Landlording in Class C Neighborhoods
Investor · Branson, MO · Member since 2016 · 101 posts · 146 votes
Landlording in Class C Neighborhoods
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Property Manager · Metro Detroit, MI · Member since 2008 · 305 posts · 362 votes
8yOriginally posted by @Spenser Harding:
@James Wise and @Keith Jourdan - what criteria do you use to define whether a house is located in a B or C neighborhood? What would be a defining factor that would definitely put an area in a C for example. I am looking at getting into the lower graded neighborhoods and interested to see what your perspective is.
Class A. The neighborhood you take your significant other to dinner for your anniversary that costs $200+ for 2. Awesome schools. Hardly any rentals at all.
Class B. Area with desirable school district, 90% owner occupied, mid tier restaurants are in these areas, Apple bees, Fridays etc. A place most people would be proud to live.
Class C. Working class area with not so great schools, pretty safe, 50-70% owner occupied. No vacant/ burned out homes.
40 Replies
I don’t mind investing in c class . I’d rather B but the entry is more than I’m willing to do right now .c and d class can be very profitable .its a tough place to be but I grew up in poverty so I understand their ideology and how their poor choices created that mindset .one thing I learned investing in the hood is ( I’ll say it bluntly) you can’t be a wimp ! At times It is intimidating and can be confrontational I’m not going to sugar coat it , but if you worked hard to get that property you know what you have to do and you just go in and get it done . It is not for everyone , especially west coast sis males used to seeing palm trees and range rovers everyday - sorry had to say that
- Rental Property Investor · Phila, PA · Member since 2018 · 554 posts · 118 votes7y
@Garrett Hawk love this !
- Rental Property Investor · Phila, PA · Member since 2018 · 554 posts · 118 votes7y
@Keith Jourdanlove this
- Rental Property Investor · Phila, PA · Member since 2018 · 554 posts · 118 votes7y
@James Wise piss off
- Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 31k+ posts · 20k+ votes7y
Originally posted by @Cameron Riley:
@James Wise piss off
lol the mods are gonna ban you from the forums if ya run around doing stuff like that. This ain't Facebook or Twitter my man. The minimum level of acceptable behavior has a higher bar here.
Originally posted by @Keith Jourdan:
Originally posted by @Spenser Harding:
@James Wise and @Keith Jourdan - what criteria do you use to define whether a house is located in a B or C neighborhood? What would be a defining factor that would definitely put an area in a C for example. I am looking at getting into the lower graded neighborhoods and interested to see what your perspective is.
Class A. The neighborhood you take your significant other to dinner for your anniversary that costs $200+ for 2. Awesome schools. Hardly any rentals at all.
Class B. Area with desirable school district, 90% owner occupied, mid tier restaurants are in these areas, Apple bees, Fridays etc. A place most people would be proud to live.
Class C. Working class area with not so great schools, pretty safe, 50-70% owner occupied. No vacant/ burned out homes.
Oh that's seems Like a good scale... Except I'd have to admit that my "C-" rentals might really be "D." Hahaha. Oh well, I love them anyway and they cash flow like crazy.
My 89 year old MIL always comes back from the doctor and complains that a lot of people in health care really don't like "old people." I think a lot of landlords really don't like (i.e. respect) poor people. Landlords that believe being poor = bad person or inferior person probably shouldn't manage rentals for poor people (or at least they won't enjoy it or do near as good a job as me ;) ! )
- Investor · Detroit, MI · Member since 2016 · 61 posts · 86 votes7y
I have had succes. Screen tenants, maks sure they are clean, responsive and have income. My favorite trick is to have my tenants pay rent 2x or 4x/ mo. electronically, that way they are NEVER a month behind. For low income tenants, they will never be able to catch up if they fall a month behind. But if they are making smaller payments, its doable and they feel good about it. And so do I. Probably would be much more annoying, if I had more tenants but with 6, I am cool with it. Also, section 8, whenever possible has worked well for me.
- Lender · Pensacola, FL · Member since 2017 · 658 posts · 626 votes7y
Originally posted by @Jay Hinrichs:
Originally posted by @James Wise:
Originally posted by @Jay Hinrichs:
Originally posted by @James Wise:
Originally posted by @Ola Dantis:
@Garrett Hawk Honestly, I don't think your screening process should vary based on the neighbourhood class.
