What defines a Warzone?

Wholesaler · Stanley, NC · Member since 2013 · 19 posts · 4 votes

I am trying to determine what a good area for me to start marketing to for my market (Charlotte, NC). But I think it would be best, since I am just trying to get started, to avoid the so called "warzones". But what makes an area a Warzone? How do you decide whether a location is in one? What qualifiers do you use? Where do you get your data and how far back do you go?

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Dawn AnastasiPro Member

Rental Property Investor · Milwaukee, WI · Member since 2013 · 6k+ posts · 4k+ votes

12y

Originally posted by Thomas Mitchell:

*I'll add that we had a local gang leader offer to do "security" for a fee....

Gotta love people with an entrepreneurial spirit! :)

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Bill Gulley
Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
12y
You might say that it's an area you don't want to live in.

We don't really have war zones in my area, I think of Philly, run down empty buildings used by gang members, illegal anything going on, shots fired, fires started.....you know, like in the movies.

While there can be a silver lining in some areas that have potential and many other factors, I'd suggest new guys stay away from thr really blighted areas, just IMO.

Invest in something you'd live in is a good place to start out. :)
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Thomas Mitchell
Wholesaler · East, TX · Member since 2012 · 88 posts · 61 votes
12y
I could answer this question but I'd get banned from posting.
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Kenneth Shelley
Investor · Ambler, PA · Member since 2013 · 44 posts · 4 votes
12y
Might I recommend calling the police and asking them for advice on this subject. I am sure they will be able to tell you more about this topic then us.
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Dan Holden
Real Estate Investor · Spartanburg, SC · Member since 2013 · 62 posts · 22 votes
12y
Some counties have "crime maps" on their sites. It's the areas that are really colored in that you want to avoid. I'd like to expand on what @Bill Gulley said, it's an area you don't want to live in if you had the choice. I add that because sometimes you gotta do what you gotta do to survive and I've lived in some scary places I never want to see again.

PS: I am very curious as to what @Thomas Mitchell was going to post.
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Thomas Mitchell
Wholesaler · East, TX · Member since 2012 · 88 posts · 61 votes
12y
Right now I am managing a low income 24 unit apartment complex. It is in a bad part of town and it is a NIGHTMARE. We have had two shootings in the last month and a half. I was going to buy this complex for no money down owner finance and I'm really glad I didn't. Last week I had a tenant that I was evicting arrested for public intoxication. She had a crack pipe in her pocket so she got that charge as well. This lady doesn't have a penny to her name but she got bailed out that night - probably by her dealer. We have spent probably 1K in eviction fees in the last two months. We have an ad in the paper and when I tell people on the phone where the apartments are located they usually say, "Ok. Thanks. *click*" That, my friend, is a war zone. The only people who are willing to live there are people you don't want living there. It's a vicious cycle and unless you have the money to kick everyone out and start over from scratch, it's not worth it.

*I'll add that we had a local gang leader offer to do "security" for a fee....and we are seriously considering it. I cannot believe that I'm actually considering paying protection money to a ghetto mafia. (technically, it's not my call - it's the owners. But I'm sitting here thinking, "maybe that's not such a bad idea....")
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Dawn AnastasiPro Member
Rental Property Investor · Milwaukee, WI · Member since 2013 · 6k+ posts · 4k+ votes
12y
Originally posted by Thomas Mitchell:
*I'll add that we had a local gang leader offer to do "security" for a fee....

Gotta love people with an entrepreneurial spirit! :)
Podcast Guest on Show #29
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Rob K.
Investor · Southeast, MI · Member since 2012 · 2k+ posts · 1k+ votes
12y
I would consider a "war zone" to be a place where you have the following: Shootings, murders, arson, gang activity, vacant lots used for illegal dumping, etc.

You should be able to tell it's a war zone just by looking around. When my older daughter was five, if we were driving through a sketchy area, she would ask, "Are we in the ghetto?"
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Deborah BurianPro Member
Rental Property Investor · Oklahoma City, OK · Member since 2013 · 1k+ posts · 412 votes
12y
When we started out, we asked ourselves, are we comfortable with myself or my then 19 y.o. daughter working here alone at night. If the answer was no, we didn't buy...

Funny thing about the crime maps. Our community started them after we owned several properties. We looked them all up and discovered that our personal home, in a nice suburb, was by far the worst area. Eventually, we moved, lol.
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Michaela G.
Investor · Atlanta, GA · Member since 2013 · 3k+ posts · 3k+ votes
12y
There are war zones and there are perceived war zones.

