Found a Fantastic Deal, but there's a catch

If there is anything I've learned from Dean's books is looking for a great deal in a good neighborhood. Yeah, it probably sounds like it's too good to pass up, but down the line you might regret it and you may have a hard time finding good tenants that won't destroy your property and pay their rent on time.

Thanks for the advice. This is the same warning that my b/f gave me. It is a really hard one to give up but I think that the risks out weight the benefits.

Don't be afraid of the area. Keep looking at the opportunity. Hey nobody said you had to keep it forever! I say if it's a ridiculous price. Go for it! Some of the worst crimes are committed in the best of neighborhoods! You have the option to buy it low and flip it for a decent profit. Just make sure you figure in repairs if there are any. Use it as a stepping stone! I can't wait to hear about this one! Yeh Jen! Continue success.........Lubertha

I think if its a steal ( like your getting it for almost nothing, I would buy it and rent it sec 8. of course you would have to bring it up to their standards. So repairs would weigh in on the total price of it.
JMO
Richie.

already (not to sound harsh) just b/c you wouldn't live there someone else will. Like B.C. mention you can bring the property into compliance to make it available for Section 8 (or Housing Choice Voucher-depending on what name your HA uses) program. They will base the rent on the sub-market for area that the property is in. In a year or two if you have the same tenants you can see if they would be willing to buy the home thru cash, lease-option or finance purchase.

I agree with Lubertha If it is a awesome deal jump on it!!

Good-Life everybody,
Jennahouse21 when i read your post,The first thing that came too mind was...Deal!!! In the area i am thinking(You know it is not a location,spot)REI is a numbers game...Not people!
A proverb for all "One man's garbage-Another man's treasure"( for the ladies just say women instead of man).
This deal can be passed on thru you having a(Plan C)

Sounds like a good deal and also dont let anyone steal your dreams and you have to start somewhere and buy more properties. Good luck !!

Warm regards,

Paul T. La Moy

Jen, if it is a steal, where maybe it is so cheap, that you could do cash purchase, go for it. Remember, you still have to bid. Put in your offer and see where the chips fall. You might be surprised that this might be your lucky charm. Please fill us in on your decision. Good Luck

I would not buy in a bad area. There is nothing wrong with sec. 8 people, just because someone is on welfare does'nt mean they are bad people. But if the area is all crime then I would not even think about buying it. If you have to do repairs and the house is vacant now then you can have a problem of people breaking in and trashing the place for the plumbing and all right after you put money into it. And you are correct, it will be hard to sell a home in such a bad area. Be careful, if I were you I'd pass it up, something better will come along. Like Dean says, look for the ugliest house in the best area.

Jeremy

My opinion...

If the deal is such a deal... then location becomes second to numbers in certain situations.

If your positive of the numbers then the location doesn't really matter if you have a positive outlook. It sounds like a Duplex from your saying that you could have 2 tenants live there. First off, they usually fetch for more on the comps. so even if you did buy it for so cheap once you flip it you already made profit from equity! No tenant involved and a LITTLE based off of location lol!! The only thing you want now is a tenant involved so they could pay for the refi, which won't be a problem after the flip because then the home will look nice...

Now about the tenants...

EVERYBODY NEEDS SOMEWHERE TO LIVE... Everybody.

If you say the neighborhood is trouble that doesn't mean everyone that rents in that area is trouble and it sure doesn't mean that a tenant is going to destroy your property. I've grown up in some "rat hole" neighborhoods and I can't remember anybody's apartment ever being trashed while they were living there and any damage after the move out to the interior was minimum. That's what a security deposit is for anyways.

As far as tenants not paying... Well you got to look at the risk factor involved with your tenant. I'm hoping your not letting just ANYONE rent out from you. First off, don't let your Home be a revolving door, that's what a lease is for, make it a year. I'm not sure how many bedrooms and what not you have but, if your renting out to a bigger family, verify income because based on it you'll know if they are at risk of not paying. Another easy solution is to make sure they give deposit up front, that usually will get rid of any fears of them not paying because they anted up the dough before actually stepping foot in your home. Make sure the tenant knows that your lease is strictly enforced... Honestly if you do a little research and be thorough I don't see you having a problem with tenants.

Section 8 is not bad at all... if you get it to spec, you'll get a check from the gov like clockwork on the 1st. You don't have to chase the tenant for money. That's a thought. Then at that point all you need is the tenant. Now I don't know if your at all familiar with Section 8 system but here's a little rundown... There's a line lol, a HUGE line. People are waiting YEARS (no exaggeration) to get into the program...

