Should you buy in lowlife areas?

Which areas have you been looking at?

I've invested in Frankston south of Melbourne which is one of the not so nice areas you talk about. It all comes down to the tenant though. Our property has risen nicely in the last few years, and although the tenants may fall behind in the rent from time to time they don't wreck the place. You've got to find a good investment and then get a good property manager to manage it for you.

@ Steven B – I had a feeling you would name those areas. They may be 'low income earners but there is plenty of opportunity in those areas. There are larger pieces of land that could be subdivided or will allow for multi dwelling development. Rental yields are also quite strong whilst you are waiting for your plans to be approved in council. The area has a major shopping centre, tdecent train and bus services and a several medical centres. 

Regards

Shahin

Never would.

You don't always get a less than desireable tenant in these areas but you have to be prepared for some of the bumps along the way eg: unemployment, relationship breakdowns, first time out/no credit history etc.

So it comes down to what you expect from the tenant and what you get as payback (risk).

Understand your customer.  Quite often in low-socio-economic areas there is a very healthy rental demand since not everyone wants a mortgage (or can qualify for one).  Understand the needs of your customer.  Don't presume to know the needs.  Ask point blank what they are.  (You can do this by asking tenants straight out "What is annoying about this place, or other places you have lived….. or you can attend open for inspections for rentals and listen to what the prospective tenants are saying as they wander through.  They will not be saying "Gee I wish the walls were freshly painted"… they will be saying "Oh cool, look, there are hooks on the walls… I'll be able to hang my pictures") You might think "ew, yukky brown kitchen" and prospective tenants might instead be saying "hey cool, check out how much storage space there is".  Perhaps your customer will be thrilled to bits with a property that has lots of storage, within a 100m walk of the shops, and not to have to battle plumbing issues every day.  I am investing in low socio-economic areas, and in areas that are not low socio-economic but in dwelling types that are pitched towards lower-income tenants.  If you can understand what your customer needs, what has distressed them about past dwellings they have lived in, and communicate clearly that you are happy to provide an appropriately maintained dwelling, and that in return, paying rent and looking after the property is not optional but compulsory, then …. what I find…. is no problems.  Ultimately, if after all that someone wants to mess with you, then so be it.  But you can choose not to renew the lease, and they will find that when they try to find alternative accommodation, they slam into a brick wall because they are on the TICA blacklist.  You are not running a charity… if someone chooses to mess with you despite you providing a suitable product, then you can fire the customer.  Your mortgage repayments are not optional, and accordingly neither is the tenant paying rent and taking reasonable care of your property.

Remember that people on low income will probably be home for a fair whack of the day due to either being unemployed or working part-time rather than full time, and as such might spend a decent amount of time utilising the internet, tv or xbox.  As such it is essential your property doesn't have issues with the tv aerial or phone points for instance.  Also, window coverings need to bring in light but also provide privacy (which is true for all dwelling types anyhow).

@ Dark night definitely agree – there are massive 1000sqm + blocks of land in Werrington and Kingswood going for low $300k.   Plenty of opportinuty. 

Probably not best to refer to them as "lowlife" areas…..lol

Cheers

Jamie

If the amenity is good – transport, shops and activities.

And the area is close to the CBD.

Then great things often happen.

The artists are attracted to cheap rents.

The artists bring the commercial creatives.

They, together, bring the people who want to be near the action.

Then, off it goes!

This happens in most cities, and it's a moving feast.

Once it takes off, the artists can't afford it any longer and they move onto the next hot spot.

Footscray, to me, looks like this type of area.