How To Identify Bad "D" Or "F" Class Areas

Buying & Selling Real Estate
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How To Identify Bad "D" Or "F" Class Areas

Michael Swan
Rental Property Investor · San Diego, CA · Member since 2014 · 1k+ posts · 2k+ votes

Hi all,

Since I was featured on Podcast 238 about a year ago, I have talked to many BP Nation Members asking me if they should buy this deal or that deal.  Here is a simple way to determine if a deal a broker is sending you is a good deal or really in a "D" or God Forbid in even worst an "F" class area.  Both are not acceptable.  Google Earth all commercial in a one block, two block, three block, four block, five block, and six block radius.  Look down at the street level.  If you see ANY Grafiti, broken windows, boarded up windows, unsavory characters loitering around etc...  

If that is what you see, you are in a "D" class area.  Why would you want to invest in this kind of area?  Would you feel comfortable if your 16 year old niece was walking in that neighborhood on a Friday evening at 9 pm?  If the answer is no.  Again, why would you want to invest there.  Those unsavory characters will be stealing your copper when you have a vacancy or robbing your tenants.  Why would you invest in a "D" or as I said, God forbid war zone "D" or "F " class area.  Don't fall for the Path of Progress scam brokers claim time and time again.

Swanny

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Noel Challenger
Realtor · Paterson, NJ · Member since 2017 · 134 posts · 97 votes
8y

Take the state's or the county's (whichever is higher) median income and divide it by two. That should give you the median income for a C and lower class neighborhood. For example:

NJ Median Household Income, 2016 = $73,702

$73,702 / 2 = $36,851 which is the median income for a C and lower area

The median income in Paterson is $33,000 as well as Newark, NJ. That's how you know it is a lower class neighborhood.

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  • Account Closed
    Specialist · Paradise Valley, AZ · Member since 2018 · 3k+ posts · 2k+ votes
    8y
    Originally posted by @Michael Swan:

    Hi all,

    Since I was featured on Podcast 238 about a year ago, I have talked to many BP Nation Members asking me if they should buy this deal or that deal.  Here is a simple way to determine if a deal a broker is sending you is a good deal or really in a "D" or God Forbid in even worst an "F" class area.  Both are not acceptable.  Google Earth all commercial in a one block, two block, three block, four block, five block, and six block radius.  Look down at the street level.  If you see ANY Grafiti, broken windows, boarded up windows, unsavory characters loitering around etc...  

    If that is what you see, you are in a "D" class area.  Why would you want to invest in this kind of area?  Would you feel comfortable if your 16 year old niece was walking in that neighborhood on a Friday evening at 9 pm?  If the answer is no.  Again, why would you want to invest there.  Those unsavory characters will be stealing your copper when you have a vacancy or robbing your tenants.  Why would you invest in a "D" or as I said, God forbid war zone "D" or "F " class area.  Don't fall for the Path of Progress scam brokers claim time and time again.

    Swanny

     Good advice. Ask your wife if she feels safe there. Otherwise, move along. (Those houses are cheap for a reason.)

    5Reply
  • Michael Swan
    OP
    Rental Property Investor · San Diego, CA · Member since 2014 · 1k+ posts · 2k+ votes
    8y

    yes @Account Closed,

    Exactly!!  These RE commercial and residential agents are preying on unsuspecting California, Washington, Hawaii, New York, New Jersey and even Denver investors, licking their chops, bragging to their colleagues that they have another sucker on the line to sell them a bill of goods.  I feel sooooooo bad for people when they call.  

    How do you prevent this?  Contact RE investors in that area that have solid teams in those areas you are interested and pick their brain, asking for their solid recommendations.  If a RE commercial or residential agent is on BP, you need to ask yourself, why can't they get local buyers or investors? Why are they targeting these out of state investors on BP? What is their angle?   

    Swanny

    2Reply
  • Derek Janssen
    Rental Property Investor · Novato, CA · Member since 2018 · 110 posts · 145 votes
    8y
    Google maps street view. Look at the cars. Are there bars on the windows? Go there and ask yourself if you’d feel safe there at night walking down the street.
    2Reply
  • Michael Swan
    OP
    Rental Property Investor · San Diego, CA · Member since 2014 · 1k+ posts · 2k+ votes
    8y

    @Derek Janssen

    Right on!!! That's what I am talking about.  Why waste your precious time after seeing that?  That RE Broker does not have your best interests in mind.  RUN!!!