Now if a tenant is a being a bad tenant, i.e. destroying or disrespecting your property, then you report to them and they get KICKED OUT the program... and they have to start at the beginning... 7 outta 10 they can't afford NOT to be on Section 8. That's a little motivation for them to respect your investment and not trash it....

I would buy it, flip it, and make it Section 8 ready if your truly concerned about neighborhood.

YOU CAN DO IT!!! GO OUT AND GET IT!!!!!!!!!

Knowledge is Power
- Pimpedoutgeese

You just answered your owns questions and concerns with due dillegence. Problem solved! Get the house and move on to the next one...

Lloyd

I would consider price vs neighbor hood. The first house I purchased was not in the best neighborhood, so my approach was to low ball the price even below the asking price. The price I offered was one that I new I could make a few thousand, even if everything went wrong. Guess what, the owner took it!
If the profit is there, and the house is comparable to the neighbor hood, go for it. Personally I don;t care if I make money in a million dollar neighborhood or a 10k neighborhood. Profit is profit.

Best of luck, if the numbers work, why not?

David

Keep in mind, if you have the desire and heart to help low income families into a home, then you'll definitely be a success. Good luck!

Look, there are tons of great opps in neighborhoods you don't want to live in. When you're a millionnaire, those numbers will be exponential!

Make a lowball offer, see where that lands you, and AFTER that ask if owner will carry! If so, and you fall into hell, then you could let it go, but with 2 tenants paying the rents, 1 tenant's rent should be able to carry some spruce up costs.

You don't have to rent to section 8 people - some of whom are very nice just like us. Prob with section 8 tenants is the state carries a higher standard of landlord responsibilities, and will make you do more expensive repairs then would normally be required. However, as some have commented here already, section 8 people don't want to get kicked off lists so they're often really good tenants.

Also, go to Home Depot and buy those steel security doors for $100 a piece and install at front and back doors. I have them in every place I live (I buy them), and they're great for piece of mind and air flow.

Now, if there's a murder being committed there often, then by all means, listen to your loving and concerned boyfriend. You can just toddle down to that police department and have them run crime numbers on their computer for you. Some cities and precints allow you to access online. Look deep before you leap, but it looks like a great opp for you to buy, fix and flip for a nice profit if you can hold it for a year or 2. Good luck!

Lets say the property sells for $10K, with two tenants, maybe Section 8. In most cases Section, pays somewhere around $1200 to $1500. In a period of about two months you will have already made back more than $5K of the money spent on the property. In four months it might be paid off in full. However, Jen at the end of the day you have to make the decision on how you feel about the entire process. We are just here to support you. Good Luck.

Sandra

I want to thank all of you for all of your encouraging words and your support in this process. I am really thankful for all of your valuable input. This property is one to reconsider.

Thanks,
Jen

I wouldn't offer very much if it is in a bad area...If you decide to go with it...Even if it is already well below market value...Crime areas are def harder to rent out, or sell if you went that route...

Also, where there is high crime areas, lots of drugs and violence is probably a factor as well...Not all cases of course...

The last thing you wanna do it buy a house in a crime area, and rent it out to tenants that treat it like crap, and cause problems where cops get called a bunch or things like that...

Personally if it were me looking into something like that, I would have to get the house for real cheap to the point where I could pay the house off pretty quickly just incase something happens and you can't find good tenants...Even in good areas, people treat houses poorly sometimes...crime and bad neighborhoods is asking for problems in my opinion...

Sounds like a good deal, but bad area in most cases = problems

If you plan on flipping to another investor they usually don't go for deals in bad areas. I know here in Ohio I have a ton of properties for around 5k and they are in bad areas and no investor will touch them b/c where they are!! That is 5k for a duplex that needs 20k in rehab and comps out at 80k!!!

I know from experience that some low income areas can work and other will not. I have some properties in the Youngstown/Boardman area that cash flow good and have had tenants for a long time. However if I did not know the area and bought a mile down the road then I would be trouble. Drive the area and check it out during the day and night. Also get a police report on the area. Another suggestion when doing your due dilegence, pretend that you own the property and place an add in the paper for prospective tenants. Do not give the current address, just the area. When prospective tenants call let them know the area you have some pretend properties and see what thier reaction is. I learned this awhile ago and it will help alot when deciding.

it'll let you know also which area(s) prospective tenants are looking to move into. Check out Craigslist and see are there any other listings in and around that area where the property is located to try to get a idea of rent market and what other landlords are asking for their places. I have agree with echriston; a neighborhood can change from good/ok to bad/worse within few blocks of each other.

Hi,
After reading the great comments,It seems our buyers list would be a great tool in judging the worth of the properties...We buy and hold!