Would you buy a tri-plex from a slumlord

OP

Property Manager · Queens, NYC · Member since 2016 · 110 posts · 58 votes

7y

Originally posted by @Brandon Sturgill:

@Maurice W. Evans sometimes opportunity looks scary...is there any other renovation going on in the neighborhood...neighborhood watch groups...on Facebook...it sounds like a war zone. If there is no stability or upside, this may not be a good deal...irrespective, you'll have a huge capital outlay getting this ready for tenants...are you coming out of pocket?...remember, this thing has to appraise if that's your exit strategy.

No Reno that I'm aware of. Just a depress area. I feel bad for the people that are forced to settle for such conditions.

It would be a but and hold strategy, not really easily flippable in my opinion.

But should cash flow. :/

Is there a way without coming out of pocket?

Victor N.

Investor · Wellington, KS · Member since 2016 · 256 posts · 188 votes

7y

If this is where I think it is, a future buyer won't be able to finance a purchase so it will be owner carry or all cash only. There will be no appreciation. This is a cash flow play with war zone tenants. These were temporary housing built during WWII

Victor N.

Investor · Wellington, KS · Member since 2016 · 256 posts · 188 votes

7y

Price sounds too high still too

4 Reply

Ned J.Pro Member

Investor · Manteca, CA · Member since 2017 · 1k+ posts · 2k+ votes

7y

If this is the "norm" for the area, and there is no foreseeable improvements coming to the area..... then unless you like to deal with the drama of D class tenants and neighborhoods, I would pass.

The fact that you "feel bad" for these people's living conditions is a warning sign that you may be thinking with your heart and not your head. Unless you want to take on the role of social worker and try and pioneer the improvement of the entire neighborhood, then I would pass.

If this area is likely to remain a war zone forever, then I would pass..... $$ can be made but its not my cup of tea.....

4 Reply

Michael Noto

Real Estate Agent · Southington, CT · Member since 2008 · 5k+ posts · 3k+ votes

7y

@Maurice W. Evans If purchased at the right price the only thing that would turn me off to a deal like this is the fact that the property is in a rough neighborhood and the tenants, All of the other things that are wrong can be fixed.

2 Reply

OP

Property Manager · Queens, NYC · Member since 2016 · 110 posts · 58 votes

7y

Originally posted by @Ned J.:

The fact that you "feel bad" for these people's living conditions is a warning sign that you may be thinking with your heart and not your head. Unless you want to take on the role of social worker and try and pioneer the improvement of the entire neighborhood, then I would pass.

You are 100% correct. I am doing that.

As a Pastor and one who is socially conscious, the injustice really riled me up. However, I am not called (or resourced) to relieve an entire neighborhood of its decades of baggage.

Thanks for the check.

6 Reply

OP

Property Manager · Queens, NYC · Member since 2016 · 110 posts · 58 votes

7y

Originally posted by @Victor N.:

If this is where I think it is, a future buyer won't be able to finance a purchase so it will be owner carry or all cash only. There will be no appreciation. This is a cash flow play with war zone tenants. These were temporary housing built during WWII

My wife did say she heard these were originally military housing of some sort. (We have only been in the midwest 5 years and don't that part of town at all)

thanks for the heads up

OP

Property Manager · Queens, NYC · Member since 2016 · 110 posts · 58 votes

7y

Originally posted by @Michael Noto:

@Maurice W. Evans If purchased at the right price the only thing that would turn me off to a deal like this is the fact that the property is in a rough neighborhood and the tenants, All of the other things that are wrong can be fixed.

Yeah, i guess you can't put good tenants in a bad neighborhood...at least not for long anyway.

Account Closed

Investor · Columbus, OH · Member since 2017 · 861 posts · 1k+ votes

7y

I know in my city, some of the most "stuck in a rut" areas are when there are a lot of rundown duplexes all in an area, but all owned by different owners. It just takes a couple slumlords with nasty gang banger/drug addict tenants to ruin the whole area. I avoid anything like that personally

OP

Property Manager · Queens, NYC · Member since 2016 · 110 posts · 58 votes

7y

Originally posted by @Account Closed:

I know in my city, some of the most "stuck in a rut" areas are when there are a lot of rundown duplexes all in an area, but all owned by different owners. It just takes a couple slumlords with nasty gang banger/drug addict tenants to ruin the whole area. I avoid anything like that personally

I think you are right as that seems to be what is happening here, they all have different owners and none seem to care about the tenants or property.

