I am currently looking into potentially investing 15-25 init apartment properties on Chicagos south side. The cap rates are extremely high across the board in this area (ranging from 8% to 12%). To put it simply, I am looking for what the "catch" is. Now I am aware of the high crime rates and the low income of potential tenants but I am wondering what other risks come along with owning apartments on the south side. Are high vacancies common? Would appreciate any advice from investors or anyone familiar with south side Chicago real estate market.
@Scott Ravida The higher cap is to offset the higher management expenses and headaches of owning these properties. They are extremely profitable but need to be run correctly. Many tenants will require several visits to collect rent and some may not pay at all. You will have evictions or tenants that just randomly leave one day. Vacancies not not necessarily a bad thing, it's better than inheriting a bad tenant. I've found buildings on the south side get hit with far more city code violations then other parts of the city. If your dumpster is open, your grass gets too high, they don't like your tenants leaving belongings on the deck, you get hit with $500 tickets.
You need someone local or a management company that is equipped to handle the management of these properties.