Triplex in Class C Neighborhood - NEED HELP QUICK

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Triplex in Class C Neighborhood - NEED HELP QUICK

Ryan Copeland
Rental Property Investor · Columbia, SC · Member since 2020 · 244 posts · 275 votes

There is a triplex listed in a class C neighborhood, it's fully rented and 2 of 3 units have already been renovated.  It will cash flow $1500 per month.  Is it worth being in a Class C neighborhood?

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Denis Kalic
Rental Property Investor · Bronxville, NY · Member since 2020 · 3 posts · 15 votes
5y

@Ryan Copeland

I promise you this will be the most unbiased and best answer. I own from SFR all the way to apartment complexes from Class A to Class C neighborhoods.

Just speaking to Class C:

- Cash returns will always be better and appreciation usually worse

- Yes the average quality of tenants is worse. I have an apt building in Class C I literally have a tenant who doesn’t throw out trash and the PM has to babysit him (he pays on the first of every month always)

- Vacancy isn’t necessarily more and turnovers aren’t always higher

My strategy is I take a property in a Class C area and make it a Class A/B property. Labor is cheap in those areas you have to learn how to exploit cheaper cost of labor to renovate your property. I add new electrical, plumbing, kitchens, LVP flooring, tiled showers always. The reason I do this is because I take my sweet time to choose tenants. I like to have the best property in the neighborhood that way I can be a tenant chooser rather than a tenant taker. Have high standards and ask for (1st + Last + Security) those who are good people will pay up for it. This isn’t a magic bullet but I believe even in the worst places you can find the best people. I keep turnover and vacancy and legal costs low this way. To find a good PM, you need to find successful investors in the area and follow them that’s the only way. All PM’s are great when it comes to talking when you’re prospecting them. I don’t trust 95% of what they say. Let people criticize, but this is the way.

Btw, I don’t take section 8 in these properties. Let people say what they want, but I don’t want someone who is forever on Section 8 it should be transitory and not at my property.

Again, make your property the best, refi it to pull out all cash equity, and be a tenant chooser not a tenant taker. Best of luck bro.

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  • Tom Lundberg
    Prince George, British Columbia · Member since 2019 · 20 posts · 7 votes
    5y

    How good of a deal it is will depend on how much your willing to deal with. Cash flow of 5k per month but is a full time job might not be as good as a deal as 500 in cash flow with your feet up

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  • Account Closed
    Investor · Columbus, OH · Member since 2017 · 861 posts · 1k+ votes
    5y

    I see water bills in your reports. I pass along all water bills to tenants (either they pay directly for SFH or I split via RUBS for MFH) and I am astounded at how much water some families use. Some people seem to do the laundry for the whole neighborhood and will drive your water bill through the roof. I would make sure you can pass that along to tenants.

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  • Drew SygitBusiness Member
    Property Manager · Royal Oak, MI · Member since 2012 · 12k+ posts · 9k+ votes
    5y

    A Class C property requires a BETTER property management company than Class A or B!

    So, if you want your purchase to be successful, you should screen for a really good PMC.

    Check out our 3-part blog series here on BP about screening a PMC better than you screen a tenant:)

    [email protected]248-209-6824
    Logical Property Management4.9451 Reviews
    WebsiteView Page
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  • Daniela Andreevska
    Real Estate Consultant · Member since 2020 · 44 posts · 71 votes
    5y

    Hi, @Ryan Copeland!

    Each class neighborhood comes with its pros and cons. Class C properties are good for beginner investors who have a relatively limited budget and are still learning about rental property investing. There are two main drawbacks when it comes to Class C.

    The first one is that these properties require more maintenance and repairs than Class A and Class B, but this problem should be eliminated for 2 out of the 3 units that you are considering buying. In any case, regardless of the property class and neighborhood, I cannot emphasize enough the importance of getting solid home inspection before jumping on a real estate investment deal. You want to make sure that you are paying the actual worth of the property and that there won't be any surprises with major structural issues, especially with aging buildings.

    The second thing to consider with Class C is the more hands-on experience. However, since you are buying out of state, you will be hiring a property management company, so you don't really have to worry about doing all the work yourself.

    So as long as the numbers make sense, you should go ahead with this opportunity.

    Good luck!

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