Updated about 2 months ago on . Most recent reply
Neighborhood vs Numbers
I have started looking at properties for a long term rental investment recently. I am in Greenville NC a smaller city about an hour east of Raleigh. Since I have started looking I have come across some decent options. I have found a property that has good COC and a potential of 10% cap rate but is in a low income and higher crime area of the city. The property itself is in decent shape, the numbers line up. I think I'm going to put in an offer however I have some reservations about the street, the vacancy rate of the neighborhood and just the overall gut feeling I get when I am there. Is my concern about the neighborhood justified or is this a common rookie mistake? Any thoughts from more experienced investors? Pros and cons for investing in the lower income areas? Would appreciate any feedback! Thanks
Most Popular Reply
You're making a veteran move, not a rookie mistake. We often overthink this - most of real estate boils down to answering the question "Do people with options want to live here?"
Those cheap cash flow properties don't actually cash flow on end of year actuals. It's a tough tenant class to manage, not enough gross rents to cover ongoing maintenance, repairs, and vacancy (they are always older properties).
The house is cheap and the vacancy is high because nobody wants to live there. The home value and rent appreciation will not come close to keeping pace with inflation.
I like to revert back to the Bezos quote - "When the data and the anecdote disagree, trust the anecdote."