Remember, the screening process should work for any class and replicable in any market.
Hope this helps, Garrett. Goodluck. Thanks! - Ola
That's just not practical. To expect the people who will live in a neighborhood with $40,000 houses to have the same background as those who want to live in a neighborhood of $180,000 houses would never work in practice. Neighborhoods are going to be the biggest determining factor in the type of tenant you get. Anyone telling you otherwise doesn't have enough experience in the business to offer up real world advice on the topic.
Jim no kidding... I think that is the biggest thing I see most on BP starting their landlording journey have the hardest time understanding... they just don't understand how 40k houses the tenant base erodes exponentially as you go down in asset value.. although to us who work it every day its like landlording 101.. I think the investors starting out many times live where they live they simply have no clue.. unless of course they were born and raised in a certain market then they pretty much know.
but if your born and raised in Cupertino for instance you have no clue as to how people live their lives in 40k neighborhoods of pretty much any larger MSA in East of the Ole Mississip.. Now I am talking larger MSAs here not some little 30k population mid west town.. were median price range maybe under 100k.
Case in point property management is straight savage. Anyone disputing that fact hasn't been in the game long enough. Anyone & I mean Anyone with enough experience will agree that it's savage.
When prospective sellers walk into my office & see the girls collecting rents through a bullet proof window they are already ready to sign that listing agreement before I even sit down at the table with them. They know that I know the game & they are in the right place. This business is just so foreign to so many.
Jim when I first got into funding turnkey that was circa 2002 in Detroit we met at the PM/ rehab contractors office.. come in the back and the parking lot is fenced with Razor wire .. looked like the fence at San Quentin , then the 3 pistols in the shoulder holsters on the hat rack was another clue we were no longer on an episode of Portlandia.. then the bank teller window with the metal slide for the rent and of course bullet proof glass a little Like bank lobbies in Sicily I had been in.. Just another world and yes you earn your money.
Razor wire and bullet-proof glass are the worst forms of property management until you consider the alternatives.
When I was a teenager in Upstate New York in the 1960s, my parents kept cautioning me if I ever got into financial difficulty and couldn't get a loan from a bank, to never borrow money from a loan shark because most of these predatory lenders had connections to organized crime. If you enjoyed The Godfather movie, you'll know the types of stories out of New York City making the news regularly. Mob creditors had "extralegal methods" of either getting their money paid back or putting the fear into other would-be defaulters (they made sure the press and police could find your body). In the 1990s, payday loans came into existence so the authorities had some visibility over who was using them and defaults are written off rather than sent to extralegal collection. Publicly-traded payday loan companies are not raking in high profits. Instead, they are providing a much-needed service to this specific target market.
The same is true of public housing projects. One of my college roommates was an architecture major and I got to overhear dormitory conversations about the failures of sweeping up slum dwellers into high-rise apartment buildings. The problems of society just got relocated rather than solved. Instead, Congress decided it was better to offer juicy tax incentives to the private sector to take care of the problem for them (subject to fair-housing laws). Landlords with the right business model and the ability to execute are providing a much-needed service to this specific target market. Community capital is a recent approach to help solve these social issues, but it's too early to tell if they'll work (they sound good on paper, however, and I'm toe-dipping cautiously into this space).
Being poor is not a disgrace; it's just inconvenient. In my opinion, people who want to pull themselves up out of poverty will find a way to do so.
- Rental Property Investor · West Palm Beach, FL · Member since 2017 · 262 posts · 136 votes7y
@Garrett Hawk You want to account for much higher vacancy because with these types of properties you will likely inevitably face evictions which are expensive. In Ohio I lose about 2 months of rent due to eviction. I will get more efficient overtime but definitely in the beginning it is best to prepare for this.
@Keith Jourdan I agree that they leave junk in the unit that you have to get rid of. I have a friend from Detroit that is interested in investing there. Where would you recommend looking into? Where do you find this type of research you mentioned for retail corporation classifications?