To me a war zone is an area where I don't feel comfortable driving through with the top of my convertible down. Or at least where I wouldn't want to stop the car. @Thomas Mitchell 's property definitely is one that I would want to avoid.

I have all my properties in an Atlanta neighborhood that is looked at as a war zone by outsiders. Yes, there are some gangs there; Yes, there are squatters living in vacant homes; Yes, you can buy drugs and Yes, everything will get stolen if you don't have a way to protect it.

With that said, I lived in one of my houses for 1.5 years and I got to know the neighborhood really well. I'd walk with my dog all over. Have never had a real problem. Sometimes people would spit on the street in front of me or tell me to go back to my neighborhood, because I'm white, but that was the minority. But this is also a neighborhood rich in African-American history, having been the first neighborhood in Atlanta, where black people were allowed to own. A lot of people were born there and grew up there and want to stay.

So, I'm just saying that what may look like a war zone from the outside, may not necessarily look that way, once you've taken a closer look and met people.
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Dawn AnastasiPro Member
Rental Property Investor · Milwaukee, WI · Member since 2013 · 6k+ posts · 4k+ votes
12y
Originally posted by Michaela Graham:
I have all my properties in an Atlanta neighborhood that is looked at as a war zone by outsiders. Yes, there are some gangs there; Yes, there are squatters living in vacant homes; Yes, you can buy drugs and Yes, everything will get stolen if you don't have a way to protect it.
With that said, I lived in one of my houses for 1.5 years and I got to know the neighborhood really well. I'd walk with my dog all over. Have never had a real problem. Sometimes people would spit on the street in front of me or tell me to go back to my neighborhood, because I'm white, but that was the minority. But this is also a neighborhood rich in African-American history, having been the first neighborhood in Atlanta, where black people were allowed to own. A lot of people were born there and grew up there and want to stay.

You can basically buy drugs anywhere in this country that you want to buy them, so that's not saying much.

I grew up in a neighborhood that did have gang members in it, so perhaps my tolerance has built up from that.

The area I'm in now, I realize that it's not "Wisteria Lane" and that the people in the area do not have high incomes. That doesn't mean it's not a good area to live in or invest in.
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Jose Reyes
Full Time Rehabber · Covina, CA · Member since 2012 · 28 posts · 22 votes
12y
Talk to neighbors. They'll usually tell you what's really going on in the area. Other then that, drive around. If you feel uncomfortable, that should give you your answer. But always remember, there is money to be made in all locations. It really comes down to the tenants you get, and in bad areas, that's a crap shoot.
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AC Cooley
Real Estate Investor · Atlanta, GA · Member since 2010 · 126 posts · 43 votes
12y
Drive through that neighborhood between 7pm-9pm on a Friday or saturday night and see if you are willing to deal with the activity in that neighborhood. It's getting cold so the activity won't be like the summer months but still...
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Rick Baggenstoss
Developer · Decatur, GA · Member since 2011 · 1k+ posts · 1k+ votes
12y
I'd argue there is not a warzone in Charlotte.

IMHO, I think a smarter way to look at your area is in tiers or bands of risk, A, B, C, etc. or segments. Things like vacancy, vandalism, turnover related costs, liquidity, schools, cost, income, commute to downtown/business centers, distance from your house, your knowledge of the target market, level of competition should all play into your formula for market evaluation, grouping, and ultimately, preference.

Redlining an area based upon race, while ignoring other key criteria is terribly short-sighted especially in a fast-moving market like Charlotte. Take a broader view, then as folks have suggested, invest where you're comfortable and where you can be successful.

Personally, I'd stay away from a property close to Cowfish Sushi and Burger Bar. Cowfish would ruin my cashflow! From there, all of Charlotte is attractive, especially, large lot houses in fast growing areas.

Best of luck!

Rick
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Anthony McDougle
Real Estate Investor · Charlotte, NC · Member since 2013 · 40 posts · 5 votes
12y
@Rick Baggenstoss just out of curiosity, what parts of Charlotte would you define "fast growing areas"?

Also, I've talked to people who live in the area near Hwy 16 on Hoskins Ave. who talk about shootings and whatnot in the area. I also looked up crime reports on some specific places in Charlotte, and it showed some pretty scary stuff. Driving around near my office near the airport is pretty sketchy too. None of it's a race issue.

