Question about Fifth Ward, Houston Market

[Willny Guifarro]

Hey fellow BP members, I'd like some advice on a wholesale deal I just got under contract. What exactly are landlords in this area going after in terms of cap rate ? I have a Quadplex in this area under contract and I'm not too sure if It's a great deal ? Or if I over paid. Any help is appreciate. Thanks -Will

[Jeffrey H.]

Hey @Willny Guifarro - 

The 5th Ward south of Interstate 10 is in transition, but you need to be very wary of the rest of it.  I would not walk some parts of this area during the day, much less at night.

Land prices have been historically cheap in this neighborhood because of the long blue collar history, proximity to the Port of Houston, and the prevailing crime rate in the area.  

I do believe in 50 years it will return to a nice bluecollar neighborhood when energy prices rebound, but I would not invest there today.  There are better deals to be had with the current energy downturn in Houston.

You might be able to work a good Section 8 play in the area but I wouldn't take a property there even with a 15% cap rate over a 12 month period - in the long run your place is gonna get trashed.  The quality of tenants you will get is going to be terribly sporadic.  On the plus side you should be able to score some crack on a regular basis.

How do I know about the area (not the crack)?  I lived in the 5th ward for two years after college as it was affordable...my truck was vandalized every six months, and I was in the nice south of I-10 area.

I own several rentals in the Houston and larger metro area now - none are in the 5th ward.