Crummy neighborhoods - Posted by Chris Smith

Real Estate Investing
#1

Posted by Mark wv on February 26, 2001 at 19:57:19:

Chime time. LOL I’ll add that what I look for are, areas that while some homes are run down, there is a few close by “my house” that owners are trying to keep up and renovations are being made to others, also drive the area on sat & sun I you see alot of owners out an’ about washing their cars , home windows, mowing, yard work ect these are areas that people care about their homes and most of the time are glad to see someone buy that dump down the street and fix it up.

I’ve got good tips from these yard workers and have sold 2 to people in the area that thought that house down the street couldn’t be bought.

Mark

#2

Crummy neighborhoods - Posted by Chris Smith

Posted by Chris Smith on February 24, 2001 at 22:34:48:

Hi, I live in an area with a small city that is surrounded by rural and suburban type neighborhoods. People are leaving the city in droves and are willing to sell for sheap. There is an increase in crime and slum conditions. I just saw an ad for a fixer upper for $3500. It isn’t unusual to see 3-5 bedroom houses going for $12000-$25,000. There are alot of investors with ads in the papers saying “I Buy Houses”, etc. I would like to flip contracts and would like to know if this is a good environment to make deals or should I stay out of these bad areas and focus on areas around the city. Some areas aren’t that bad but because they are in the city, people are moving.
Thanks, Chris

#3

Re: Crummy neighborhoods - Posted by Mark (WV)

Posted by Mark (WV) on February 25, 2001 at 21:23:11:

Chris, I’ve bought a few F/U in this type of area’s and what I see more and more are older people that can’t afford or won’t keep the house up to par.

You have to be very careful a lot of these older homes have to be up graded with 100-200 amp power and have no insulation at all.Both problems have to be taken care of before you can even think of flipping or renting.Because ether of these problems can take the profit out of the deal.You can’t show it with out electric.

About the only thind you can do if you have alot of nerve is to go a head and buy one and learn the problems first hand, or you can go to the city inspecters office or permit office and ask what would be involved with rehabing one of these houses.

I would prob. do the last.I have nerve but money is limited. In most that I have, I will if the house is in a area that is questionable plan on renting it,selling to anyone is out.If the area is good but the house is just run down (roof ,siding ,carpet,holes in wall)I’ll fix and sell.

But as in all things everything depends on comps and cost of rehab.Frank is right, if you buy to resale you can’t afford to set on it for 6 months.With this in mind when you look at one ask your self ,can I sell this in this area or will I have to rent to recoup my investment,if you can’t say yes to one of the choices then pass.

Hope this helps,

Mark Richmond

#4

Re: Crummy neighborhoods - Posted by TPK

Posted by TPK on February 25, 2001 at 07:57:19:

I purchase rentals, sfh and multi-unit buildings. I have found that I make more money in these parts of town. However, this may not translate into what you are tring to do.
One of the questions I always ask a seller is,“why are you selling?” Then I try and figure out if I am just taking over his headaches, which then become mine, or do I have an opportunity that will make money. Only do deals where you are fairly sure you will make money. Nothing is guarenteed, and you will make mistakes, but you should know going in what you are going to do and how much money you are expecting to make before you invest one dime.
So, when you go to look at this fixer-upper you should know what the houses sell for in that area of the city and how they are selling. Then do some due diligence and figure out how much it will cost to bring it back to where you can sell it. If it doesn’t seem it will make money for you find something else. And you will find something else.

Tom King

#5

Re: Crummy neighborhoods - Posted by JoeS

Posted by JoeS on February 25, 2001 at 06:31:35:

Do these houses sell for cheap, or sheep or a combination called sheap? Just kidding. There are 2 ways to look at this situation: Buy cheap, sell cheap.
Frank’s post was good…how long before you can sell it? Also to consider, can you find someone in the area who is renting who would like to buy one of these houses and live in one unit, and rent out the other units? I have done this for 5 years. I am now starting to look “outside the city”, in better neighborhoods. I am somewhat burned out by buying in the inner city areas, but I have made a good living. ALWAYS remember, you make money when you buy, BUT you should have approved buyers lined up. Hope this helps.

