Killing it by turning crack dens into safe housing

Innovative Strategies
7yFollow

Killing it by turning crack dens into safe housing

John Hickey
Rental Property Investor · Chappaqua, NY · Member since 2015 · 1k+ posts · 947 votes

I’d like to share my strategies here to help others make money and turn the worst war zone, vacant areas into safe spots for families to live.

I’m by no means the only one doing it. It’s just hard to find people talking about it. 

I think if we talked about it more more people would take the risk and the worst crime areas could turn very quickly into homes.

Some of them aren’t going to be pretty. 

Some are pretty simple.

Welcome all to advise and share here.....

Especially those who have successfully taken stuff from war zone to secure housing.

So I’ll start it out.

Buy the worst house in whatever area your going to purchase. It might be useful to ask the cops what house they goto most often in the city.

Try to buy at least half a block. Getting a corner with 100’ in each direction is helpful.

See a bodega? Get that too.   Don’t let a single commercial or residential property within 500’ get sold to someone other then you or some one you can trust that will assist you.

32Reply
363 views

Most Popular Reply

Michael Ealy
Developer · Cincinnati, OH · Member since 2018 · 1k+ posts · 3k+ votes
7y
Originally posted by @John Hickey:

I’d like to share my strategies here to help others make money and turn the worst war zone, vacant areas into safe spots for families to live.

I’m by no means the only one doing it. It’s just hard to find people talking about it. 

I think if we talked about it more more people would take the risk and the worst crime areas could turn very quickly into homes.

Some of them aren’t going to be pretty. 

Some are pretty simple.

Welcome all to advise and share here.....

Especially those who have successfully taken stuff from war zone to secure housing.

So I’ll start it out.

Buy the worst house in whatever area your going to purchase. It might be useful to ask the cops what house they goto most often in the city.

Try to buy at least half a block. Getting a corner with 100’ in each direction is helpful.

See a bodega? Get that too.   Don’t let a single commercial or residential property within 500’ get sold to someone other then you or some one you can trust that will assist you.

 Good strategy and kudos to you for having the guts to do it. Not many real estate investors, and specially newbies can do what you do.

Having said that, buying in the worst neighborhood by buying the whole block can be very profitable. One deal I did was in Avondale area of Cincinnati. If you do your research, Avondale has one of the highest crime rate in Cincinnati. I got 30 units - townhomes for only $450,000 - and only 3 were occupied. They were paying $300/month. You can research the address - 3561 Eden Ave, Cincinnati.

Got everyone out and renovated the units (it's still going on). When I did my estimate, I projected the rents can be increased to $850/month. But I made a mistake.

It was way lower than my projections. My leasing agent was able to lease it for $1,250/month. And there was a waiting list. My partner and I will make $2 MILLION by the time we sell it or if we decide NOT to sell and just refi, we'll get $1M cash on top of our initial capital and keep it for cashflow.

Here are the pictures: (I will dig up the before and post a before and after in a different post)

Here's a video: 

If you ask the folks here on BP who lives in Cincinnati if they will buy in Avondale, 99% will say "NO way!" That's why 99% will never make $2M on one deal. Again, not a strategy for a newbie BUT, doing this improves neighborhoods and the real estate developers and investors who are willing to do this, can get rewarded handsomely.

18Reply
See this reply in the discussion

133 Replies

Jump to latestLatest
  • Jon Penton
    Specialist · Denison, TX · Member since 2017 · 22 posts · 17 votes
    7y

    @Michael Ealy I’m a real estate photographer - loved the video! The lighting, color, transition between rooms, even the slowmo fans 👌🏼 Did you do that yourself?

    2Reply
  • Tony Gunter
    Investor · Canton, GA · Member since 2014 · 728 posts · 500 votes
    7y

    Like everything real estate, location, location, location.