I wouldn't say those places are "warzones" necessarily if you're comparing them to some really bad crime-ridden places elsewhere in the country (or seen in movies), but I don't think I'd want to invest around there...
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Joel OwensBusiness Member
Moderator
Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
12y
"It's a vicious cycle and unless you have the money to kick everyone out and start over from scratch, it's not worth it."

It's STILL not worth it!

Take the property and rehab the whole thing and guess what?? That bad area is still a bad area.

HML lenders will tell me block by block where they will not lend. If you rehab the property and make it nice in a bad area the only tenants that will live there is still the rough ones. Then you have to lease up for cash flow and they trash the new units all again and you have a massive loss. There are certain areas of Atlanta where tenants are known for paying a few months upon rehab of buildings and then they do not pay anymore and trash the place.

I choose not to invest in those type of places under any circumstances. To some people they see the potential returns they say "not so bad and talk themselves into it". It's just not for me and never will be. There were some roads you drive DURING THE DAY where you won't roll down the window or unlock your door and you sure as heck do not stop the car under any circumstances.

There is a difference between a bad building and a bad area. The bad building you can rehab and clean out the elements. Good tenants want to live in a former bad building in a good area once it is cleaned up and rehabbed. A bad area is still a bad area. So when looking at the crime maps you look at violent versus non violent offenses. Look at if they are concentrated to one building or is it the whole area that is bad.

If you have limited capital investors might go for the bad areas. Most of my clients stay far away from it and do not need those areas or returns. If you make 50k a year and have 50k saved up and need to grow it like crazy you might be willing to take huge risks. If you have hundreds of thousands to millions and a great business or high level professional paying job you do not need the drama or the headache. I hear you on the 24 unit. I had a 20 unit and never again.

The scale isn't large enough to be totally hands off with a full time PM and repair person.
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Michaela G.
Investor · Atlanta, GA · Member since 2013 · 3k+ posts · 3k+ votes
12y
@Kenneth Shelley

I would take whatever the police say with a grain of salt. The problem is that even in the nice areas cops will only get called when things go wrong. So, someone that's been in the area for a while will have negative memories associated with every property. Maybe it's the first break-in in 10 years or it's something stolen out of the car parked in front.....whatever it is, it adds up in their memory bank. They don't get called when things go right.

I did a lot of work and lived in a neighborhood in Grant Park in Atlanta. It's all Victorians around the Atlanta Zoo. I lived there from '91 to '06 and the houses were around 400K, pretty high for Atlanta. Even there, if you were talking to the cops, none of them wanted to live there, because they just see the crime. They don't see the 9 years and 364 days that that particular house had not been broken into. Their memory only makes this 1 connection. It makes you cynical - it's part of the job of being a cop.

Not saying to totally disregard what the police says, but to dig deeper than what they tell you.
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Account Closed
Retired Landlord/Author · Commerce Township, MI · Member since 2012 · 1k+ posts · 1k+ votes
12y
As an Inner City Landlord in the City of Detroit since 1985 and retired in 2009 I think I maybe able to help you.

When my husband purchased our properties in 1985 the area was pretty good at that time. However it began to go downhill around 2006, we sold our properties in 2009 and took a beating financially.

Location, location, location is the key. If the neighborhood looked well groomed, houses have nice curb appeal, decent school district then it's looking good. This could be in the Country, in the Metro areas, etc. As long as it looks decent, then take your next step.

You can tell also by checking the rental prices for that neighborhood and see what they're running for in the papers and such.

Keep an eye on for changes that take place over the years and don't wait too long like we did. My husband thought the City of Detroit would come back because of all the building going on surrounding the Waterfronts. Downtown Detroit is quite grand, but...unfortunately, nobody wants to live in the surrounding area. Trying to get him to sell was like pulling teeth. Finally he did see, and I finally got him to sell.

Nancy Neville
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Xing Zhu
Durham, NC · Member since 2012 · 498 posts · 48 votes
12y
There are different levels of Warzones. The ultimate Warzone is defined by the new IMAX 3D movie, Ender's Game!

The next one is Wall Street.
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Rick Baggenstoss
Developer · Decatur, GA · Member since 2011 · 1k+ posts · 1k+ votes
12y
@Account Closed makes a good point. I would absolutely seek to understand the direction of an area, particularly one that is borderline. If you're a flipper, then slow degradation of your market won't kill you, but for someone holding, it will. In this case, Nancy did sell in a warzone or a deadzone. The movie equivalent is Thunderdome where block after block of these grand buildings are vacant, burned, and/or vandalized.

