Bad neighborhood?? (long) Please Help. - Posted by jim jr
Posted by jim jr on July 06, 2003 at 11:48:42:
I am trying to do my first deal and I am getting nervous. I bought some land (4 lots) when I was home on leave in SC. The land is in a rural area, low income area. I did by the land in hurry because I was on my way over seas and wanted to get started. I had been studying real estate for a year or so and was tired of reading. Now I am worried that I made a mistake in buying the land.
I just got the first lot cleared, drive way cut, and had a septic tank installed. My father is coordinating all of this for me, and can get work done pretty cheap. I got the lot cleared, driveway, and septic tank installed for $1400. My dad knows nothing about real estate investment, but has been a private contractor for years, and has worked in every area of the home business (building, remodeling, vinyl siding, etc.). I just got off the phone with my father and now he starts telling me that he hopes I didn’t make a mistake by trying to do business in this neighborhood.
My orignal plan was to clear the lots and do some land/home deals, by renting out the land and selling the mobile homes Lonnie style. Now that I am ready for a mobile home to go on the land, he starts telling me that he is unsure about the area. He says he just doesn’t want me to lose my money, by placing a home on the lot and having it vandalized. He says a rode around the area more, and saw a few really old and run down, abandoned trailors. Also, when he was going to check out the lot after the work had been done, there was a lot of “young people” hanging out on the corner lot of the road that my land is on. He said they were all drunk, bla bla bla, and were waving him down because they probably thought he wanted to buy some drugs or something. So now he is scared and is unsure of the area. I knew the area was poor but the land was only 14,000 for 4 lots a .9 each (3.6 acres). The land has quick access to a major interstate (I-20) and is 10 miles from a new, developing industrial park with 5 or 6 new businesses in a shopping center (KFC, Pizza Hut, Wendys, etc.). But like I said, is a very low income area. There is not a shortage of used mobile homes where I am from.
So now I am at a fork in the road. He tells me that we should just try and rent the lot for $150 a month and let somebody else worry about the trailor. But I say if we rent the lot, that means somebody will be moving a home there to live in, so why not sell them that home and make money off of both ends. He says that it could sit there for months, and some young punk could ruin it. Then I say, well you have to take some risk or we will never get anywhere. I will not have to invest a big amount of money in the home. I can get one for $2,000 or $3,000 and my father is going to do most of the work for next to nothhing. We can get homes moved for a couple of hundred bucks and my father will set them up.
So what do you guys think? I have to do something. I pay $137 a month for the land payment and I want to get moving. I have the cash to buy the first home and get it set up. Is it too risky to put the money into this rural, poor neighborhood? I am starting to sweat over this, but at least I am gaining experience. My point to my Dad was that, the caliber of people who will be moving into this area, are more likely to buy if the home is already set up and ready to move in with low monthly payments. What are the chances of them moving the home there themselves, and if they would, why not be the person to sell it to them. I just think if I go with just renting the land, that it will just sit there and rot. But that could happen with the home as well.
Any suggestions? Sorry this is so long, but I just got off the phone with him and my blood is pumping. I have searched the archives and I have read DOW (read DOW after I already had the land). Is my dad being over cautious or did I make a bad move? Any adivce is greatly appreciated.
Thanks, jim jr.