    Swanny

    1Reply
  • Noel Challenger
    Realtor · Paterson, NJ · Member since 2017 · 134 posts · 97 votes
    8y

    Take the state's or the county's (whichever is higher) median income and divide it by two. That should give you the median income for a C and lower class neighborhood. For example:

    NJ Median Household Income, 2016 = $73,702

    $73,702 / 2 = $36,851 which is the median income for a C and lower area

    The median income in Paterson is $33,000 as well as Newark, NJ. That's how you know it is a lower class neighborhood.

    9Reply
  • Michael Swan
    OP
    Rental Property Investor · San Diego, CA · Member since 2014 · 1k+ posts · 2k+ votes
    8y

    Hi @Noel Challenger,

    I have recently been talking to BP members that have been duped to thinking these D or F class areas are really C class areas.  Just by using Google Earth, and seeing the surrounding stores in a 6 block radius, it is pretty straight forward and easy to see a D or F class area and not be fooled into thinking they are buying in good hard working blue collar C class areas.  

    Swanny

    2Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    8y

    Mike I am going to disagree with you on one point..   

    and that is its the investor themselves that are to blame.. they are out there trying to find the highest returns possible for the lowest invested dollar..  risk /reward.. anyone with any common sense knows the two do not go together but yet these investors still chase those deals.

    Brokers just put the stuff up in the form of listings.. and I have not really seen a broker say an area was a B when it was really a D..unless its a Morris invest situation were he was a broker or is a broker and de frauded a ton of folks.. and his marketing messages were all bass akwards saying that D and low C tenants are better than  A and B

    I mean it happened to you personally right. ?? I think I recall one of your post saying you had to sell a building because you did not realize how tough the tenant base was.

    But if you advertise REAL returns in SAFE B areas of 4 to 5% folks  will pass that over and try to take the 10% returns even if you tell them it carrys more risk.

    Podcast Guest on Show #222
    JLH Capital Partners51 Review
    WebsiteView Page
    8Reply
  • Michael Swan
    OP
    Rental Property Investor · San Diego, CA · Member since 2014 · 1k+ posts · 2k+ votes
    8y

    Hi @Jay Hinrichs,

    Great point.  It ONLY happens to unsuspecting newbies.  Us Old Dawgs need to look out for them.  I wish someone would have told me on my first deal I spoke of on Podcast 238.  That is my point!!  Of course the broker on my first bad deal never contacted me again and was on to the next sucker from California, Washington, Hawaii, New York etc....

    That's why I advise all to do that Google Earth test I speak of when you think it is a C class or better area.  As Donald Trump says, lots of Fake News out there.  Newbies just don't know any better.

    Any 

    Those same brokers don't like to talk to me anymore.  They know better now.  They only are targeting unsuspecting newbies.  If it was truly a good deal, their local buyers would snap up the good deals.

    Swanny

    1Reply
  • Matt K.
    Walnut Creek, CA · Member since 2015 · 3k+ posts · 2k+ votes
    8y
    Originally posted by @Derek Janssen:

    Google maps street view. Look at the cars. Are there bars on the windows? Go there and ask yourself if you’d feel safe there at night walking down the street.

     Was also going to mention the cars.... always a good indicator.  Another one is liquor stores and title/payday loans or check cashing.  If those flood the area... probably not the best.  Flip side of that, grocery stores (more so for chains) typically are NOT in the bad areas.

    3Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    8y
    Originally posted by @Michael Swan:

    Hi @Jay Hinrichs,

    Great point.  It ONLY happens to unsuspecting newbies.  Us Old Dawgs need to look out for them.  I wish someone would have told me on my first deal I spoke of on Podcast 238.  That is my point!!  Of course the broker on my first bad deal never contacted me again and was on to the next sucker from California, Washington, Hawaii, New York etc....

    That's why I advise all to do that Google Earth test I speak of when you think it is a C class or better area.  As Donald Trump says, lots of Fake News out there.  Newbies just don't know any better.

    Swanny

    did you buy the apartment building sight unseen..  you never went there and just bought it ???  

