manager) on B neighborhoods? Do you guys/gals think my expectations are too high? Lastly, how do I verify if the property is indeed in a class c or b? I use areavibes.com to check the neighborhoods and also google map to look at the areas. I know its a lot of questions. Any advice or comments are highly appreciated. For a new investor, its kinda overwhelming. But I am ready to put in the work and effort. Thanks in advance for your comments.

[Remington Lyman]

Quote from @James Olympia:

Hello everyone. I hope all are doing well in this cold cold weather. I'm from California and I have spent the last 6 months researching Columbus Ohio to buy multi-family units, 4 plex to be exact. I did connect with a few property managers and realtors. I am financially stable and pre-approved to buy. My only hold up choosing either in Class B or Class C neighborhoods. My conservative side tells me to choose B, while my financial brain says choose C. Hilltop, Linden, Franklinton have alot of MLS postings, probably for a reason. Is it still possible to get 8-10% CoCR and/or $200-$300 per door after all expenses (mortgage, insurance, tax, capex, vacancy, maintenance, property manager) on B neighborhoods? Do you guys/gals think my expectations are too high? Lastly, how do I verify if the property is indeed in a class c or b? I use areavibes.com to check the neighborhoods and also google map to look at the areas. I know its a lot of questions. Any advice or comments are highly appreciated. For a new investor, its kinda overwhelming. But I am ready to put in the work and effort. Thanks in advance for your comments.

You will need to get a local, rockstar Realtor, contractor, lender, and property manager. Then you should be able to ask your team's opinion and move from there. That is what I did here in Columbus, Ohio

[Ramandeep Sidhu]

Class B and Class C neighborhoods refer to the quality and desirability of a neighborhood. Class B neighborhoods are generally considered to be more desirable and higher quality than Class C neighborhoods, but they also tend to be more expensive. In general, Class B neighborhoods are characterized by a mix of owner-occupied and rental properties, with a lower crime rate and higher median income compared to Class C neighborhoods. Class C neighborhoods, on the other hand, tend to have a higher concentration of rental properties, lower median income, and a higher crime rate compared to Class B neighborhoods.

As a new investor, it can be overwhelming to decide between Class B and Class C neighborhoods, especially if you have conflicting advice from your conservative side and your financial brain. One way to verify if a property is in a Class B or Class C neighborhood is to use online tools such as Areavibes.com or Google Maps to get a sense of the neighborhood's demographics, crime rate, and other factors that can affect the value of the property. You can also reach out to local property managers or realtors for more information on the specific neighborhood you are considering.

It is possible to achieve an 8-10% return on investment (CoCR) or $200-$300 per door in a Class B neighborhood, but it is important to carefully assess the property and its potential for profitability before making a decision. Factors such as the condition of the property, the demand for rental units in the area, and the costs of maintaining and managing the property will all impact your potential return on investment. It may be helpful to consult with a financial advisor or real estate professional to help you evaluate the potential profitability of a specific property or neighborhood.

[Bob Stevens]

Cleveland is a much better overall market, I have seen 4 units for about 160k brand new with 850 rent per unit, taxes about 5k, so high ROI

About 40k per year with about 25k net on 160kish, about 15 % net cap based on cash purchase, This is typical in the Cleveland markets,

BTW I NEVER paid attention to this A B C D area, IMO its useless, ( just a way for some guru to make themselves sound good. I have worked in all areas for 10 years and have been very successful its all about screening. I was told 10 years ago I was crazy to set up shop in Cleveland, well how wrong were all those people. I was told I was absolutely nuts to buy in East Cleveland, again how wrong where they . We are now trying to buy as much as we can in certain areas of East Cleveland as we know what is coming, again most will tell me I am nuts, but that ok :)   

All the best 

[Scott Allen]

Work on building up your core four

[Alex Schober]

@James Olympia I bought my house in Columbus in what I would personally consider a "B" neighborhood. I wonder if you've done any on-the-ground research in Columbus? I shared your "financial mindset" of investing in a "C" neighborhood (specifically Franklinton) but by just walking around, you'll be able to feel changes in safety perceptions almost on a block-by-block basis. I think Franklinton has a lot of potential given that it's directly west of downtown; however, it may take a while, and you may not get many people willing to pay you rents that "B" neighborhoods like Merion Village, Olde Towne East, etc. might command. I'm happy to discuss this further individually. 

I do echo your question about whether other folks here have a more formulaic approach to determining the class of the neighborhood. 

[James Olympia]

Thank you all for the comments and advice.