Considering investing in the hood/ghetto
Chicago, IL · Member since 2015 · 8 posts · 2 votes
@Judi Smith Congratulations on deciding to make a move in the RE game!! Investing in the hood is definitely a specialty and not for everyone. Read this thread in it's entirety.
https://www.biggerpockets.com/forums/61/topics/115...
It's filled with nuggets from some successful hood investors. Feel free to reach out as I invest in these communities as well.
I wish you the best!
Sincerely,
E. Harris
mistake they have to want a better life to begin with they are not thinking like you are they are or at least think they can make more money selling drugs in the street they rather have a Mac daddy car than a beautiful apartment for real.
@Assata Moore When I speak of the hood I am not speaking to any particular city or race. As for your experience at MSU, crime happens everywhere. I never said crime is limited to the hood. I never said you cannot be successful from the hood or from a low income environment. I am living proof. Success can come from anywhere. We could get into my personal beliefs on the circumstances that creates the hood but I would probably get kicked off this site, lol, and it is different from the point I was trying to make in regards to RE investing. I commend you for staying in your community. One way the hood can turnaround from being an economically depressed area is for the talent from the hood to return and reinvest in the community. People become successful by seeing and learning from other successful people.
Agreed! Thank you and let's not get kicked out of BP, lol...
Judi, I invest in a low income neighborhood. You can listen to my podcast or read my weekly BP blog posts. It is more time consuming than traditional rentals, and can be an emotional drain. It takes a mix of compassion and sticking to your guns to make it work if you are going to self manage. It does have a lower entry cost, but be sure to have a sizable nest egg of readily available funds put aside for all the costs that come up; they come up way more often in the low income areas. Choosing the right property is key too - look for something on the edges, on a block where people care, and/or something unique, like an extra bathroom or bedroom.
hey @Judi Smith
Great money to be had in Illinois if you do it right. Check with @Edward Mccracken he is doing it right in some souther neighborhoods in the Chicago suburbs and I'm sure would be willing to show you the ropes.
I started out in the Ghetto - Actually a war zone (Imagine waking up to video of a vehicle in the living room of one of your houses and your tenant being interviewed on the morning news about the gunshot that put a bullet in the drivers head after an attempted drug ripoff)... Like you, It was the only area I could afford. There is a reason the properties are so cheap.... they are a constant headache.. Be prepared for a VERY management intensive experience. Vacancies will be high, Damage will be frequent and evictions will become your new hobby. I managed the property myself as it was very difficult to find a decent management company who would put the time and effort in to make sure the tenants paid on time and would knock on doors when they didn't. I learned a TON during the time .... and the biggest lesson I learned is that I don't really want to invest in the ghetto....At the time I enjoyed owning the property, and took setbacks in stride.... and fortunately, I had an exit strategy other than selling to another landlord. I do not recommend anyone buy a property in a difficult area because it is all you can afford... be patient and save your cash until you can buy in good blue collar neighborhood.
jeff
There are other ways to invest in real estate without the risk. Though not all people in low priced neighborhoods are bad people, there are definitely more dangerous people in those areas, and dangerous situations. Are you comfortable dealing with people that are or were drug dealers, in prison, etc.? If not, then you probably want to stay away from high crime areas.
Maybe you should consider partnering with someone else and buying into a better area, or check out some of the crowdfunded real estate sites, loans, etc. Rather than a house, look at condos in better areas.
I invest in areas what some ppl would call the hood. It is definitely an art.
You have to screen your tenants A-Z. You will get a ton of responses for your apartments. Your goal is to find the best 1-3 tenants and start your negotiations.
older ppl are generally better since they have been thru walks of life and having an apartment over their head is extremely important. They feel this is the only thing they have and have to maintain it.
you must be a good negotiator. From negotiating the purchase agreement to lease, to wear and tear to even negotiating the tenant to leave your apartment is a skill not alot of ppl have.
Always remember this is not yuor house. You must be wiling to make all necessary repairs but often opt for the $28 closet door instead of the $100 closet door... There are other cheaper ways of getting doors :)
have actual man hours needed to do the work on the home. Plumbers/electricians charge an insane rate for their work. I have managed learned it is alway good to keep them happy while making sure you are getting atleast 50-75% off the market price. if you pay full price, you will neer make a dime
International investors actually like hood properties. They can buy them and even if the property is generating 500 a month after all expenses, they live in luxury overseas!
the best hoods are close to subways/trains/ public transportations/ large strip malls (think home depot/walmart). These areas will def improve over time as population increases.. (think NYC, san francisco ignore chicago since its called the windy city for a reason)
the MOST important!!
anything you do in life requires work. So if you think you will buy 10 hood properties and collect 5k a month your wrong. If you think you will buy a 400k coop in nyc and collect 2500 a month you are wrong.
but i will tell you what real estate will give you. it will give you security as to where your money is. it will give you appreciation even if nominal. It will give you equity pay down and you pay your mortgage and if you ran your numbers correctly it will pay you a monthly dividend. So just like you might research why you are sick and if it is buying aspirin you will take it without consulting a doctor, the same is true for property management. Learn the ins/out material supplies labor etc so if it is small job you can easily tackle it if it is a larger job you can call a contractor and eventually hand off the property to the property manager.
Overall I have been RE investing for over 7 years and I truly do believe if you are willing to work and put in the effort and take risk nin the long run it will span out becuase remember populationg grow exponentially.
I have investment properties in nyc, jersey city, miami, houston, and philadelphia areas. My main focus right now if nyc and philadelphia. If you have any question you can reach out to me Best of luck
You can make money in bad neighborhoods. I invested in Harlem when it was bad because of sentimental reasons. I did not do it for money, but made money on it anyway. If you invest in these neighborhoods you should install bars/gates on windows and doors. There are some really pretty affordable designs you can get from local locksmiths. Put in security cameras and good bolt locks. Call the local police station and they will do a free walkin assessment to better tell you how to secure the property. If you cook for cops or give them some hot cocoa on a cold winters day they will monitor your property more. If you cant cook or make cocoa buy it for them. Do not do too much to upgrade the apartments in the beginning. You can get good durable things that require little maintenance but that does not cost an arm and a leg. Lastly, screen your tenants, there are good people who live in the hood. You do not have to settle just because the neighborhood is bad. Cleanliness attracts better tenants.