Neighborhoods - Posted by Gio

Posted by Gio on March 25, 2001 at 20:30:41:

I really appreciate your response!

Neighborhoods - Posted by Gio

Posted by Gio on March 22, 2001 at 20:17:25:

Hi there!

Carlton Sheets said that picking the neighborhoods you want to invest in is the first step, right? What specifically do I look for in a neighborhood? And can you do this in small towns, or do you have to go into bigger cities?

Thanks for your help!

Re: Neighborhoods - Posted by Russ Whitney

Posted by Russ Whitney on March 24, 2001 at 21:45:36:


In my opinion, there are 3 types of neighborhoods and 3 types of Real Estate. Where most hear location, location, location. You might, as a beginner, consider the mantra,cash flow, cash flow, cash flow.

The three types of real estate are, low income neighborhoods, moderate income neighborhoods and upper income neighborhoods. No matter what type of real estate you buy, ( single family, multiple unit, commercial, etc.) it is going to be on ‘one’ of these categories of neighborhood.

Benefits and Deficits of each.

  1. Low income - Cheaper price to buy, more cosmetic distress, making it easier to find seller financing and more logic for buying below market value, (ie: if it needs cosmetic improvements, there is a logical reason for the seller to sell below market)

Historically, the rents are not that much lower in low/moderate income neighborhoods,therefore, if you can buy cheaper, do the cosmetics reasonably, and the rents are close to comparable,you have a better shot at positive cash flow. Defecit - Properties in this type of neighborhood will not appreciate as well, However,keep in mind, that for a beginner,cash flow is usually very important…

Middle Income - NIcer areas, no cosmetic distress - you are going to pay more for the property,the rents are not going to be considerably higher,therefore the cash flow will be break even,maybe even loss.

Without some equity into the property, it’s hard to make these pay, unless you are in a really hot market… and are flipping them. Benefit - They will appreciate much better than the lower income.

Upper Inccome - If you are just beginning, I would stay away from these for the time being. Mostly, equity investments for those with cash…

Just a brief ‘starting opinion’. There is much more to learn, however, start with this tidbit and see what you find in your local market…

Russ Whitney