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.
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.
Sherman Oaks, CA · Member since 2013 · 3k+ posts · 2k+ votes
8y
I have also used esri to get a flavor of the tenant base and or even run local rental ads for more feel. Esri is what some lenders use and companies like Starbucks to determine that local population habits and more. Esri breaks down population into 72 levels of classes let's say, although they use PC language but it is easy to decipher. Lastly, rentfaxpro has more LL and PM metrics one would need to know as well.
Of course nothing can totally subsitute for in person evaulation in many cases.
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
One can also hire an Urber driver or go to Fiverr and have them drive the area with Facetime on your iPhone. Trulia has crime heat maps. If that part pans out, I'll actually spend a day or two in the target area if I'm going to be buying there. I like looking at how people maintain their properties. I like to be in the neighborhood during the day and during the night when the "night people" come out ( to see if there are "night people" and what they may be up to) and I like to know what streets are the boundaries that I will be investing in. Ultimately, when I Joint Venture with people there are no excuses if I picked the wrong neighborhood.
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.
Investor · Arlington, VA · Member since 2012 · 1k+ posts · 491 votes
8y
I'd be very careful. I've been struggling in some C- / D+ areas in STL as an out-of-state investor for the last three or so years...even with a good team in place. The pro forma looks fantastic for this ~60k fourplexes, but the turnover, mx (the buildings are 100+ old) are major killers. I'm just barely breaking even over that timeframe. The only thing that is saving my behind is the appreciation due major rehabs going on, probably from the CA, HI, DC investors...
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.
Investor · Portland, OR · Member since 2017 · 182 posts · 115 votes
8y
@Michael Swan it may not be "pretty" but I know a guy from Council Bluffs, IA who THRIVES in F's D's C's... yes he works 60 hours a week. Yes, he only pays staff a nickel. But he is VERY successful. One of the things I love about RE--- many ways to WIN.
Walnut Creek, CA · Member since 2015 · 3k+ posts · 2k+ votes
8y
Originally posted by @Account Closed:
@Michael Swan it may not be "pretty" but I know a guy from Council Bluffs, IA who THRIVES in F's D's C's... yes he works 60 hours a week. Yes, he only pays staff a nickel. But he is VERY successful. One of the things I love about RE--- many ways to WIN.
Chicago · Member since 2018 · 214 posts · 165 votes
8y
I'm with Dennis M. You can make good returns on bad areas. You can't expect appreciation. But you can make it on the rent. Still, I don't want to own in an area I can't go and fix something if I have to.
Realtor · Paterson, NJ · Member since 2017 · 134 posts · 97 votes
8y
One of the best ways to get a feel if a property is in a higher crime area is by looking at the types of stores around it. Some of these businesses include:
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
8y
Originally posted by @Account Closed:
I doubt people buying Morris were being wiped out. Those people more likely were highgly paid professionals who were looking for EZ money investments.
think again Brad there are post after post of people putting their life savings into those morris homes and have nothing but empty shells to show for it taking 90% capital loss's .. granted some of them of course are as you describe but many were not.
in Fact he preys on the beginner and those who did not know about BP or also those that thought because he was on TV how could it not be true :( one of the worse violation of the public trust I have seen in the last 2 decades.. right up their with Kwami the mayor of Detroit that got thrown in prison.
@Matt K. of course- totally agree... but BP is a place to share "exceptions" as well as norms. Just wanted to put it out there.
This thread is give advice to those that may not understand the risk of investing in this type of property....
The oh I know this one guy who's amazing at it isn't helpful to anyone...
I don't believe it's always only "this one guy who's amazing" that succeeds in lower-income neighborhoods. I agree there are many investors who do not understand what it takes to succeed in lower-income neighborhoods. By the same token, there are some investors who very much understand what it takes to succeed in lower-income neighborhoods.
I think it's fair to say nearly every city has lower-income neighborhoods. And every city has tenants who rent in those neighborhoods, and landlords who are profitable operating in those neighborhoods. Whether that city is Chicago, Miami, or Laredo, you'll find them.
The problem is when landlords who are ill-suited to operating in those neighborhoods decide to invest there without properly educating themselves. Maybe the education will lead them to NOT invest in lower-income neighborhoods because they realize they would rather not invest there. Maybe the education will lead them to be better-trained to invest in those neighborhoods. Whatever the result, not diving in blindly is the best decision.
Not all investors are suited for lower-income neighborhoods. Maybe it's fair to say most investors are not. But it's not true to insinuate that only that golden needle in a haystack landlord can succeed in lower-income neighborhoods. It just takes the will to learn what it takes, and the will to succeed.
@Matt K. of course- totally agree... but BP is a place to share "exceptions" as well as norms. Just wanted to put it out there.
This thread is give advice to those that may not understand the risk of investing in this type of property....
The oh I know this one guy who's amazing at it isn't helpful to anyone...
