Investor · Los Angeles, CA · Member since 2019 · 8 posts · 12 votes
Hi everybody!
I thought I’d turn to the forums because I saw an interesting deal, but there’s some red flags.
Since I’m relatively new to real estate, I’m hoping some more experienced people can guide me in the right direction.
I found a deal for a 4-plex out of state listed at $39,900. It’s been on the market since January 2019 so I feel like it could easily be bought it for around $25-$30,000 or even less. The property details list that each unit rents for $475/mo. It sounded too good to be true.
Here come the red flags. It’s in a class D neighborhood and supposedly one of the most dangerous areas in the state and the property is in “distressed condition.” I know that it’s highly advised against investing in class D neighborhoods.
If somebody could give me some advice on what to do I’d highly appreciate that! Thanks so much!!
Here's what I get concerned about with this types of property. If you fix it up and sell it, who is going to buy it and for how much. If you fix it up and rent it, how much are you going to spend every year repairing stuff that your D class tenants broke.
I thought I’d turn to the forums because I saw an interesting deal, but there’s some red flags.
Since I’m relatively new to real estate, I’m hoping some more experienced people can guide me in the right direction.
I found a deal for a 4-plex out of state listed at $39,900. It’s been on the market since January 2019 so I feel like it could easily be bought it for around $25-$30,000 or even less. The property details list that each unit rents for $475/mo. It sounded too good to be true.
Here come the red flags. It’s in a class D neighborhood and supposedly one of the most dangerous areas in the state and the property is in “distressed condition.” I know that it’s highly advised against investing in class D neighborhoods.
If somebody could give me some advice on what to do I’d highly appreciate that! Thanks so much!!
I would take this money, and buy a single family or duplex in a decent area, in that city or elsewhere. Build experience, get better, and buy more. I think there are people who do well with D areas, but they are usually local to a city, and experienced. There are far better ways to make money here. However, the first step is taking action and figure out what is available, and it sounds like you're doing that, so keep digging! You will get there.
There is nothing wrong with buying a 4-plex out of state for $39,900 in a C or D area it all depends on the PM company that you feel can successfully manage it and make it work for you that is the toughest part!!
Now if it was in your city/area then you could make it happen with less stress..
For example- I purchased this 4-plex located at 306 South Lauderdale Memphis Tn 38126
Only buy it if you can get percentage rent from your drug dealer tenants.
Obviously joking, don't buy it. You should listen to the first 100 episodes of the Podcast. Dorkin rips on Detroit almost every episode for this exact reason. 25% returns on current actual numbers likely don't exist and if they do, they're not on the market for 4 months.
Best of luck, I'm sure you can find a tertiary market in your state to buy something under 100k.
I thought I’d turn to the forums because I saw an interesting deal, but there’s some red flags.
Since I’m relatively new to real estate, I’m hoping some more experienced people can guide me in the right direction.
I found a deal for a 4-plex out of state listed at $39,900. It’s been on the market since January 2019 so I feel like it could easily be bought it for around $25-$30,000 or even less. The property details list that each unit rents for $475/mo. It sounded too good to be true.
Here come the red flags. It’s in a class D neighborhood and supposedly one of the most dangerous areas in the state and the property is in “distressed condition.” I know that it’s highly advised against investing in class D neighborhoods.
If somebody could give me some advice on what to do I’d highly appreciate that! Thanks so much!!
Too risky for you dawg. Pass on this deal. If after cutting your teeth in this game for a few years you still wanna go into the hood there will be no shortage of ghetto inventory other investors are ready to exit out of. This stuff beats you down. Totally friggin savage.
Only reason I would buy in a war zone is to get extra trigger time when a tenant decides they don't want to leave and starts shooting at the LEO that has come to remove them after eviction.
I found a property for a steal of a deal but is was in a low C class hood. Would I make money? Absolutely! Would I spend all my profit on repairs and fixes after they destroy the home? Yup! A lot of work for little to no gain. causing only frustration and liability.
This post is unbecoming .... "extra trigger time" ...... this is your input to the conversation? Look inside yourself!
@Benny Morfas great thread and your post highlights the major value of asset price vs asset quality. It always makes sense to pay for your peace of mind with a property with the proper economics behind it. Never look at price.
Paying pennies on the dollar but you pay more for the headaches management and possible other issues for the property is not worth it.
Well depends really. The one I’m looking at is 100k and it’s at the University of Alabama. Sure it’s near D class ergonomics but it’s that cancels out due to a high need to rent.
If its in Indiana, I am on the southside of Indianapolis and I am also a contractor. I do work in different parts of Indy. Feel free to give me a call and I will tell you my honest opinion. I started as an investor and went into contracting to help my cause. Let me know if I can help. I have bought low end rentals and have sold them. But they have their place when starting out, just depends on much you can stomach…..
Not only have I owned low income properties but my company has manage them. I could tell you personally as an investor I was never more stressed ,more busy and lost more money due to owning these properties and as a management company I can tell you that did not change
the challenge of these properties is they are very high time intensive type business models and if you were not there to be hands-on to deal with the older properties ,higher maintenance ,month to month type tenant mindset you will not only lose money but the personal stress level you will endure will make your whole real estate experience a negative one
We got to the point when we were unloading are low income properties that we actually had to come to closing with money but we did that because we no longer wanted this to be our problems.
Just make sure that if you do move forward and buy these properties that you’re buying them with the strategy they will align with your future goals find a deal because you think it’s a deal if it doesn’t not align with your goals it’s not a deal it’s a diversion from focusing on why are you involved in real estate.
I know because I learned this first hand and it was a very expensive and stressful mistake that I would not want anyone else to do them selves
We have 50-60% of our investors Come to us from out of state and even though they start not knowing anything were able to help and guide them by being on their team to give them the right advice so that they understand why they’re even doing this before they ever actually buy
Only reason I would buy in a war zone is to get extra trigger time when a tenant decides they don't want to leave and starts shooting at the LEO that has come to remove them after eviction.
I found a property for a steal of a deal but is was in a low C class hood. Would I make money? Absolutely! Would I spend all my profit on repairs and fixes after they destroy the home? Yup! A lot of work for little to no gain. causing only frustration and liability.
This post is unbecoming .... "extra trigger time" ...... this is your input to the conversation? Look inside yourself!
You don't value the lives of those who protect and serve on a daily basis?
If a LEO was endangering his life by evicting someone from my property and they decided to literally go out with a bang, it's my moral obligation to protect myself and those on my property. And yes, help law enforcement if it so inclined.
You might look inside yourself and reorient your moral compass to involve protecting your fellow man. Especially those that are protecting you.
There is nothing wrong with buying a 4-plex out of state for $39,900 in a C or D area it all depends on the PM company that you feel can successfully manage it and make it work for you that is the toughest part!!
Now if it was in your city/area then you could make it happen with less stress..
For example- I purchased this 4-plex located at 306 South Lauderdale Memphis Tn 38126
Stay away from D class unless you are a contractor and live close to the war zone because war zones are "hands on, full time work". My personal rule of thumb is stay away from $500 rents because these tenants come with financial hardships to begin with. One thing you will see with out of state Fourplexes is that most of them have rent about $500. The returns look amazing on paper but the vacancy and turnover will destroy your returns. Typically, everytime a tenant leaves one of those $500/month rentals you will incur about 1K in repairs and the cycle continues.
Incredible rehab . That property was rough it is something most people would run from but I commend you on seeing what others missed having insight when others just had sight . Excellent job sir