Heres the scoop on my situation…
Im 28 years old looking to get into the REI again after a year ago my brother and I had purchased a home in a semi-bad neighborhood. We financed the deal with my brothers money. Purchased all supplies for the complete rehab with both of our money and ended up keeping it for 2 years. We ultimatly sold the house to a buyer. My brother made $500.00 after it was said and done. We had our tools stolen once, a rock through the window a couple of times and needless to say we had spent hours and weekends messing with the house and didnt have much to show for it.
I am glad that I had the experience of learning the ropes about construction. I am not glad that it left a bad taste in my mouth.
My question to all of you is: Do houses in bad neighborhoods turn any of you guys off or is it a thing that Im going to have to overlook while doing deals.
The conventional wisdom, as it’s been told to me, is never to bother rehabbing a house in a bad neighborhood, cause when all is said and done, and after all the headaches you experienced, you still have a house in a crappy neighborhood. And who want’s that?
I’ve heard, it’s always better to have the worst house in a good neighborhood, then to have the best house in a bad neighborhood… because the surrounding area effects the property value of your house.
LeiterCIA is correct here, you want to focus on the law of progression where the neighborhood influences a positive increase market value. Whereas, if you were to fix a house into prime condition in a crappy neighborhood you would gain little or no value… which contributes to the law of regression – and that’s not what you want.
We (my wife and I) buy and hold…we will not buy in a neighborhood where she is not comfortable working alone. Additionally, we buy in the city that has the best schools around because that is where the most renters want to live!
Keith
Thanks for the advise however most of the cheap houses are in crappy neighborhoods.
This is how Milwaukee Wisconsin is…
Most of the city is poverty level and is filled with minority crime and gangs. So in my mind its all crappy. The only areas worth doing business is outside and in suburbs but most or the houses are selling for quite a bit more than comps are telling me. Do I lowball the offers till I get a bite or is this just a bad city?
I am sure that Milwaukee is similar to just about any metropolitan area. There are communities within the city that generally do not have the issues that you mentioned. Try the old ethnic neighborhoods. For example; Cleveland’s Little Italy
There is still a pride of community in these areas and the propertys tend to hold their values a little better. Crime is a little less in these areas, also
Another thing to consider is using leverage. If the reason you bought in a lower value neighborhood is that is all the cash you had, consider getting a loan to purchase and fix up in a higher value neighborhood. Remember the property qualifies for the loan. If you have basic good credit, the bank then approves the property. If the deal works in a higher value neighborhood go after it.
Lower value neighborhoods do great as rentals though. If you buy it, make it clean and functional, you can rent it for positive cash flow.