Investing in rough neighborhoods

3 Replies

So I'm looking at a home that on the other side of the block has nice homes, a street I would walk through at night alone.  This home is on a street, I wouldn't like to walk down that block alone.  I drove by the property yesterday during the day and I asked myself if the comps would come in for this property.  Has anyone had experience with a situation like this?  I keep telling myself, "There is a number for each home." but I still have some concern.  I'm not going to pursue this property but I would still love to hear about anyone who did a fix and flip in a rough neighborhood.  What are some things that should be considered?

@Ricardo Sabogal, how familiar are you with the neighborhood? In my experience, it is very difficult to know the character of each neighborhood until you have been active in a market for a while. Does the neighborhood have a stigma for crime or does it just look run-down?

I'm a pragmatist, so I think of things in the big picture. To me, we make money by solving problems and also most problems can be viewed as opportunities. So, what is the opportunity in this neighborhood?

You mention fix and flip. If the neighborhood isn't that great, its probably a good cash-flowing area. Maybe the opportunity is to BRRRR (Buy Rehab Rent Refinance and Repeat) and when the neighborhood gentrifies or when your loan is paid in 15 years to sell.

There is probably an opportunity to do something in that neighborhood, the key is to identify it and decide if its the kind of work you want to be doing.

Thanks Kevin! I have been living in the area about 4 years, my wife, her whole life. I am glad you are making me think of things differently. I’ll look at what rentals go for in the area and see if it makes sense. Thanks again!!!

Generally, I would just stay out of rough neighborhoods unless that's what you want to specialize in. Even if they cash flow (which they usually don't), it's not worth the hassle. And that goes many times over for a new investor.

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