Is buying in rough neighborhoods worth it?

12 Replies

I am new to this and have just been looking at real estate around where I live. I am wanting rental properties. Most things in my price range are in tough neighborhoods. Everyone I talk to about it says it is a bad idea to buy something in those parts of town. Any advice? Should I just be patient and wait for the right buy or take some risks? I don't want to be let down on my first real estate investment.

rough neighborhoods have distinct challenges.. and if your just starting out and have no expreince I personally would not recommend it.. ONce you get some experience and want to go in that asset class and can do that with your eye's wide open,   And if you go into the low end stuff you really need to scale quickly other wise you will probably get burned out dealing with those type of properties.

@Tyler Shackelford what do you consider a rough neighborhood? Everyone has a different perception. Target humble areas.

Frank

Thank you Jay for answering that question I was wondering the same thing 

If the property is in an area you don't feel safe going to at night, you might want to pass buying it. You can fix up a busted house. You can't fix up a busted neighborhood.

@Brenda Lyons  

   I live in Ohio Oregon I see your in Oregon Ohio   :)

Thanks for the answers. The going at night or not is a good way to judge it. A lot of the areas I have seen these houses are areas I probably would not go at night.

I think my best bet at this time is to keep saving until I find that right place to start.

I have managed several properties in questionable neighborhoods.  Obviously, your biggest challenge will be keeping the property secure when it is vacant. I always recommended to my clients that they installed metal security doors and put cages on their ac units. It's never a 100% guarantee,  but it does help. I also try to meet a few neighbors and give them my contact info. If they see anything questionable going on they can call me. I have had several clients who have been very successful in these areas, but as it was mentioned before they come with their own unique challenges.

Originally posted by @Tyler Shackelford :

Thanks for the answers. The going at night or not is a good way to judge it. A lot of the areas I have seen these houses are areas I probably would not go at night.

I think my best bet at this time is to keep saving until I find that right place to start.

 That's usually my litmus test.  If I wouldn't get out of my truck there at night it's probably a pretty rough area.  Drive around the area at night and you'll get a good feel.

I would never suggest a rough neighborhood as your first investment.  To operate in those areas you really need to know the business and be an expert at screening and dealing with tenants.  You also need to know the area and trouble spots really well, often bad areas are block specific and you can find decent pockets in bad areas with a lot of owner occupants that keep the trouble away.  

I owned some properties in just such neighborhoods. Stabbings, shootings, beatings on a regular basis...and those were by the certified tourist guides! (I tell ya, I got no respect)

No, seriously, it really was no joke doing things like going to collect an overdue rent payment, knocking on the door and having it answered by a guy with a drawn gun. Cleaning up vomit in the hallways and syringes in the backyard also got pretty tiresome after a while. At some point, heck, every day with properties like these, you are likely to question not only your sanity but also your reason for being.

So for these kinds of properties, I would argue that you need to go beyond the traditional investment analysis, beyond the numbers, and ask yourself how much is your peace of mind worth. Heck, if you must analyze it, calculate the present value of your life and weigh that against whatever "IRR" you think you'll derive from that kind of investment.

So many stories, so little time. In case you haven't guessed already, I would never in a million years consider revisiting that mess. So glad to be out of it.

Thanks @Jason A. That helps a lot with my decision making. Like I said earlier, I will probably just wait and save more. I feel like patience is the best thing for me at this time.

@Tyler Shackelford   What parts of Ohio are you looking into? There are a lot of investors purchasing in the Cleveland and Columbus areas. 

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