I don't believe it's always only "this one guy who's amazing" that succeeds in lower-income neighborhoods. I agree there are many investors who do not understand what it takes to succeed in lower-income neighborhoods. By the same token, there are some investors who very much understand what it takes to succeed in lower-income neighborhoods.
I think it's fair to say nearly every city has lower-income neighborhoods. And every city has tenants who rent in those neighborhoods, and landlords who are profitable operating in those neighborhoods. Whether that city is Chicago, Miami, or Laredo, you'll find them.
The problem is when landlords who are ill-suited to operating in those neighborhoods decide to invest there without properly educating themselves. Maybe the education will lead them to NOT invest in lower-income neighborhoods because they realize they would rather not invest there. Maybe the education will lead them to be better-trained to invest in those neighborhoods. Whatever the result, not diving in blindly is the best decision.
Not all investors are suited for lower-income neighborhoods. Maybe it's fair to say most investors are not. But it's not true to insinuate that only that golden needle in a haystack landlord can succeed in lower-income neighborhoods. It just takes the will to learn what it takes, and the will to succeed.
Cheers,
Anyone "... who very much understand what it takes to succeed in lower-income neighborhoods" is not going to be asking how to identify these types of neighborhoods. This thread isn't directed to them nor is it going to help them. The people this thread is going to help are very much NOT the ones who understand what it takes...
Anyone "... who very much understand what it takes to succeed in lower-income neighborhoods" is not going to be asking how to identify these types of neighborhoods. This thread isn't directed to them nor is it going to help them. The people this thread is going to help are very much NOT the ones who understand what it takes...
I agree this thread may be about rescuing the ignorant newbie investor from the unscrupulous turnkey salesman.
However, I think that can be accomplished without the constant harangues about how it's impossible for investors to succeed in lower-income neighborhoods. The conversation devolves into insulting the residents, when I think the conversation should place the blame squarely where it belongs. On the Turnkey Seller.
If a Turnkey Seller misrepresents a neighborhood or the level of repairs performed and/or needed, the blame is on the seller, not the neighborhood.
And seriously, if someone is a click away from spending $60K on a property 2000 miles away without ever looking at it or investigating the neighborhood, or investigating the Turnkey company, this thread isn't going to help them. They've already lost.
Rental Property Investor · Phoenix, AZ · Member since 2015 · 224 posts · 50 votes
8y
Originally posted by @Account Closed:
Good advice. Ask your wife if she feels safe there. Otherwise, move along. (Those houses are cheap for a reason.)
My wife doesn't even like me walking around in our nice neighborhood... if I waited until I found a place she was comfortable at, I'd never own anything.
Good advice. Ask your wife if she feels safe there. Otherwise, move along. (Those houses are cheap for a reason.)
My wife doesn't even like me walking around in our nice neighborhood... if I waited until I found a place she was comfortable at, I'd never own anything.
Investor · Detroit, MI · Member since 2014 · 360 posts · 354 votes
8y
I gauge a neighborhood and its quality by a few items. Obviously, I run census data, get some reliable numbers for socio-economic data.
Then it becomes more of an art:
How many people are riding bikes, exercising, etc
Do running, cycling, fitness groups pass through on routes
How many people walk their animals
Do I see obvious illegal activity spots. Multiple people standing at a store/corner for more than 10 minutes.
How many homes have their windows open?
When I(or my wife) pull up in a car how much attention does it draw. Whats people on the streets body language?
Is a neighborhood full of old people who are fixed income? Or do I see large numbers of prime-age males not doing anything? Playing basketball, football, talking to girls, working on a car/bike is fine. But just standing in front of a property, on the porch, walking up and down the street not headed anywhere. Obvious gang-affiliation tattoos.
A high amount of cars with too much put into it. I'm not talking about a 7-series in front of a $8000 house, I'm talking about a 10 year old Chevy Tahoe, with $15,000 rims, a $8000 paint job, Chrome finishings. Not 1 or 2 of these cars but multiple. The contractor I use his building is in The Hood for real for real. I tell people I have to go meet him over there and people's ears/eyes perk up. He keeps his classic cars there behind a 20 foot fence with barb wire, then he removed something from the vehicles so they can't start. I use to hangout in that neighborhood in my late teens and early 20s, and if someone offered me 200 houses for $50K I wouldn't take them, even if they were livable. I knew a guy who was Contract Killer (he's dead now) who lived in a half-boarded up burned-down house in that neighborhood. I get wholesalers trying to sell me properties in that part of town saying its "close to, not far from". Which I laugh.
Do I see any schools, or many closed schools? Really bad neighborhoods/areas often require far travel for schools particularly HS.
How old are billboards in the area? Not one or two, but if I see several advertising events that come and gone 5+ years ago not a good sign, I know one neighborhood in Detroit still with a Final Four 2009 advertisement, an Obama 2008, and personal favorite a billboard for failed rapper from 2007ish who actually grew up not far from me in a ritzier suburb(its consistently named top-50 places in America for families) than I grew up in (Eminem making fun of a guy going to Cranbrook where guys like Mitt Romney went, its a real thing locally).
