Low income housing appreciation values

[Roc P.]

I have a question for the guys who deal in low income areas for rentals. I've been looking at some houses in a low income area, I know that the properties will cash flow but my only concern is that the homes are not appreciating at all, and the homes have actually been depreciating for the past five years.

Should this scare an investor whose main main concern is cash flow? Thanks

[Eddie Ziv]

Roc,
This is a very broad question since all markets are local and the appreciation or depreciation depends on the state and direction of the economy, population migration and other factors. You may find certain areas that considered "neglected" and even dangerous become trendy because of the prices are so low that it allowed young and trendy people to buy those properties for a few dollars (Happened in Detroit). Or it could be because the houses' architecture is unique (Such as turn of the century houses) that the area become trendy.

The flip side of course, could be that the opposite happen. A middle class neighbourhood that went down in value because the jobs disappeared and now turn into low income houses. (Atlanta have quite a few of those for instance) Those neighbourhoods, may continue to drop in prices at least for a while.

Check my first house I bought in Birmingham, AL
http://www.biggerpockets.com/galleries/show/5415
I paid $24,000 for it including rehab and it is rented for $650. You cannot find a house in a five miles radius today, that sells for less then $42,000. In many cases flippers take advantage of the low prices, "rehab the neighbourhood" if you will and drive the prices higher.