Good neighborhood but lots of available rentals

A key to any market may include knowing what the rents are of the other available rentals. If the property will be able to rent and cash flow itself, it may be worth looking into. Just make sure you do enough due diligence work around the area your considering. Is the area on the way to improving? Are people and businesses currently moving in or out of the area. You want to ensure you are also able to collect rent when due. I hope this helps. Good luck with investing. Believe and Achieve! - Joe

Thanks for responding. What you say is pretty much self-evident. I have a real estate broker who is working with me and will get comps and rental figures. I also have contractors ready to provide estimates on the repairs that some of these properties will inevitably need. What I was hoping to hear was whether there is some rule of thumb one can use regarding an inflection point where too much competition on the rental side offsets the potential for using a particular area.

I do have perhaps one advantage in that I can offer a rent-to-own option that may not be readily available in the competing properties.

In my area, I am aware of the competition but I believe my units are a better value to attract a larger pool of prospective tenants. When I look at a rental market I want to know about the competition and what they offer. Some things to consider would include with the other rentals in the area, can you offer additional items to make your building appeal more to renters. Some other items may include, a fenced in yard for recreation, a basement with storage lockers, a on-site laundry coin-op facility, garage for the renter's vehicles, furnished appliances such as a refrigerator and a stove and even additional appliances such as dish washers. I hope this helps. Believe and Achieve! - Joe

Hi Joe, Hi milts >

About a half-hour from me are two cities whose real estate is priced about 1/3 less compared to my area; so, this past week I researched the multi-units for sale there and drove up to take a look at about 20 properties in one of the cities that looked like good deals. I had never driven around this particular city before except to go to restaurants downtown. I had mentioned to some friends at work who were familiar with the area that I was going there, and they said there were some pretty rundown areas in certain parts of this particular city & that my tenants in those area's would most likely be Section-8 Tenants. I thought to myself - fine, as long as they respect the property, that should not matter.

Unfortunately, about 8 of the properties I looked at were in a pretty rundown area & about 8 of the other properties were in another very dangerous area. Now, although I've lived in a nice-rural area for about 20 years, I did grow-up in a city; so, it's not like I don't know what it's like living in a city. But, these two particular areas were pretty bad.

Here's my question > If after running the numbers, you found that one of the 3-units in the very dangerous area would get you $300/mth cash flow, would you go for it?

Thanks,
DanD

Thanks for providing the scenario. Another useful tip when considering a new area, drive through it in the mornings, at night, and on the weekends. By driving through it at various times it will give you a pulse of the community. Ceratin properties may have a "grief factor" and you want to measure that as an indirect item when looking at making offers on properties.

I would not go for the deal unless the area was transitioning with a plan for revitalization. Sometimes there are designated areas in a city that are targeted from redevelopement. These may be areas to consider. It is great you are expanding your search because yo uare fidnign out vital information on yoru surrounding area. Another strategy would be to find a motivated seller in your area. It may take some work and alot of offers, but they are there. I hope this helps. Good luck on your future deals. Believe and Achieve! - Joe

Thank you for the feedback, Joe. I will follow your suggestion, and contact the city to find out what areas they may have plans for revitalization. Also, tommorrow night I'm meeting with a broker/investor I called last week in my effort to find a buyers' broker for this particular area; I'll pick his brains to see what he knows about revilization plans for this city.

Thank you again,
DanD

I work in acquisitions for a large commercial real estate operation and I am just beginning to make a personal move toward the residential market. What I can tell you from my commercial experience is that you should have a cushion from your cash flow that takes account of potential down time should you lose a tenant.

With that thought in mind, unless the entry cost for the transaction is nothing or quite small perhaps a $300 positive cash flow is a very thin cushion. You might encounter fix up costs and brokerage fees in order to find new tenants. Considering that the neighborhoods you reviewed are dicey, it is possible that it might take you a longer time to re-let there than in some other areas.

My recollection is that Dean advises to look at stable neighborhoods. If that is wrong, I'll apologize in advance. I do agree that re-vitalization plans can make a difference but bear in mind, today local jurisdictions are fiscally strapped and plans might get dropped or extended out.

Hello, can anyone tell me if there is a ready made letter I can send to the owners of vacant properties. I know of 3 properties that have been vacant for over 2 years. 2 of these properties are owned by the same person. I have noticed the taxes are up to date. Can anyone tell me a strategy I may use to acquire these properties?

Thanks
MJ

Dan I must agree with Joe with respect to his "grief factor" comment. That being said whenever one chooses to venture into the rental market there is a certain amount of "grief" which is to be expected. Otherwise, as with most things, if it were an easy endeavor everybody would be doing it.
I would like to inquire about your knowledge regarding government subsidized rent tenants commonly referred to as section 8 recipients here in the northeast? It would be my pleasure to expound upon the details/particulars of renting to those financially "disenfranchised" individuals who receive a government voucher for housing should you seek more information. The abridged version however, is that the funding comes from federal dollars. The rates are primarily based upon the number of bedrooms in the unit. Finally, the tenants are typically more maleable because any major infraction upon your drafted lease results in their loss of benefits and ejection from the program. In short, I have found utilizing this program to be an excellent means of generating guaranteed cashflow that is in excess of the fair market rent in any particular area...

Tim

"Do not judge a man by how many instances he has been knocked down. Rather, reserve judgement for the number of times he gathers himself to continue the fight."