    Podcast Guest on Show #222
    JLH Capital Partners51 Review
    WebsiteView Page
    3Reply
  • Eric Jacobs
    Specialist · Fort Lauderdale, FL · Member since 2016 · 187 posts · 128 votes
    8y

    Personally I don’t do D and F areas.  Having said that I know investors that have made an absolute killing at it.  If you want higher yield and don’t mind high intensity management, there is money to be made there like there is in every other asset class.  The issue is not the property and I wouldn’t be so quick to blame the agent.  Investors too often fail to treat this like a real investment.  They treat their purchase more like a lottery ticket. They often spend more time doing due diligence on a car purchase than they do on a real property purchase.   Newbie or not, people have to understand their model and then invest to that model and not chase yield or appreciation or whatever.  I don’t disagree that the Path of progress is a scam.  It’s objectively not.  If an investor takes a single agent’s advice about where that is...well that’s a problem...

    4Reply
  • Michael Swan
    OP
    Rental Property Investor · San Diego, CA · Member since 2014 · 1k+ posts · 2k+ votes
    8y

    hi again @Jay Hinrichs,

    My exact point.  I was lured by new windows, granite courltertops, path of progress etc.  Now if  people ask me for help, I see these people getting conned by the trendy area, path of progress etc....  Just like me was excited by the shiny objects newbie path of progress angle.  The apartment complex looked good, but the surrounding area was really a D plus area disguised as a C class area and I just didn't know any better.

    I always open up my phone to BP members daily to help them not make those rookie mistakes.  I feel a duty, obligation and a responsibility to BP Nation, since they first aired BP podcast 238.  I just sold those two first dogs 6 months ago, at a great loss and learned my lesson the hard way.  I don't want BP Nation investors to do the same.

    That invitation to advise BP Nation is open to anybody that needs me.

    Swanny

    0Reply
  • Jameson Sullivan
    Real Estate Broker · Tacoma, WA · Member since 2016 · 545 posts · 252 votes
    8y

    In addition to using google maps to walk the areas, look at crime heat maps as well as just calling the police station and asking. Graffiti and broken glass don't ALWAYS indicate a neighborhood is D class, but actual records of crime certainly will.

    0Reply
  • Dennis M.
    Rental Property Investor · Erie, PA · Member since 2018 · 6k+ posts · 9k+ votes
    8y
    There’s Plenty of money in c- and d areas . You just have to know how to make it . It takes a different kind of investor . F to me equals war zone ..ex:Shootings open drug deals and break ins ..That being said I’d agree a lot of people getting into real estate go for these places without the knowledge or fortitude and fail and or regret it big time . I will say The profits are not just on paper hypothetically . there’s many folks getting a phenomenal ROI on lower income areas . It’s fair to say You will never get the appreciation though . To say the money isn’t there or you should not do it is not entirely true .just because I would not want my teenage daughter walking down the street there doesn’t mean I would not invest in the area lol why should I care my kids aren’t going to hanging out there . I am not living there . People in these areas have one thing in common ( aside from low incomes) and that is they all rent ! That’s good news for the guy who knows how to manage his investments
    6Reply
  • Michael Swan
    OP
    Rental Property Investor · San Diego, CA · Member since 2014 · 1k+ posts · 2k+ votes
    8y

    Hi @Dennis M.,

    I was speaking to the fact that people are being deceived and believe these areas are C class or better and the "Path of Progress" lure.  Then, their entire business plan is formed on the belief they can raise rents at least $100.00 a unit per month and get the wrong PM etc... it is a viscious cycle!! People on BP contact me all the time believing what some of these glorified used car salesman are pitching them.

    If you want a certain product and think you are buying a certain product, and then buy that product and realize you were misled, that is discouraging, costly, and just wrong!!!

    Swanny

    1Reply
  • Dennis M.
    Rental Property Investor · Erie, PA · Member since 2018 · 6k+ posts · 9k+ votes
    8y
    Originally posted by @Michael Swan:

    Hi @Dennis M.,

    I was speaking to the fact that people are being deceived and believe these areas are C class or better and the "Path of Progress" lure.  Then, their entire business plan is formed on the belief they can raise rents at least $100.00 a unit per month and get the wrong PM etc... it is a viscious cycle!! People on BP contact me all the time believing what some of these glorified used car salesman are pitching them.

    If you want a certain product and think you are buying a certain product, and then buy that product and realize you were misled, that is discouraging, costly, and just wrong!!!