    This is a white knuckle strategy, not for the faint of heart. It entirely depends on being able to actually attain a great ARV (supported with an appraisal) for resale or to cash out refinance. I find that can be a real challenge in most places where this type of inventory exists. Granted, I'm not experienced in a large northeastern metro, but the dynamic I speak of applies everywhere.

    0Reply
  • John Hickey
    OP
    Rental Property Investor · Chappaqua, NY · Member since 2015 · 1k+ posts · 947 votes
    7y

    @Angelo Mart are they in Newark?

    I met a big guy that does what I do last year. 300 units. Very cool guy. No bs. He was Albanian I think.

    Thanks Angelo.

    0Reply
  • John Hickey
    OP
    Rental Property Investor · Chappaqua, NY · Member since 2015 · 1k+ posts · 947 votes
    7y

    @Scott Mac

    So yeah some people will have to move. I keep or relocate good people. Do it all the time.

    As far as moving ppl yes. The problem ppl will move. It won’t solve that problem. They’re only a problem when they are close to my property.

    I usually align myslef with a few of the junkies. I use them to clean up the gutters. And I talk to them frequently.

    The dealers...I talk to them to. I usually give them a heads up if they’re standing in the camera field. Most people don’t realize how high def my cameras are so I’ll bring them into my office and say check this out.

    Getting rid of both isn’t an overnight thing. But once you start renting out new units at top dollar they need to be gone.

    Dealers and junkies aren’t going far. Once they settle in at the new bodega I look the owner up and start talking price. Try that for buyers market. Think I mentioned that but it’s good to hear twice. It’s a killer deal making strategy.

    2Reply
  • John Hickey
    OP
    Rental Property Investor · Chappaqua, NY · Member since 2015 · 1k+ posts · 947 votes
    7y

    @Tony Gunter

    So when I started this on house I bought was

    54 benkard newburgh NY 12550.

    It was probably worth about 65-75. I paid 47 cash. That’s the small deal I was talking about above that wasn’t that bad a neighborhood. But I talked to a buyer last week and he said it’s still rough to him.

    I sold it last year for 159 after paint and adding 1 cabinet 1 fridge and refinishing the floors. That’s a pretty low Reno price for me.

    It’s worth 250 right now if I had it on the market.

    This strategy is the definition of forcing appreciation. No need to hope an appraisers, misjudges on the high side.

    Comps support me. Will that last foverever? As long as the neighborhood keeps moving yes. If it starts to decay no.

    0Reply
  • Alan G.
    Investor · Newtown Square, PA · Member since 2015 · 132 posts · 149 votes
    7y

    @John Hickey John, started approx 5 years ago. Although the areas i buy in aren’t the war zones you invest in they are def tough. I look for streets that have a couple well cared for homes (which tells me there are at least a couple people that care) and numerous homes that have boarded windows, overgrown lawns, and you know those white sheriff sale papers on the doors.

    Slowly but surely I just start buying either from other investors and landlords, homeowners, and banks. Most of the properties I’ve purchased I’ve done full renovations to.

    Every house i do looks identical using the same materials. Outside I clean them up, number signs, front doors, windows. You can drive down my blocks and know exactly which ones i own. I talk to everyone especially the neighbors right next door. Sometimes I’ll even paint the neighbors fence if connected to mine. They love it and I’ve found as we fix, my neighbors will start to clean up at the same time.

    As far as numbers go, I’m generally 65k all in after renovation. Rents average 1200 per month but I’ve been pushing those to over 1300 by adding additional bedroom in basement. 30 percent of my tenants are section 8. I screen like crazy and I can tell you i generally get great tenants. I have a great product without over improving so I can attract the “better” ones

    Currently own just under 60 of these 3/1 and 4/1 homes and have been buying an average of 1 per month.

    3Reply
  • John Hickey
    OP
    Rental Property Investor · Chappaqua, NY · Member since 2015 · 1k+ posts · 947 votes
    7y

    @Ivan Terrero towns of newburgh is a big area. I don’t pay much attention to it. Looks pretty nice to me. Never heard of a bad area in the town, but of course it will have some.