@Joel Owens Entertain me. Let's say there's a $100,000, octoplex renting at $500 per door, rents are climbing, crime is going down, school ratings are going up, neighborhood is organized, new greenspace just implemented nearby, and you have $50,000. This is would be an automatic no, and too stupid to consider?

Never say never, just balance risk, reward, and your solve for the problem at hand.
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David T.
Specialist · Las Vegas, NV · Member since 2013 · 639 posts · 176 votes
12y
If you want to stay out of trouble, check out the local schools. if the schools are good, it's a safe bet, particularly in ATL.
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Joel OwensBusiness Member
Moderator
Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
12y
It's all based on your goals.

100,000 for an 8 unit is 12,500 door per 500 in rent.

Say those properties are exiting at a 12 cap.

4,000 a month X 12 months = 48,000 GEI

48,000 X .40 ( 60% costs / landlord pays water) = 19,200 NOI

At a 12 cap you have a 160,000 resale price.

So if the area is improving the property could work out. I just personally do not want anything small like that anymore. Those smaller properties tend to work better for more hands on local investors who like emerging markets. As the area gets better the 12 cap exit could compress to 11.5 or 11 etc. thereby with increased rents giving you more forced appreciation.

I am not saying these investments can't work. I am just saying it's not my cup of tea.
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Rick Baggenstoss
Developer · Decatur, GA · Member since 2011 · 1k+ posts · 1k+ votes
12y
Here's a link to a UNC Charlotte study on population growth. Negative growth is worth avoiding. Those areas are degrading and you property values, vacancy, etc. will go with it. http://ui.uncc.edu/display/charlotte-region-population-growth-census-tract

@Anthony McDougle Here's the population change in Charlotte. Each dot represents 25 more people since 2010 vs. 2000. Purple is negative. Note that Charlotte's burbs are growing very quickly, along the major accesses, the lake, etc. while just around downtown inner loop is reversing. The heart of downtown is growing.

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Anthony McDougle
Real Estate Investor · Charlotte, NC · Member since 2013 · 40 posts · 5 votes
12y
@Rick Baggenstoss wow that's amazing, thank you for sharing that!

That does seem to go along with what I've seen.
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Dawn AnastasiPro Member
Rental Property Investor · Milwaukee, WI · Member since 2013 · 6k+ posts · 4k+ votes
12y
Originally posted by Rick Baggenstoss:
@Account ClosedLet's say there's a $100,000, octoplex renting at ...

I've heard of a 4-family called a "quad" before but I've never heard of an 8-family called an "octoplex". Would a 12-family building be called a dodecaplex?
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LEONID ORLOV
Investor · Hermosa Beach, CA · Member since 2012 · 42 posts · 6 votes
12y
I live in LA and invested in South LA since 2009, in the neighborhoods that I would prefer not to enter, even if I needed to get off freeway to get gas.

Over exaggerated fears of people, like I used to be, turned out to be very profitable for people who knew better.(a friend of mine gave me the info about someone who is profitably invested there)

Once I bought my first property, I have learned that this is a mix ethnicity neighborhood of working families. Yes, there are elements that are undesirable and I don't see were I live by the beach, but such are not a majority.

What surprised me first is the ratio of property price vs. rent. This neighborhood fetches 1300 to 1450 for 2 bd apartment. in 2009 I was paying from 230 to 240k for the property that has 3 or 4 such units.

The same apartment in my "hood", if I may say s,o would cost from 1800 to 2500, but the property price would be from 500 to 900k or more... You do the math.

To make long story short between 2009 to 2012, I bought 7 of 3-5 units properties and they cash flow very well. Suffice to say that I am making more money from the investment than my Aerospace Software Engineer salary.

I often joking that I am making more money from "doing nothing", than "doing something" .. maybe I have to start doing more of "nothing" and less of "something" :-)

Unfortunately I was not aggressive enough and did not buy more.. This would make the difference between working and needing to work. In 2013 prices went so high, that it makes no sense. No cash flow is possible. I have no idea who is paying 450k for a money loosing proposition in the dinky part of town, but they do.

Since what I get used to in RE .. and learned to love, is not there anymore. I would like to ask people to share their out of state investment, and what is most important remote Property Management experience.

Were you investing?

How you identify the properties?

What are the investment metrics? a cash flow

How you identify PM company that you can trust ?

Leads, advise in the area were good safe returns can be obtained.

Thanks for sharing. I found the site and people who contribute to be invaluable source of great information, because nobody sells .. pure information sharing .. make me warm and fuzzy .. and trusting

Thanks for listening .. and thanks in advance for the feedback
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