War Zone or Low Income Minority Housing???

Question

I just ran across a 4 Unit Brick Apartment Building for real cheap.

It's in a good location with regards to proximity to town.

I'm trying to determine if the area would be classified as a war zone or perhaps it's just a low income housing.

My city doesn't have much in the way of gangs or crime.

The units should rent for section 8,  450 per month x 4 = $1,800 x50% = 900 NOI.  Like 550 monthly cash flow??

Give me some input
[url]http://maps.google.com/maps?q=107+SHEMPER+Dr.+Hattiesburg+,+MS+%3B+39401&hl=en&ll=31.344612,-89.349221&spn=0.004664,0.009624&sll=31.344603,-89.348698&sspn=0.006295,0.006295&layer=c&cbp=13,82.92,,0,9.66&cbll=31.344616,-89.349109&z=17&panoid=8xZTBsFoIDJqgeUPlJo9-w

James Hiddle · Answer

Easy if there are bullet holes,yellow tape across properties,chalk outlines all over and people screaming than it's a war zone.

You might want to check with local police and get a neighborhood crime report and check the statistics on the crime rate in the target property area.

Ed L. · Answer

Thanks for the advice to call the police. I actually have a agent friend who used to work for me that is now a PO.  Skinny little brunette packing a gun.  Scary thought lol...

Ed L. · Answer

Very good advice, and i think that is a major flaw with the 50% rule.

Just because you lower your monthly rent doesn't mean there will be a equal drop in monthly expenses.  May even be higher because you are renting to a lower quality tenant.

I've ran some pretty worst case scenarios and it still cash flows pretty good.   Can't wait to get in and dig around.

Ed L. · Answer

That's my big concern about any type of apartment or multi family housing in this town.

Based on my drive over there last night it appears that it was probably a pretty decent apartment complex when it was originally built in the 1980's.

I imagine it was thriving at one time. Someone took notice of this and built a new and much much nicer place right down the road from it.

The owners of these properties couldn't compete with the new development, so they just started competing on price alone.   Then it just becomes a race to the bottom.

Good thing is the asking price is 32,000.

4 Units that are 1,100 sq ft each.  Each is 2Br. 1.5 Ba.

George P. · Answer

From what I see on the map, housing looks like PROJECTS which are government owned and operated.
Anyway, like it was already stated, low-income housing requires high maintenance. Folks in there usually don't take care of stuff and enjoy the sense of entitlement. So 50% rule won't likely to work there. May be 55%. May be 60%. Account for it.

You are going to be dealing with Section 8, too (it's not necessarily a bad thing). 
 PS if you can get it for peanuts, there is probably a good reason for it - like high vacancy rate or deferred maintenance.  
PPS You have a LOT of competition around your building. When worse come to worse the only thing you can compete on is rent. That's a bleak perspective to have to lower the rent, isn't it?

Phil C. · Answer

From google maps it looked like you might have a lot of competition for renters.  Large Brick buildings as far as the eye can see!

Just something to keep in mind.

Sharad M. · Answer

Ed, whats the asking price of the property?

I would call the city's police department and speak with someone and ask them about the neighborhood.

Mickey Harrison · Answer

I agree with James. A good way to see how bad an area is would be from crime stats. I know here in New Orleans we can go online and get crime stats from the local newspaper. OR like James said go to the police station and ask about the neighborhood. Also, I'd recommend maybe passing by the property on a weekend night.

Not sure if you've had experience with sec 8 but remember that there are yearly inspections of the property that are made by HUD. They really aren't that big of deal but it seems like they always find something wrong fix what they ask (as long as they don't sound erroneous)  then collect the checks. 
*i know the descriptions of the inspections are simplified but as long as your not running a slum you should pass after your first inspection."

Another thing regarding section 8, don't be lenient on late rent. I've known people to let their sec 8 tenants slide on their portion of the rent. The reason is they feel "well the rents 450 a month gov pays me 400 on the 1st hands down..so what if they're late 50 bucks I got 400." You wouldn't let a reg tenant slip on this i don't know why people let their sec 8 tenants.

Ed L. · Answer

Well I just made the trip over to the apartments at 11 PM and they looked fine.   Definitely wouldn't call it a war zone.  It's also a very convenient location for student housing.

Advertised rate fo 2br in exact same building is 475.00  May be a cash cow for the price.  Can't wait to see how bad the interior is.

War Zone or Low Income Minority Housing???

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