    In 2010 newburgh city was not getting better. Started in 2015/16

    1Reply
  • Soniel Estime
    Rental Property Investor · Chicago · Member since 2018 · 74 posts · 67 votes
    7y

    @John Hickey

    Thank you for this post. I just purchased my first investment property in Chicago and it has been very difficult trying to get the rehab done, “got burned by my contractor” this post gives me motivation to keep moving forward! My goal is to be doing the same thing some day!

    1Reply
  • Adam Fiore
    Investor · Simsbury, CT · Member since 2015 · 46 posts · 31 votes
    7y

    @Alan G.

    I love this !!!

    This is the only way to get cap rates in the high teens

    And low 20’s

    0Reply
  • John Hickey
    OP
    Rental Property Investor · Chappaqua, NY · Member since 2015 · 1k+ posts · 947 votes
    7y

    @Adam Fiore I’m looking at some CT cities for my next move.

    Before i settled in newburgh I had spent years investigating Bridgeport, Hartford, new haven(missed the boat) and Waterbury.

    If your up for it let’s keep in touch. Part of my strategy is to have support. So I buy on one block and align with other investors that buy on other blocks.

    2Reply
  • John Hickey
    OP
    Rental Property Investor · Chappaqua, NY · Member since 2015 · 1k+ posts · 947 votes
    7y

    @Soniel Estime I still get ripped off. Happens. I once thought I’d have the same contractors for ever. If their dishonest that’s will take them down.

    If their disorganized that will take them down.

    If their cheap with thier labor.....

    Most of them if they are really good will move up out of that market eventually or they change their biz to what we do.

    1Reply
  • Adam Fiore
    Investor · Simsbury, CT · Member since 2015 · 46 posts · 31 votes
    7y

    @John Hickey

    The property taxes in Hartford have discouraged me in the past however if you could pick up

    4 6 families in a row could potentially

    Be worth it. Even though this is your bread and butter and it works for you I would hate to manage these places

    I have B class buildings in C class areas

    I have section 8 tenants before

    And I am not going that road again

    I would consider doing it if a entire street could be purchased in one shot in hartford

    Waterbury fits your criteria

    Gun waving New Haven most certainly could use your touch

    New Britain would also be worth looking into

    1Reply
  • Ivan Terrero
    Investor · Naples, FL · Member since 2016 · 256 posts · 75 votes
    7y
    Originally posted by @John Hickey:

    @Ivan Terrero towns of newburgh is a big area. I don’t pay much attention to it. Looks pretty nice to me. Never heard of a bad area in the town, but of course it will have some.

    In 2010 newburgh city was not getting better. Started in 2015/16

    The laws in NY favor the tenants. I have 2 friends that have bailed out of Beacon, Wappingers Falls and Hopewell Junction.

    0Reply
  • Ciaran McGoldrick
    Member since 2019 · 1 post · 0 votes
    7y

    @John Hickey Do you think this strategy is still possible in Newburgh? There’s been huge market appreciation in the past 2 years making deals more challenging to find. I’d like to get started in the market but fear I may have missed the right timing. How do recommend finding off market deals on some of the vacant building in Newburgh? The city hasn’t been posting many available properties online in the past couple months

    0Reply
  • Eric M.
    Flipper/Rehabber · Louisville, KY · Member since 2008 · 1k+ posts · 1k+ votes
    7y
    Originally posted by @Alan G.:

    @John Hickey John I love the strategy and am doing almost the same in my area just west of Philadelphia. I looked for a block with many board ups and foreclosures and bought all of them. Renovated everything now I control who lives there. Once the neighbors started seeing our nice homes they start fixing also.

    Doesn’t happen overnight since I’m buying 1 by 1 as they come up. Although I’m never selling. By controlling most of the tenants on a block I control who lives on the block.

