Location or Not so Much?

Question

I am considering buying a fourplex in the DFW area, Texas, and I've been noticing that the fourplexes tend to be in red/high-crime areas. How important is the location if I have strong background screening and I will not be living in the fourplex? Any stories? 😁

Drew Sygit · Answer

How are you going to find decent tenants if NONE meet your screening criteria?

Richard F. · Answer

Well, let's see. There was the time I was on a step ladder changing a hallway bulb when a choir boy pulled a knife demanding money. I said, sure, just let me pull my wallet out for you (while still on the ladder). I then proceeded to pull out my .38.

Or there was the time someone set off the fire alarm, and when the FD was checking the building, the fine folks locked them inside with bars through the pull handles (metal doors).

Oh, there was another time when I had the bright idea to put in an alarm system in a vacant unit we had prior problems with. Good Kids from the neighborhood stole the alarm...and broke every window in the place.

Or, well... there's lots more. You need to consider your safety and that of your favorite vendors. Some areas are just not worth it. Others, however, if you clear out the bad actors and slow payers, increase security features such as lighting, cameras, access control, and tight oversight, you can make them work. You also need to consider how, physically, rent will be paid, and whether your Tenant pool will have the capability of utilizing your system.

Lastly, if you must go S8, search this site for conversations and resources regarding that topic. There actually are "good" potential Tenants, but you have to offer premium units for the tier to attract those top tier applicants. Durability, serviceability, and businesslike handling of every issue will serve you well.

Chase Busick · Answer

@Mohamad Al Khen, that is a great start in figuring out your buy box criteria. I think small multifamily is a great property class to invest in for more cashflow comparatively to regular SFH's.

With that said, yes most multifamily can vary in location across any metro. The location is important in all real estate transactions, from buy and hold, to fix and flips, etc.

You want to own something that is in a good area for what you are trying to achieve. If that is just any property, any condition, any tenant class, then you may be able to find some all over... Areas of higher crimes, may result in more break ins, graffiti, drugs or tenants that may be causing trouble. This can make it hard in the future to rent outside that demographic, income class, get the returns you need for what you are purchasing the property for and more...

No matter how good your background screening is, the property, its location and condition will all set the standard of what quality of product it is and the ideal target market/tenant it will ultimately attract. A class area, will most likely attract a A class tenant. A C-Class property will be hard to attract B+ quality tenants that will want to stay long term with the least amount of issues.

There are so many variables at play in the consideration of purchases, deal analysis, tenant screening, and ongoing property management. The better you are, the more you know, and the better team you have, can help you reduce your risk in the market.

Location or Not so Much?

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