worth getting duplex in the hood?

Question

i was thinking about getting a rental property in bad part of my town to start my portfolio.

The reason i was thinking about starting in this area is because i would have a good chance at getting it owner financed.

i know it would be a higher risk, but everyone needs to start somewhere.  I gotta take risks eventually and i figured this could be where i start.

opinions?

i have about 8k in reserves incase something goes wrong.

Brian Mathews · Answer

$8K in reserves should cover your first move out.     Not all but a lot of people in those areas will tear the crap out of a place.   The hassle factor will be high as well as the repairs.   The good thing is that they may not bother you about anything until a relatively simple problem has become something much more serious and expensive.

Ryan Dossey · Answer

What is your safety worth to you? I have only ever looked at a property in the "hood" one time and I didn't like the fact that I literally walked out to people casing my car. I carry anytime I'm doing anything REI related. However I'd much rather try to avoid precarious situations all together. Not seek them out. Just my 0.02.

If you are using PM disregard^^^

A Schweda · Answer

Not that I am really experienced... but thought I would share my opinion anyway because I thought the same thing. After looking at various properties in Phoenix.. I thought the fact of chasing rent from people that could care less about paying would not be fun.. also to have the property appreciate.. the neighborhood would have to as well. It might be worth looking into better areas where you can actually make a little money safely. Just my thought.

Aaron Montague · Answer

@Jack Rengold

Don't start with a war zone property, period.  These are not the types of lessons you want to deal with on your first place.

Stick with C+ places.  If the nicer areas in town are slowly creeping outwards, then look to the edges of the war zones DOWN THE ROAD.

A class D property will chase you out of the REI game as fast as anything.  And take that 8k, and quite a bit more, along with it.

How about something like this?  I'm guessing it isn't in the nicest part of town given the rent to price ratio, but how rough is that area?

Alex SImon · Answer

You're gonna be looking at a lot of tenant damage plus more from the locals.  I had a guy try to sell me his whole portfolio of hood properties and it was an absolute disaster area.  The tenants had extra people sleeping on every spare surface, hypodermic needles embedded in the carpets, used diapers thrown in a corner, holes in all the walls, cabinets torn down, cigarettes put out on every surface.  It was not cool.  That 8k you have will be gone in a heartbeat, lost to the destructive entropy of the ghetto.

Jordan T. · Answer

To me it depends on the part of town and how rough the neighborhood.  If it's a $30k duplex with 1br per side that rents for $300 apiece, the maintenance/capex/turnover will overwhelm any long term cash flow you'd anticipate.   If you can double each of those numbers you may well have a good deal on your hands.  Also, I like to differentiate between violent crime and property crimes....get to know the crime map of your area and how it's evolved over the years. Vandalism, larceny and simple assaults can just be a C class neighborhood.  Once you get into more aggravated assaults, robberies, and selling drugs, you should stay away unless there's imminent likelihood of gentrification.

Daniel Mohnkern · Answer

I have a course on acquiring properties and, of all the advice and course material that I have purchased in the past, one bit of advice tends to be quite consistent. That is, get the worst property in a good neighborhood; not the best property in a bad neighborhood. Some even go as far as to say never purchase in a bad neighborhood at all.

Regardless of how nice the property might be or how good the numbers might be, there are certain areas that may just be the wisest thing to stay out of. There is plenty of risk in the investing realm that you will take.  This might be a little bit more risk than it is worth.

Like @Ryan  D., I always make sure I have the ability to protect myself.  But the wisest thing anyone can do is not get into a situation where he has to, if he can help it.

Personally, I would advise against it (this type of property) for 99% of people.

James O'Connor · Answer

I'm in the same boat. The town I live in and most surrounding towns are small and rural with not much for multi unit rental properties. I've been looking in a rougher city close by, it's cheaper prices, lots of multi family properties, much higher crime rate tho.

worth getting duplex in the hood?

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