If I see no police in the area riding by or walking over the course of a few hours. Really bad sign. Meaning they don't care, The Citizens don't want them around, and even worse someone has someone paid off at the local precinct.
We often just sit on houses in shifts (once we target one), and navigate the neighborhood walking, driving, biking several times over a couple months prior to targeting a neighborhood.
@Matt K. of course- totally agree... but BP is a place to share "exceptions" as well as norms. Just wanted to put it out there.
This thread is give advice to those that may not understand the risk of investing in this type of property....
The oh I know this one guy who's amazing at it isn't helpful to anyone...
Really? So you'd rather only get one side of the story? Every asset class carries risks. Best to hear the good, bad, and the ugly so you can make an informed decision.
I doubt people buying Morris were being wiped out. Those people more likely were highgly paid professionals who were looking for EZ money investments.
think again Brad there are post after post of people putting their life savings into those morris homes and have nothing but empty shells to show for it taking 90% capital loss's .. granted some of them of course are as you describe but many were not.
in Fact he preys on the beginner and those who did not know about BP or also those that thought because he was on TV how could it not be true :( one of the worse violation of the public trust I have seen in the last 2 decades.. right up their with Kwami the mayor of Detroit that got thrown in prison.
You may be right i dont have profiles of those who invested with Mr Morris. But i find it hard to believe anyone would wire their last nickels for a house. People who do this are Doctors, Dentists, Pharmacy people, Engineers,etc. All known to be brilliant at what they do but lack common street smarts.
My relative insurance man targets the groups i mentioned as they have money and no money sense.
If you want to SCAM target the above groups you will be surprised how EZ it is.
The foolproof way to determine quality of neighborhood is to look @ the residents. Sorry for saying this but class A tenants look a lot different than D or F class tenants.
I think you want to read some of the MOrris threads you will be surprised at how good this guy was at what he did,
they say the same thing about Doctors being private pilots.. every time someone at my airport lands wheels up the first thing out of their mouth is it must be a doctor :) However since I bought my Cirrus Sr 22 back in 04 and have been a member of the Cirrus owners and pilots community I have come to know many doctor pilots and boy I find them to be wicked smart and pretty darn good pilots and of course they have the means to go out and buy a 500 to 1 million dollar airplane like us lowly developers do..
(Santa Barbara CA) ...and found it looking just as bad a Chicago.
Also consider that in "good areas", citizens call the police for EVERYTHING and the police "take a report" for EVERYTHING.
In the "bad areas", citizens don't even bother calling the police for minor crimes and even some felonies and if the police do show up, they are frequently not going to "take a report."
In North Long Beach, where I worked, if I would have taken a report everytime that a citizen called in to report "shots heard", then I would have spent the entire shift taking reports instead of responding to in progress calls.
It is disappointing that so many BP people are so absolutely naive with regard to real crime, the perception of crime, what is "good", what is "bad", who is "good", who is "bad", what the police can do, what the police will do, what the police should do, and on and on and on....
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
This is hilarious but soooo accurate. I have actually done this when vetting properties, especially far away and sure enough, even in Spokane I was able to see from google street view that there were 6 or so unsavory characters hanging outside (though most not together) of an apartment complex I wanted to buy. Needless to say, between that and the crime map I found, I passed on the deal...
Investor · Alameda, CA · Member since 2016 · 132 posts · 170 votes
8y
@Michael Swan - we own a handful of Section 8/HAP properties in C class areas, most of which we purchased out-of-state, and sight-unseen.
There are a couple ways to vet the sub-market remotely. None of these were creative ideas. We simply followed the timeless advice: "be a thief of good ideas."
team vetting - we built a local team of competent folks: inspection company, insurance agent, property manager, etc. We followed the advice of @David Greene and used each team member's evaluation to triangulate and compare against the other. Example: our insurance agent drove by the properties and gave a different opinion than the seller vs. the inspection company. great approach
WeGoLook.com - can't remember where we heard about this option, but there's a company called WeGoLook that you can pay to drive to a property+neighborhood... they'll take pictures, video and do a simply 2 page PDF summary of their observations. The best part is, they can do this before you even enter due diligence it can help with negotiation, pre-PSA if you want to
Crime reports - this has been thoroughly mentioned on this thread already, but you absolutely must read crime reports before you pull the trigger on purchasing
I'm a believer in investing in C class neighborhoods, as long as you solve for the financials, management needs of the property and the submarket fundamentals support the investment for years to come. That said, D/F is a stretch.
I primarily invest in C and B class neighborhoods. Really, more c or c+ neighborhoods. They are blue collar hard working tenants. B class neighborhoods are a little pricey for my taste in Apartment Complexes and more difficult to find value plays, David Lindahl Style for my business model. In the B class, in the area I invest, it is difficult to find reposition deals that I can reduce expenses at least $100.00 a unit and increase rents at least $100.00 a unit over 3 year period.
