I currently have found a decent deal in my opinion in which I'm looking at a 13.5% CAP rate. All in all the property mainly would need some paint and new laminate floors in coming months. It is a duplex that is fully rented and rents are decent.
My concern is the area the property is in. The crime heat map on realtor.com is red, and i know if the area being somewhat high with crime. You can see vandalism in street view of other properties in the area etc. I will NOT be occupying the property, i just don't want to be getting calls from tenants.
Should I just focus on the numbers? or should I find another deal?
I measure this risk (societal risk?) by rent numbers.
$900 rent in my area - PERFECT
$500 rent in my area - TAKE OUT LIFE INSURANCE x 3
Do some research to find if you can tell a breaking point between regular citizen rent, and latin kings rent in your market.
Also, consider that this is a long term play. you might not mind going there now if you're young and single, but are you going to want to go there in 10 years? Are you going to have pushback from property managers going there?
Sounds like your unit isn't' too bad. Are there bars on the windows? Do any of your friends know the neighborhood by name, instantly and negatively? Do you have any investor friends in your market you can ask? Call a property manager and tell them you're thinking of buying it and ask for some advice on the area.
C/D class properties usually have higher than average cash flow numbers. If you are up to the challenge of managing this type of property then there is no reason not to invest. It will however be a major challenge if you are not experienced with C/D investing.
All depends on your goals @Cody Jensen . Typically the higher CAP rate and higher cash flow properties = lower class and/or higher crime neighborhoods. I personally don't mind the lower class as my goal is cash flow, but I do stay away from higher crime areas. Even though I use a PM, high crime areas are not worth it to me but it all depends on your goals. What are your goals?
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