Matt P.

Investor · Columbus, OH · Member since 2015 · 625 posts · 601 votes

7y

@Maurice Evans I wouldn't buy the property you described. No way. It's not worth the money youd have to spend to make it half way decent which is why it's in the shape it is currently. And the rents are way to low. If I am all in in for 70k on a duplex I want each side to rent for 800 or 900.

Caleb Heimsoth

Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes

7y

@Maurice Evans anything is a deal at the right price. If you can get 40-50k all in maybe. Sounds like a really tough area

Matt McConkey

Rental Property Investor · Phoenix, AZ · Member since 2015 · 222 posts · 126 votes

7y

@Maurice Evans If the area was on the way up, then you might stand a chance to fix up and eventually get good tenants in there.

If the area appears to stay stagnant, then you'll be throwing good money after bad at the problem.

You will fix the property, get a bad tenant that will destroy the place, fix it up, new tenant, bad tenant, the cycle will repeat itself.

If it was a good deal, in this market, it would have been bought by now.

Ned J.Pro Member

Investor · Manteca, CA · Member since 2017 · 1k+ posts · 2k+ votes

7y

@Maurice W. Evans.....lots of other ways to improve the community and help the struggling people in the community w/o buying a war zone slumlord apartment building that will bleed your own $$ away.

You can sink your $$ in to make it a C class property....but if the entire neighborhood is D/F class..... yours will not stay C class long.

Only way I would be interested is if the price is dirty cheap and I'm local, with experience in dealing with this class of tenant...not for the faint of heart

Peter Sanchez

Real Estate Investor · Washington, DC · Member since 2014 · 236 posts · 328 votes

7y

Well, you said the a similar one sold for $75k, right? If this one is $60k but needs a lot of work, wouldn't it make sense to buy one that doesn't need repairs for $75k?

I think the only thing that makes this look okay is that the owner is willing to carry a note for a while at a good interest rate.

Also, you mention it's a rough neighborhood. If you put thousands into the property to fix it up, will you be able to charge higher rent? Maybe the seller hasn't bothered fixing it because he thinks he can't raise the rent so instead of keeping up his triplex he is just milking it dry and trying to sell what's left.

Unless you're already rich, you only have so much ammo to go hunting with. Save your bullets for the elephant!

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OP

Property Manager · Queens, NYC · Member since 2016 · 110 posts · 58 votes

7y

This is why I love my BP family :)

2 Reply

Mindy JensenPro Member

BiggerPockets Money Podcast Host · Longmont, CO · Member since 2014 · 7k+ posts · 10k+ votes

7y

Originally posted by @Maurice W. Evans:

slumlord is a pretty harsh term, however, let's say

-the living conditions of current tenants is bad (partial electricity, no hot water, holes in windows and walls, rats)

-some visible mold on a couple walls

The term slumlord isn't HARSH enough!

Kelly N.

Investor · SE, MI · Member since 2013 · 1k+ posts · 461 votes

7y

Yes, I would buy a triplex from a slumlord, and fix it up to be a place we can be proud to rent out. Not in this type of neighborhood, though.

Kevin Nichols

Investor · Rock Hill, SC · Member since 2014 · 122 posts · 33 votes

7y

Price is too high. When you start talking about electrical problems and issues, you can easily sink $20K or more into fixes. Holes in walls, etc.

I bought in a "C" neighborhood before. Bought a duplex for $25K. Looked like they cooked crack in it. We pulled out some of the drywall, repainted, new kitchen cabinets on each side, flooring, new windows and that was about $15K. (Did the work ourselves)

Made it look super nice. But it still was in a "C" neighborhood. Put it on zillow and got over 500 inquiries in 2 weeks. Rented it for 2 years and then sold it last summer for $85K.

Happy day at closing. You start working in the bad hoods, you are going to work to make your money or become a slum lord.

Dennis M.

