OfflineI'm thinking about buying a rental property in a rough part of town. The house is in great condition. It's 3bd,2.5bath 1530sqft, built in 2003 and it's going for 150K. The appraised value of the home is 200K. This used to be a forclosed property now the bank owns it. My question is should I go for it. The area is in a vevitalizing stage, there's new condos everywhere, new businesses coming into the area and there's a college that will soon be a full blown campus starting the 2008-2009 school year. What are some thoughts? Thanks for the help.
Michael
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if the location is border line bad, but is in a rehab stage in the community ( there are positives that you think are going to turn the neighborhood around) but, if your wrong, it could be your worst nightmare. Think you need to weigh the positives and the negatives to see where this neighborhood is going to be headed in the next 1-2 years from now, SULLY.
YOUR HERO, SULLY
Tough call to make here.
In general, you want the worst home in the best neighborhood, NOT the best home in the worst neighborhood. So that is a minus.
BUT... if the area is really turning around then you can make a killing as ALL the property values will rebound. (You hear this a lot with downtown areas.)
Only you can make the call about which of those 2 points is more critical.
Are you willing to carry the house for a while?
How rough IS the neighborhood? Are you afraid to collect the rent during the DAY?
I agree with the previous responses. If you're certain the area will pick up AND you're able to hold onto the property for a number of years, then go for it. Make sure you're able to cash flow. Maybe with a section 8 tenant. Each month, section 8 rent can be directly deposited into your bank acount. Just know, if you end up wanting out early, it may be next to impossible to unload. Yikes!
prefrence (might have misspelled that one) Some folks all they do is invest in urban areas and others like me will not set foot in one.
but if it is on the rise, maybe the crime and holagans will be on the way out cause of the increase of living expences that will follow all the things coming to town.
Don't Wish the Past, Create the Future! - DH
The area is not that rough, I would go there to collect rent. I'd go there at night to collect rent. In the early 90's the area has had a bad reputation, but the city has renamed that part of town as New Tacoma and is looking forward and revitalizing it. I plan on holding the property for at least 15 years. I think it will go up in value during that time. The comps for the area is 200-220 right now.
Sounds like your getting the property at a good price. Since there is a college near buy, you automatically have a large pool of renters at hand. If you rent to college students try and get a student that will have there parents directly send you the check. I had many fellow college buddies that did this so they could rent the nicer pads.
Also look into a lease option, more money for you in the front and back end. Only 5% of the leasers end up buying anyway. That way you will still have your property and have better quality renters/leasers.
Zeek
If the neighborhood is turning around, it sounds like a good deal. If you decide to purchase the property you may also want to think about obtaining other properties in that neighborhood so you can help to turn it around. Look up the surrounding houses in the tax records, which are hopefully on line in your county. You may be able to get a lot of those properties at a fairly good price. Especially if the property owner is an out of town landlord.
Let us know what happens!
Roni