    Love your idea.

    I find it kind of creepy that you claim twice that you "control who lives on the street". Well, if you are following fair housing laws, I don't see how you control who lives on your street. 

    How do you control who applies to rent your units? Or do you just pick and choose who you approve based on your personal biases?

    1Reply
  • Judy Parker
    Rental Property Investor · Closter, NJ · Member since 2015 · 884 posts · 722 votes
    7y

    This strategy sounds perfect for Paterson, New Jersey.

    If they are crack dens or meth labs, how do you decontaminate them?

    And you need armed security 24x7, to protect your workers, and supplies (copper pipes)?

    0Reply
  • Davido Davido
    Rental Property Investor · Olympia, WA · Member since 2012 · 544 posts · 311 votes
    7y

    @Jon Penton

    @Jon Penton

    @Jon Penton

    @Jon Penton

    @Jon Penton

    @Jon Penton😊



      1Reply
    • Ori SklootPro Member
      Investor · Berkeley, CA · Member since 2016 · 242 posts · 304 votes
      7y

      @John Hickey. I love when investors can help communities and make good money while doing it. Keep it up. By the way, bonus points to your strategy if you buy in a qualified opportunity zone. Hold for ten years and then sell with tax free gains.

      0Reply
    • Alan G.
      Investor · Newtown Square, PA · Member since 2015 · 132 posts · 149 votes
      7y

      @Eric Michaels

      Creepy? I’m creepy because I only let hard working families into my properties ? I’m creepy Because I won’t let drug dealers, strippers , and general trouble makers into my properties ?

      My goal is to help change this neighborhood 1 house at a time. I abide by all fair housing laws but my screening process may be a bit tougher than others. I’ve learned that there really are some good people in these neighborhoods that just think a little differently than you and I. My tenants don’t want the dealers living next door to them any more than I do.

      When I say “control” I just meant I now have the ability to keep out the undesirables

      2Reply
    • Anthony Rosa
      Rental Property Investor · New York City · Member since 2019 · 703 posts · 538 votes
      7y

      @John 

      @John Hickey - Hi John, I see you're from Chappaqua and by no means is that near or around a war zone area, in fact its one of the wealthiest zip codes in the US.  I am very familiar with NYC and its surrounding counties and the only war zone area, that I can think of while typing, that's at a near distance to you so you can see what's going on would be the City of Newburgh, NY (but its slowly in the upswing).  Is this the area that you're changing around?

      0Reply
    • Desiree Wrencher
      Member since 2019 · 8 posts · 4 votes
      7y

      @John Hickey looking for more info

      1Reply
    • Mattaniah Yip
      Investor · Los Angeles & Detroit · Member since 2014 · 52 posts · 17 votes
      7y

      @Michael Ealy very impressive!

      3Reply
    • William McCartney lll
      Member since 2017 · 4 posts · 2 votes
      7y

      Damn John you the man

      I find what you do is actually fun

      1Reply
    • John Hickey
      OP
      Rental Property Investor · Chappaqua, NY · Member since 2015 · 1k+ posts · 947 votes
      7y

      @Anthony Rosa right on both counts.  Yes Newburgh NY is the place that I have been focusing my energy on.  

      2Reply
    • John Hickey
      OP
      Rental Property Investor · Chappaqua, NY · Member since 2015 · 1k+ posts · 947 votes
      7y

      @Ciaran McGoldrick some would say it’s bragging 

      But I can tell you when I applied this strategy to some of the worst blocks in newburgh beginning in late 2016 you could buy shells for 10k.  Now they are 200k. 

      I would say yes you can make money in newburgh.  But the heavy lifting of this post is not about making money.  So yeah I would say goto newburgh ans noon what’s going on learn some stuff. 

      Then down the road get a band of like minded folks together and fix a block yourselves.  

      0Reply
    Join the conversationCreate a free account to reply, vote on answers and follow this thread.
    Log InJoin for Free