#6

Re: Crummy neighborhoods - Posted by Frank Chin

Posted by Frank Chin on February 25, 2001 at 02:32:56:

I would stay away from it.

If you buy a fixer upper for 3,500, and spend 10K to 20K fixing it - you’re up to the 13K to 23K range already. If you say houses sell for 12K to 25K - where’s your profit?

Besides, how long does it take to sell the house? Even if its a cleaning or paint job, you can be sitting on a rehabbed house for a year or two in a crummy neighborhood.

From my perspective, I check to see how easy it is to sell before I buy. I probably focus on where people are moving to, and why they’re moving there. Could it be the schools?, or is it because values hasn’t run up yet?

What is the reason for the increase in crime and slum conditions? Are businesses and industries leaving town? Do you attend town council meetings to find out why? Does the city have a planning department, and what are their plans?

Even if you know the answer to this, and a turnaround will soon be underway, it’ll take a long while for perception catches up with reality. It does not look like a promising area to make fast cash from flips.

#7

This may sound crazy… - Posted by HR

Posted by HR on February 26, 2001 at 06:45:11:

I agree with Tom.

This may sound crazy, but there are good crummy neighborhoods and bad crummy neighborhoods. You obviously only want the good.

To the unexperienced, all these neighborhoods look bad. That isn’t so. A “good” crummy neighborhood has demand: demand to rent, demand to buy, etc. It just happens to have a bunch of blighted property. Buy in that hood, for sure.

A bad crummy neighborhood has plenty of stuff available for cheap, but few want it: tenants, buyer, etc.

I’ve been buying lately in the good crummies and will make a bundle from it. Saturday, my wife, daughter, and I were driving to a parade outside of town, and I’ve thought of buying there. In the last year, there is more vacant, beat up, blighted stuff… and it’s become obvious that there is little demand. No way would I now buy there. In parts of the inner city, though, with good access to transportation, groceries, churches, etc: I’ll buy there all day long.

Good luck,

HR

#8

Re: This may sound crazy… - Posted by Peter

Posted by Peter on February 28, 2001 at 17:32:14:

So what would be your advice if one was in a “bad” crummy neghborhood where the demand (people w/money)
is low (mostly Sec. 8, low income, etc.)

#9

Its not crazy -but How do you Tell. - Posted by Frank Chin

Posted by Frank Chin on February 26, 2001 at 07:36:09:

I had a post recently regarding doing Rehabs in Springfield MA - as relatives of mine had done it. Seems its gotten a little harder lately. I’m told houses take a year or more to get sold.

But then it could be different for a brand new rehab.

As you said, transportation, shopping, churches is the key. I’m told the trick is to find stuff along bus lines. Many folks there own clunker cars and appear to shop in nearby suburban malls. There’s plenty of neighborhood churches.

Told my relatives I was going to take a more careful look. In fact, I was just going to see if I can identify GOOD CRUMMY neighborhoods. But because the whole region is down, this may be difficult.

Questons:

1- Do you look for the one or two run down houses in a solid neighborhood? If the whole area has one or two vacant houses per block - then forget it?

2- Do you look for an older town surrrounded by high priced suburbs? For instance, searching homes for Worcester MA indicate home prices from 57K to 115K. Many of these homes are 100 years old. Home prices in surrounding suburbs run 250K and up.

3- What region of the country are you in.

Thanks.

#10

Re: Its not crazy -but How do you Tell. - Posted by Nate

Posted by Nate on February 26, 2001 at 15:16:44:

  1. Look at the retailers. A ton of vacant retail space is a really bad sign. In “good” crummy areas, the retail will be crappy, low end, and bad looking, but there will be some stores in the storefronts.

  2. of vacant homes definitely plays a part. if there are so many vacants/board-ups in an area that even if you bought and rehabbed half the block it wouldn’t make a difference, you are in the wrong area.

  3. crime! in urban areas, this is a big consideration. of course, every urban area has crime, but from talking to knowledgable locals (including the police - they’re often very helpful) you can learn which areas are “war zones” with high drug and crime activity that you should avoid.

Others, please chime in with other ideas…

NT