Looking down the road, I can see a path for me towards buying apartment buildings. I hear everyone saying to stay away from lower income areas because of the headaches. However, I see 6 and 12 unit apartment buildings for sale in Hartford, NB, etc. Someone must be buying these properties and I would imagine it must be profitable for them otherwise they wouldn't buy them. With that said, if a management company is hired to do all the "dirty work", does the advice of staying out of low income areas still apply? I agree that in Hartford, as with any town, that there are better sections than others, but it seems to me that if you want to explore the possibility of owning more than 4 or 5 unit buildings you need to be open to looking in cities like Hartford, Waterbury, New Britain. What are your thoughts?
Hey @Dave Mosher
Think carefully about your observation: I see places everywhere being bought, but I don't agree that they are all making money.
I own properties in areas that I wouldn't personally live in, and I have a property manager. Most investors will tell you that the real killer is turnover/vacancies, and that's my biggest problem. My nicer properties have tenants that stay longer and take better care of the property. Even though my monthly income doesn't look as good, when I look at the past 2-4 years, I can see that they cash-flow just about the same, yet are less problematic.
You don't have to invest in A class neighborhoods, and if you don't have much money to start out you can certainly invest in less desirable areas and still make money. But do yourself a favor and stay away from D class, or "war zones."
Great response, thank you for your thoughts. Sounds like vacancy can be the X factor.
The boy properties I have visited in Hartford were owned by the Hartford Housing Authority. The majority being the split 6 style brick buildings. I worked for a design/ management company that did a lot of projects (repointing, windows, roofs, etc). I was threatened and followed when I visited the project sites. Things like measuring a window and I wasn't threatened with a gun... I didn't measure the rest of the Windows in that building. I was with some of the staff who would not step foot in some of the properties... the way they were kept (these I believe were all section 8) was horrible. The tenants just trash the places. I'm not sure if others have seen different, but from what I saw a and dealt with, I wouldn't own property in those areas. I have been to bad areas of Springfield MA, New Britain, Stamford, Bristol and others. You couldn't pay me to own houses in any of them!
I own a couple properties in Hartford, and one of the reasons I like the area is exactly what you said in the beginning; the availability of mid size properties which aren’t as common in other areas around here.
If you go to any city in the Northeast it will have it’s good areas and bad, just know which are which and try to stay away from areas you aren’t comfortable with. More importantly, the big distinction that needs to be made is that lower rent areas don’t always mean lower quality tenants. There are good and bad tenants at all income levels, one of the keys to success is finding the good ones and avoiding the bad ones.
If you’re lookin to hire management for your properties, you should know that companies typically charge more for these smaller properties and lower rent areas, and you will need to be careful at keeping an eye on them and your property. With smaller properties you have a lower margin of error so empty apartments or unkept maintenance can quickly add up.
It's also worth mentioning that some of these properties are owned by out of state investors who can't get good cash flow where they are. I agree that there are areas in Hartford that just aren't worth it. I let investors know right off the bat that if they are interested in a property in certain areas, that I am not the right property manager for the job...
That being said, I do offer management in Hartford, and investors do like getting as many doors under one roof as they can. Hartford presents many options in that regard. Unfortunately, the taxes in the city can kill many deals.
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