@James Wise I am curious if you know the Ohio laws regarding requiring current home inspections to pass the application process?
- Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 31k+ posts · 20k+ votes7y
Originally posted by @Allyssa McCleery:
@Garrett Hawk You want to account for much higher vacancy because with these types of properties you will likely inevitably face evictions which are expensive. In Ohio I lose about 2 months of rent due to eviction. I will get more efficient overtime but definitely in the beginning it is best to prepare for this.
@Keith Jourdan I agree that they leave junk in the unit that you have to get rid of. I have a friend from Detroit that is interested in investing there. Where would you recommend looking into? Where do you find this type of research you mentioned for retail corporation classifications?
@James Wise I am curious if you know the Ohio laws regarding requiring current home inspections to pass the application process?
What do you mean by this? The legality of the city to enforce these laws?
- 7yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Originally posted by @James Wise:
Originally posted by @Allyssa McCleery:
@Garrett Hawk You want to account for much higher vacancy because with these types of properties you will likely inevitably face evictions which are expensive. In Ohio I lose about 2 months of rent due to eviction. I will get more efficient overtime but definitely in the beginning it is best to prepare for this.
@Keith Jourdan I agree that they leave junk in the unit that you have to get rid of. I have a friend from Detroit that is interested in investing there. Where would you recommend looking into? Where do you find this type of research you mentioned for retail corporation classifications?
@James Wise I am curious if you know the Ohio laws regarding requiring current home inspections to pass the application process?
What do you mean by this? The legality of the city to enforce these laws?
she might be talking about those POS thingees you got there in some areas of Clevelandia.
- Rental Property Investor · West Palm Beach, FL · Member since 2017 · 262 posts · 136 votes7y
@James Wise As in when you screen a tenant, and you require that the tenant let you "inspect" their current residence to determine if you want to lease your unit to them. Does that make sense? I am wondering if that is perfectly legal to do in Ohio.
- Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 31k+ posts · 20k+ votes7y
Originally posted by @Jay Hinrichs:
Originally posted by @James Wise:
Originally posted by @Allyssa McCleery:
@Garrett Hawk You want to account for much higher vacancy because with these types of properties you will likely inevitably face evictions which are expensive. In Ohio I lose about 2 months of rent due to eviction. I will get more efficient overtime but definitely in the beginning it is best to prepare for this.
@Keith Jourdan I agree that they leave junk in the unit that you have to get rid of. I have a friend from Detroit that is interested in investing there. Where would you recommend looking into? Where do you find this type of research you mentioned for retail corporation classifications?
@James Wise I am curious if you know the Ohio laws regarding requiring current home inspections to pass the application process?
What do you mean by this? The legality of the city to enforce these laws?
she might be talking about those POS thingees you got there in some areas of Clevelandia.
We have Point of Sale (POS) inspections as well as rental inspections in the varies suburbs around Cleveland. Some are exterior only & others are interior & exterior. The legality of some of these has been challenged around the Cleveland area as well as other parts of Ohio.
Bedford & Lakewood are two cities that have removed point of sale requirements due to the legal cases. Other cities like Euclid have slightly modified some of their processes on these inspection.
- Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 31k+ posts · 20k+ votes7y
Originally posted by @Allyssa McCleery:
@James Wise As in when you screen a tenant, and you require that the tenant let you "inspect" their current residence to determine if you want to lease your unit to them. Does that make sense? I am wondering if that is perfectly legal to do in Ohio.
No we do not go out & inspect the tenant's current properties that are outside of our portfolio. I know of some small time private landlords that do this but I have never heard of a large Property Management company doing something like this. The logistics would be tough to tame, but I suppose it's doable yes. There would be a huge cost increase to the Property Management Company's clients IE people like you & you'd probably also receive extreme push back from the tenant base as it's not a normal market practice. This could artificially increase vacancy to unacceptable levels.
- 7yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Originally posted by @Allyssa McCleery:
@James Wise As in when you screen a tenant, and you require that the tenant let you "inspect" their current residence to determine if you want to lease your unit to them. Does that make sense? I am wondering if that is perfectly legal to do in Ohio.
I think that is perfectly legal anywhere.. and do it un announced :)
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