Advice Needed! Looking for Insights from Experienced Class C Investors

[Samantha Andrews]

I’m looking for feedback from experienced Class C investors who have managed challenging neighborhoods.

Last year, we purchased two newly built duplexes through Rent to Retirement as an out-of-state turnkey investment. We are now less than a year in, and we’ve already had two evictions. Then, our original property management company decided not to continue managing our properties.

We have since reached out to other property managers. The first drove through the area and said nearby Section 8 housing was a concern and that they were not comfortable managing there. A second property manager also drove through the neighborhood, sent us pictures of boarded-up duplexes nearby, and pointed out that there are roughly 20 duplexes (40 doors) on the same street that are currently vacant. They ultimately declined to manage the properties, as well. 

Selling is not necessarily the easiest option right now, so we need to be prepared to hold these properties for at least the next couple of years if we cannot find a reasonable exit.

For those of you who have successfully invested in Class C or transitioning neighborhoods:

• Have you seen areas like this improve over time, or do they generally decline?
• What indicators helped you determine whether a neighborhood was worth holding?
• What strategies helped you stabilize properties in difficult areas?
• What would you focus on over the next 24 months to make this work?

We are looking for honest feedback from people who have experience operating in these types of markets. Are we facing an uphill battle, or are there ways to turn this around?

[Marc Winter]

I have seen many of the 'turnkey' property sales companies show the same dismal results. To me, they prey on uninformed, inexperienced investors. It is so sad to see.

We have managed 100's of class c properties--in your situation, I'd cut my losses, sell it, and invest in an area YOU KNOW.  

When buying, you need to see the property, the street, the neighborhood, employment stats, and migration trends.  And have a team, including property management lined up BEFORE you buy.

Then you'll have a real fighting chance of coming out ahead.  Good luck.