Rental Property Investor · Erie, PA · Member since 2018 · 6k+ posts · 9k+ votes

7y

Would I buy a triplex from a slumlord? ...hmmm let me think about that , heck yes ! In fact I have multiple times ! Except I never paid more than 40 grand for one .the hard part of doing it is learning where to put money into it and what to let go . It’s surprisingly easy to turn into a slumlord yourself especially after you spend four exhausting weekends getting the exterior looking great .. then you stop by and see trash in the landscaping,somebody spray painted the siding and the next week a splattered cherry slushie clear up the side of the building to the roof .. don’t ask me how I know all this lol Eventually you might say “ screw it let them live like animals and I’ll just collect their rent”

Kevin Nichols

Investor · Rock Hill, SC · Member since 2014 · 122 posts · 33 votes

7y

Originally posted by @Dennis M.:

Would I buy a triplex from a slumlord? ...hmmm let me think about that , heck yes ! In fact I have multiple times ! Except I never paid more than 40 grand for one .the hard part of doing it is learning where to put money into it and what to let go . It’s surprisingly easy to turn into a slumlord yourself especially after you spend four exhausting weekends getting the exterior looking great .. then you stop by and see trash in the landscaping,somebody spray painted the siding and the next week a splattered cherry slushie clear up the side of the building to the roof .. don’t ask me how I know all this lol Eventually you might say “ screw it let them live like animals and I’ll just collect their rent”

This has happened to me as well in my "C" neighborhood rentals. I typically do a lot of the work myself, which makes it even more personal.

You try to make something nice and the people in the neighborhood bring it down. That's one of the reasons I sold them. They'll never be more than "C" neighborhoods unless they gentrify.

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Gino BarbaroPro Member

Rental Property Investor · St Augustine, FL · Member since 2014 · 2k+ posts · 1k+ votes

7y

@Maurice W. Evans

You can't reposition the neighborhood unfortunately. Once you buy it, all of those violations become your problem. Is it worth the return on investment to rehab it, put in new tenants, and still own the building in a neighborhood that has very little potential for appreciation.

Gino

Anthony Wick

Rental Property Investor · Ankeny, IA · Member since 2017 · 2k+ posts · 3k+ votes

7y

@Maurice Evans

You can’t save everybody.

2 Reply

Account Closed

Investor · Milwaukee, WI · Member since 2013 · 1k+ posts · 1k+ votes

7y

Hmm...well the rents are too low for starters, at least in relation to the purchase price and needed repairs. That is how you need to assess the value, not by what one other property sold for. One comp does not a market make.

Gotta love slumlords who continue to collect rent even if the unit is not habitable. It's one thing to have a functional dump. Those units are not habitable. Partial electricity and no hot water is not habitable in the US. Mold and rats are probably because of the holes. Those are a step away from condemnation if not qualified already. Which makes the $60k a ridiculous price and explains why it isn't sold. There are some properties that are worth less than free my friend.

The price might go way down if the city started issuing violations and the seller all of a sudden needed to pony up. Hmm...maybe might even end up in auction.

Think on this for a second...

You have an out of state "investor" sucking $15000 out of your city annually and you get what, exactly, in return for that? A few bucks in the property tax coffers? What's the property tax $1000? Insurance $1000? That's $13000 left over sucked right out of your city into a different economy. How much does the blight cost you? How much in market value and subsequently property tax not realized? How much to police the area? At least if they were local the money would get spread around town and recirculated to your economy. Nothing good coming from the property. Nothing but the sound of Wichita dollars getting sucked out of Wichita. The rats and mold are fitting. Now their bright idea is to over-charge you, and collect 5% interest on top of that too? Hmm...impressive. Something to aspire to and be proud of right?

It's the same reason that Walmart is not good for your town either. This is going to sound nuts, but I'm going to say it anyways. My cat was lost once. Walmart would not even let the crazy cat guy put a sign on the door. A corporate thing, they had a canned response all written and ready. Couldn't even fake it and take the sign down the minute I walked away. Funny, I got the exact response, word for word, from Walgreens. It was like they went to the same store to buy the response. Suuuuuuuuuuuuucking dollars out on a massive scale and not even willing to give back the tiniest kindness. Conversely, all the local shops put the sign up front and center without hesitation. To be fair, Starbucks let me hang one too.

Out of state "investors" can be a very good thing, if they actually invest. This is a loot and pillage. Your city gets nothing out of it. Your city might even take a loss from it.

I just gave you the ammo my friend. What you gonna do with it?