    Swanny

    Ok , yeah I agree with that .lately This Morris invest ponzi scam has really revealed how this is happening all over the Midwest . It’s a crying shame . It’s heartbreaking because Some people on here were completely wiped out of their life savings and left with a vacant shell of a home in a war zone worth nothing . 

    1Reply
  • Anthony Catalano
    Member since 2018 · 1 post · 0 votes
    8y

    First post newbie here, what about flipping in these C & D areas?

    3bdrms with possibility for bringing in an illegal rented room, or family members to split the mortgage costs?

    0Reply
  • Sam Shueh
    Real Estate Agent · Cupertino, CA · Member since 2016 · 4k+ posts · 1k+ votes
    8y

    Crimereports.com

    2Reply
  • Michael Swan
    OP
    Rental Property Investor · San Diego, CA · Member since 2014 · 1k+ posts · 2k+ votes
    8y

    hi@Anthony Catalano

    Welcome!! I have never flipped a property, so I can't comment on that.  If this will be your first rental property, I would buy in a good Blue Collar C class neighborhood with 25% down on a $60-70,000 condo, or $70,000-$80,000 townhome or $80,000-$120,000 single family or Duplex.  

    Stay safe!! 

    Swanny

    1Reply
  • Christie Macias
    Santa Barbara, CA · Member since 2018 · 15 posts · 12 votes
    8y

    I saw the comment in the thread about checking the crime heat maps.... the problem with that is while it may seem helpful when looking in areas you don't know, I just cross checked it with my own city (Santa Barbara CA) thinking to myself "I bet there is almost nothing here" because it is extremely safe here and found it looking just as bad a Chicago. Then I realized it was a map comparing levels of crime within a city. The extremely bad neighborhoods here based on the map are not actually dangerous at all. It is probably where there is just some vandalism (graffiti by the kids) and some domestic violence and maybe people calling the police on older youth.  We should be aware that the crime is relative to the culture of the community. I am not saying not to use it as a resource, but don't rely on it. You could miss some great opportunities. But maybe follow up asking questions to the local real estate agents who live there.

    best,

    Christie

    4Reply
  • Angelo Mart
    Professional · Parsippany, NJ · Member since 2013 · 384 posts · 262 votes
    8y

    In NJ our inner cities are like 3rd world countries and any multi-family outside of there are so inflated along with extremely high taxes (NJ being the highest in America), therefore, leaving NEGATIVE Cash Flow. I choose to pick slightly better neighborhoods within the ghetto cities. My neighborhood is a D or F for NJ but within my city it is a B lol. My 2-Family is beautiful, has great equity and Cashflows tremendously. My street is quiet, tree lined and well maintained. We only had 1 shooting and 2 drug raids on my block last year at the same building that always gets in trouble. Besides that I love it, the thing that drew me in was the constant increase in population and the fact that it is one of the most densely populated Cities in America. There is a plethora of tenants if screened properly. Remember there is good and bad everywhere

    4Reply
  • Ian WalshBusiness Member
    Lender · Philadelphia, PA · Member since 2016 · 2k+ posts · 1k+ votes
    8y

    I have met some old grizzled landlords that have made a fortune in those areas.  You really have to know what your stomach can handle before going into them.  

    2Reply
  • Sean H.Pro Member
    Flipper/Rehabber · Pittsburgh, PA · Member since 2010 · 224 posts · 75 votes
    8y

    Try calling around to different property management companies.  Say you are thinking about buying in the area and get their opinion.  They don't have a dog in the fight and know the local area well.  They should be able to give you information about which areas to steer clear of.  

    1Reply
  • Account Closed
    Rental Property Investor · Torrance, CA · Member since 2016 · 724 posts · 1k+ votes
    8y
    Christie Macias a lot of that crime in trendy areas is night life related. I was shocked when I looked up the LA crime map and saw Hermosa Beach in the red. Is it actual crime, or just drunk college kids getting into fistfights?
    0Reply
  • Gordon Starr
    Rental Property Investor · Dayton, OH · Member since 2015 · 312 posts · 273 votes
    8y

    Hi @Christie Macias "crime heat maps.... the problem with that is"

    There is another reason heat maps don't help. With a lot of C class, the dominant crime is theft. But in the really degraded areas, no one has anything worth stealing. Or, if people do get robbed, it doesn't get reported because they don't want to get busted.

    1Reply
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