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.
JPiper