Invest in Duplex in a "C" class neighborhood?

16 Replies

Hey ya'll first post here on the forums. "Newbie investor" so go easy on me here.

Been reading and listening a ton to podcasts and articles. Learned how to run the numbers, etc.

I've located a duplex close to downtown Greenville, SC that should (with the proper rents - still a bit fuzzy on this one. More on this later.) cashflow around 4-500/mo.

The duplex is fully renovated already by what I can only assume is an investor looking to flip it.

I'm seeing comparable 1B/1Ba apartment units being rented for $700-800 within 5 min drive to downtown. The duplex isn't in a fantastic neighborhood, has a decent amount of crime, but is slowly being turned over into a nicer neighborhood.

My question is this. Knowing the slow growth and flip into a nicer neighborhood, and the potential to net 4-500/mo, would you invest? Let me know if I'm missing any pertinent info to make the decision. I can provide the numbers if need be.

Thanks!

Blair

@Blair Ellis depends on the purchase price.  500 cashflow on a 25K investment (leveraged) is good.  500 cashflow on a 200K investments is not so good.  With that said, I know Greenville is experience massive growth so there probably will be some run way on appreciation too.  

@Blair Ellis I feel like the people paying for those 1/1’s are going to want to be in nicer areas which you know 5 mins in one direction from DT is one way and the other another. Now if it’s in Nicoltown then I think you’re good but expecting 7-800 out of the gates is going to be tough imo. Btw, don’t forget your taxes, ins, cap ex, repairs, and vacancy costs in your cash flow. With those added in, Its going to be extremely hard to get a turnkey in Greenville that’s gonna net that much cash flow immediately.

@Blair Ellis I agree with Marvin that area is going to be everything. My first question would be, “If someone bought the property and renovated it, especially a duplex, why aren’t they keeping it?” It would seem that the potential buyer would be less likely to be an end user and more likely to be another investor. Did something not work out with their plan? Not saying that’s the case, but definitely a point to consider. Thoughts?

Yea it's a place in Nicholtown...
And I agree, something seems a bit off about them not keeping it.

Just not 100% sold on pulling the trigger there.

It's listed at 169k. All in cash price would be about 38k at the list price.

I've accounted for all the typical expenses in my numbers.

Advertising
Taxes
Insurance
Vacancy
Repairs
Cap Ex
Water
Sewer
Garbage
Gas
Electric
HOA
Snow/Lawn
Prop Mgmt

All good points Marvin.  You also need to add in Property Management expenses and eviction costs.  @Blair Ellis One suggestion is to contact a couple PM to get their opinion on the property.  Even if you plan to manage it yourself, it is good to get information from the professionals in the area

@Blair Ellis , come on man, you want our opinions, give us the data.  Ok we now have asking price.  Maybe the very next important numbers to know is the current and projected rents from each unit.  I could try and work backward with your numbers and then guess what 500 positive cash flow is but just give us the complete analysis to get a credible opinion.  

Also, just another thought, If you haven't been a buy and hold investor, then you have a lot to learn about property management.  Don't think of outsourcing it....big mistake for a beginner.  

Ok, now you are thinking of buying a 1 bedroom 1 bath unit.  Does it have washer/dryer hookups?  The reason I ask is that for buy and hold investors, keeping tenants for multiple years is a big plus and saves you money.  However, 1 bedroom properties, especially if you don't have laundry capabilities spell very temporary tenants.  Which means more hands-on management.  Also, means lower security deposits, which can easily be eaten up by move out damages.  

I began my real estate investment journey in 2003.  Back then my rents were in the range of 700-800.  Tenants moving out with some damage could still exceed the deposit.  Now my rents are 1100-1200 and a tenant moving out with typical damages usually get something back (I always charge a full months rent for deposit).  Smaller units (mainly beds) have higher turnover and more out of pocket maintenance cost.  

If this is your first property, I would shoot for a better location that would be slightly easier to manage.  My first few properties had to have little repairs as I was not strong enough mentally.  Nowadays I want them torn up as much as possible, helps to eliminate competition and gets me to reduce buying cost.  But, I had to grow mentally first.  The hardest thing you will do is to buy your first property.  You don't want it to be so hard to overcome obstacles that you are not mentally tough to handle all the issues.  I am a 1000% better investor and landlord now than when I bought my first property.  The last property I just bought was a foreclosure and had I bought it as my first property I would not be in the real estate business.  Get my drift.......Good Luck and Cheers.

@Blair Ellis , I went looking and found this.  https://www.realtor.com/reales...

If this is what your looking at it looks fine.  The property, although older, looks to be rehabbed.  Doesn't look class C to me but maybe it is.  The only draw back is one bedroom.  But as 1 bedroom's go, it looks like it could appeal to a single or childless couple.  I like that it has washer dryer hookups.  I don't know Greenville South Carolina, but if you like the neighborhood then I think it could be a profitable property for you.  Your target price should be between 150k-159k assuming rents 750-800.  Good luck. 

@Blair Ellis    I own a small 2br house that i reno'd right down the street from the duplex you're referring to.  My house is a small 2br 1bath and approx 700 sqft.  it is completely remodeled and rents for 900/month.  i have excellent tenants.  Hit me up if you have any other questions.  I am pretty familiar w/ that area.

@Blair Ellis I don’t know the area, but I’d say to make sure the property is in a C/C+ neighborhood. If you’re in a C/C-, you’re going to have trouble finding good tenants who pay on time. Some landlords excel at that kind of thing, but I don’t think it’s for most of us.

You want to make sure you can handle the tenants and area in the few years that it’ll take to become a better and safer neighborhood.

Joe - The property management line item was included because if I'm going to eventually turn it over, I want to make sure it makes sense both ways. To include it and to not include it. But I agree, I'd be doing it my self to get used to it. I want to learn.

Emily and Adam, good looking out. I like the neighborhood. I think it's definitely growing, but I'm not sure exactly what I can get for this property in rents, which is the part that's causing me the most hesitation.

@Blair Ellis sheesh Rentometer coming back with super high rent rates for the area but as u know there's good parts of Nicoltown and not so good parts. Btw, I'm assuming the cash flow is high because there's not going to be a loan and if that's the case, you have to think about your CoC return.

Rentometer is coming up with high rates because of its proximity to downtown. But this is an interesting duplex at 1-1/1-1 (bed-bath) per side. Comparable (albeit lesser quality) nearby apartments are going for only 700 for a 1-1. Trying to accurately figure rental income has proven to be the part of this whole deal that has me perplexed.

This would be leveraged, not a cash deal. Just need to find creative ways to come up with the down payment.

@Blair Ellis Hey man I live close by to that duplex your talking about and i'm a investor focused realtor... to be honest I don't think it's really going to cash flow as much as you think it will. It's a awesome transitioning area but the streets are touch and go. my opinion is that you will get 750 tops. maybe in a year or so you can get 800. Let me know if you need help seeing the property or want someone to look at your numbers in detail, just PM me. The house has been on the market for a while so there is opportunity to potentially negotiate it.