Lower Income neighborhood 4 plex

7 Replies

As a complete newbie, I really need some advice. I am going through the education process using the guide here on this forum and various real estate books. I'm learning as fast as I can read.

I am interested in making multi family properties my niche area. I noticed a fourplex in a lower income neighborhood for sale. Using the 50% rule rental property calculator on this site, I came up with a positive cash flow of $900. Asking price is 250,000. One unit is rented at 1000.

I'm worried about it being in a high crime area, and fear that I may have rent payment problems with some tenants. Right now only one unit is rented. The rest have been empty for some time. The property has been sold several times in the past 5 years. This is also a big red flag. What do you guys think.

Research the neighborhood, drive it at night and see if even you would feel comfortable getting out of your vehicle at night in that area. I personally wouldn't pay even close to 250k for this 4 unit, 3 units are vacant and not making any money when you take over. The fact that it has sold several time in the last 5 years is alarming, I'd do some research and find out why.

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I have a very similar situation. 4 plex selling for 269k with average rent of 850$ . lower income part of town. The neighborhood is 4-plexs with park near by. My calculations with 20% down (52k) and 50% rule shows 400 cash on cash per month. This gives me a 9.2% return per year. What is a good return % per year?

yes I agree drive the area at night stop at a local store or gas station at night. That will give you the real vibe of the area. Also 250k is way to high do some research on any mortgage on the property. Learning the debt in property will give u a better idea on price to offer. You want to be all in Renovation purchase and holding cost for under 250k.

I use neighborhoodscout to look at relative crime rates in my area-- here a $1000 rental would be high income ;). Personally, I rule out the highest relative crime rate areas. 

The price is a little steep for that high of a turn over you should pull comparable properties and check appraisal value owner may just be looking for a quick out. Is the property FSBO or listed with agent; because if it's by the owner he is probably marking it up so he can make a profit or break even.

It has sold several times because no one else wants the headache of dealing with terrible tenants. The price of 250k might seem cheap for four units at 62.5k per unit but for around that price there are plenty of places in the country where crime is much lower and the schools are probably much better.