Hi,
I'm just wondering if anyone has a theory or information about investing in "bad" neighbourhoods, particularly those in the USA? I have been looking at property in Fort Lauderdale, USA and have found some places where the numbers really stack up and make them attractive investments. The purchase price is low but rent is still reasonable and they are currently tenanted. It actually seems easier to find cashflow positive property in areas like this. However, they are in poor and predominantly black neighbourhoods, (not that I think there is anything specifically wrong with black areas but I take it is an indication of the socioeconomic status of the area). To be honest these are places where I would be nervous visiting at night.
Whatever I do here I plan to use management companies etc so I would not be the one actually chasing up rent or dealing with maintenance. Still, it is a concern that my precious investment could be at the mercy of people who don't appreciate and respect it. Any thoughts?
Thanks,
Jeremy.
I have read that the management companies can be a problem.
You are remote and then how do you know if they are managing the property?
I have read stories of maintenance tradesmen taking payment and then doing a runner without doing any work.
Not sure on the crime rates and the effect this has on your investment.
High area of unemployment can be also a problem !Thanks Duckster, your comment reflects the kinds of suspicions and concerns that I have too
Buying in problem areas can be just that a major problem.
People are attracted by the low cost say $30,000, that may offer a 20% return. The problem is that your return is coming from a small base. What that means is that a few small issues such as a broken window or more serious such as a hot water service will quickly wipe out your case flow. This is assuming that you get to collect the rent in the first place.Nigel Kibel | Property Know How
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Thanks for your advice Nigel. I thought going for simpler cheaper properties was ideal rather than putting all your eggs in one basket. The places I was looking at were between $80,000 and $140,000. Isn't it preferable to buy two places for $100,000 rather than one place for $200,000. In the latter case, if you lose the tenant you lose your entire income compared to losing only half of your income in the first case?? I'm guessing though that there comes a point when the property and the rent are too cheap so that, as you said, there is a very small buffer and relatively small issues can wipe out your income.
Jeremy.
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