4 Plex deal in Louisiana

I have a opportunity to buy a 4 plex for $30,000 that is vacant and need some TLC. The only concern is it is located in a c or d class area of town. I’ve look at the comps in the area and after repaired value another 4 plex sold for $165,000. I would like to get some input from experience multi family investor.

It would be really tough for anyone to directly comment without a lot more info. Cost of repair, ability to sell or finance later, etc.

All of that said, a property in a bad location is going to be a property in a bad location even if you did fix it up. The next buyer will be thinking the same. They will want a bargain before they are interested. Many will not even take a look so your pool of buyers is smaller. The tenants who will live in the area is also a narrow set.

My rule of thumb is that I would prefer to buy a bad property in a good area. Rather than to buy a good property in a bad area. You can always fix a property, but you can’t always fix the area.

Bad area wins

To relate a personal experience to illustrate a point, when I got married while still in law school my W and I then set out to find that decent-nice apt that we could afford.

Well of course in the better parts of town all we could find where we’d feel ok and that were short drive to school were just too high in price.

So at last we decided on a brand new 3 story apt house that was about twice as far a drive as we wanted and in a part of town where I didn’t really feel totally safe walking…especially after dark.

But the unit we got was brand new and fully furnished with new furniture and appliances and was safe enough once inside the property.

A year or so back I was close enough to take a drive by and have a look at the place and was saddened to see that property has been let slide into a slum property to fit into the rest of the neighborhood.

The moral of the story was, to me, that a crummy neighborhood is going to drag down a nice single property instead of the great prop elevating the crummy area.

As tempting as that price point can be, you will more than likely have a much higher vacancy and collection loss to worry about. Turnover could be terrible and what good long term tenants you get will probably not be able to absorb market increases in rent. You will probably also have to worry about qualifying for Housing Assistance Payments, which can open up a whole new can of worms as far as inspections, condition, etc. Just remember too, it costs just as much to renovate in a bad part of town that it does in a good one!

[QUOTE=SuzField;883693]… Just remember too, it costs just as much to renovate in a bad part of town that it does in a good one![/QUOTE]

Picking up on the last part of the prior reply…

If you get a great price on a property in a troubled area it could be a long term time sink. Some of the ‘discount’ is to compensate you for the added hassle.

The most common reason a landlord starts to lose their grip on their business or decides to get out is a property that has a lot of headaches.

[QUOTE=SuzField;883693]As tempting as that price point can be, you will more than likely have a much higher vacancy and collection loss to worry about. Turnover could be terrible and what good long term tenants you get will probably not be able to absorb market increases in rent. You will probably also have to worry about qualifying for Housing Assistance Payments, which can open up a whole new can of worms as far as inspections, condition, etc. Just remember too, it costs just as much to renovate in a bad part of town that it does in a good one![/QUOTE]

Suz,

I took a look at your profile. An older message implies you are an appraiser. Is that still true?

I noticed that you list Chester County in PA. I wife’s family is from there or south of there.