Opportunity In a So-So Neighborhood - Posted by Les

Posted by Allan on October 20, 1998 at 20:04:04:

There can be a lot of money made in the middle to lower
class neighborhoods!!! I’ve made a lot of money in these sections, but sometimes there can be some headaches. But it’s cheap to get in and the rents are high. Cashflow, cashflow cashflow all day long.

Opportunity In a So-So Neighborhood - Posted by Les

Posted by Les on October 19, 1998 at 17:18:21:

I have a potential deal in process and am not sure what to do. I got a call from an ad I ran from a lady that owns a 3/1 in a so-so neighborhood. The home is rented at $450/m (just rented oct.3) and is in pretty good shape (except the roof is blind right now but I’ll get up there somehow). She needs to put in a working heater/furnance and vents (I suggested that she put in vents vs keeping radiators if she could get it done at the price she is claiming 1100.00/used heater, vents and labor.) The seller needs an operation and is looking to get out but wants $20,000 cash. I tried to make a creative offer where she would take back a short term note but that scared her and she continued to emphasize that she needed the 20k. I said fine because the lenders that gave her money to do the fixups appraised the property at 40K. I am waiting for a copy. I told her I wanted to go to contract and that the contract would be contingent on the property appraising for 40K(and others of course). She told me she had other interest for 28k but that they were moving to slow. I went home feeling good about the deal as I was not afraid to get out of the car at the property. On the otherhand when I took a drive by at another time of day there seemed to be police sworming all around in the vicinity and a lot of the homes on the street over were vacant and borded up. The seller told me that the area was being rehabbed. How can I verify this? I am looking to quick turn this property to another Investor for 28,000-29,000 so I can take a minimum of $3000 profit but am kind of scared I will get stuck withit. as I am writing this my mind is going weigh the pros and the cons but some experience would be much appreciated.

Peace and Blessings


p.s. sorry it was so long

Re: Opportunity In a So-So Neighborhood - Posted by Alex Gurevich, TX

Posted by Alex Gurevich, TX on October 20, 1998 at 10:32:25:

Sounds to me like you are not in so-so neighborhood, but in a bad neighborhood. If you are counting to flip the house like that for cash, you only buyers may be low income housing landlords. These guys will be pretty shrewd. I have a feeling that you may not get more than 20-23K for the place in cash. Remember your buyers will see boarded up houses too, and they’ll check into buying them. I’d try to get a contract for 10k-12k. If not, pass.

You can buy houses for 1/2 of value or less in much better neighborhoods (so-so + ). If you are getting into a mess, get in really cheap.

My .02 - Posted by mark (SDCA)

Posted by mark (SDCA) on October 20, 1998 at 10:27:02:

I don’t mean to split hairs but… For me, it would depend on how so-so the neighborhood is. I don’t buy in neghborhoods I would want to live in. I also don’t buy in neighborhoods I would be AFRAID to live in. I buy in blue collar, middle class neighborhoods. Solid rental neighborhoods inhabited by solid working class families. The dangers, turnover, lack of appreciation, property damage etc make the “bad neighborhoods” too much hassle for me regardless of the cash flow either real or on paper. SO jsut how “so-so” is the neighborhood??

Re: Opportunity In a So-So Neighborhood - Posted by JPiper

Posted by JPiper on October 19, 1998 at 19:33:54:

Can an investor make money in a “so-so neighborhood”? The answer is yes…in fact, I believe the opportunities are much greater than in a good neighborhood. My own preference is “so-so neighborhoods.”

Perhaps a better question is can YOU make money in a “so-so neighborhood”. Here the answer becomes hazier. One of the things that becomes imperative in a “so-so neighborhood” is that you develop an in-depth knowledge of the area, both on values, how properties sell, rents, who the buyers are, financing methods in the area, etc. Other qualities are the personal qualities necessary to work these areas. Rent may be more difficult to collect necessitating more intensive management. Your abilities to evaluate prospective tenants and/or buyers becomes more important.

Knowing how to evaluate the condition of a property becomes more important, because these areas are more typically older areas…with older houses. Having decent contacts with contractors, and some abilities to manage and work with them (this is always difficult)…but more specifically in older areas.

There may be some type of a deal here. But you haven’t presented information that shows me that there is a deal. I see that you might have an appraisal. But in these areas appraisals are a dime a dozen. Have you come up with your own market estimate?? Who’s the tenant in the house? What’s the story on the tenant? This could impact your ability to do a deal. Have you seen the lease, or the application? Is there a deposit?

Frankly, I’m would increase your suspicions when someone tells you that they have buyers at $28K…but they’ll sell for $20K because you are faster. The case is more apt to be that houses in the area may be very difficult to sell for cash. It could be that you are overpaying for a cash deal in this area. Cash and qualified buyers are at the premium in “so-so neighborhoods”.

The rent on this property is good, considering the possible purchase price. If you could leverage into this in some way, your rate of return would be excellent, assuming you can collect your rent.

So this is a long answer…the answer really depends on you.


Re: Opportunity In a So-So Neighborhood - Posted by Mr Donald (NORVA)

Posted by Mr Donald (NORVA) on October 19, 1998 at 18:06:52:

Bypass this one unless you’re experienced in this type of deal. There are many other deals that you can put your efforts to without this much attendant risk.

How much were you planning on putting into this one, anyway?

Re: Opportunity In a So-So Neighborhood - Posted by phil fernandez

Posted by phil fernandez on October 19, 1998 at 18:03:28:


I only invest in good neighborhoods. To me that’s rule numbers 1 through 10. Easier to sell and easier to rent. And much easier to collect your rent.

Who’s going to be interested in buying your house in a bad neighborhood. Probably only a limited amount of people and are these buyers even bankable. Your holding period will also be much longer in bad areas most of the time.