Pros And Cons of Investing In Low-Income Neighborhoods

Recently, the trend of investing in cheap rental properties is rising among investors and there has been lots of argues between the investors about it because many of them believe that “the better the neighborhood, the better the investment”. The low-income neighborhood doesn’t mean that it’s going to be a bad neighborhood, in fact, it is a good investment option.

Why Should You Invest In Cheap Rental Properties:

There are various reasons behind investing in cheap rental properties. There might be a chance of improvement and growth potential for low-income neighborhoods as well. You can buy a property in the low-income neighborhood, half of what you’d pay for the similar property in A class neighborhood.  Unlike other neighborhoods, low-income neighborhoods are less affected by economic downturns. So, there’s a little bit guarantee of it when you invest in a cheap rental property.

Tenants in cheap rental properties are more likely to stay for a long time and if they stay for a long time, then this means you’ll have lower vacancy rates. Also, if they’re being good tenants, then there’s a very less chance of you having trouble with them.

Another reason behind investing in cheap rental property is that you can buy more than one property with the exact amount of money. It depends on you whether you want to buy one property in an A class area or many properties in B and C class neighborhoods with the same amount of money.

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Why Should You Not Invest In Cheap Rental Properties:

Dealing with low-income tenants can sometimes become a headache for you. There’s a risk that you might get rent payments late which can make collecting payments very much difficult for you and the process of renting out a property is not that easy. Also, check the background of tenants to make sure that you choose the right type of tenant.

Cheap rental properties usually exist in neighborhoods where the crime rate is very high and this is something that should be considered by everyone because safety should be everyone’s number one priority.

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 Tips On Investing In Cheap Properties:

Tenant screening:

If you want to save yourself from trouble, then choose the right type of tenant. The process of tenant screening is very much time consuming and hectic. You’ll have to check their background, applications etc. Tenant screening for cheap rental properties can help you to avoid problems like delayed payments, evictions and the need for maintenance. So, if you want to save yourself from the real mess, make sure you find the right tenant.

Focus on the numbers:

Learn to focus on numbers when it comes to investing in cheap rental properties. It’s very easy to reject the area by its appearance, but don’t forget that it’s a money-making scheme. Don’t worry if the property or its streets don’t look nice because, at the end of the day, you’re investing just to make money. 

Hire property manager:

A property manager can help you in advertising your property, choosing the right tenants and also dealing with them directly. In that case, the property manager will make your life a lot easier. This also includes attending tenant’s complaints and collecting payments. A property manager can save your time, but at the same time, you’ll have to pay him for his work as well. It’s up to you whether you can afford to hire a property manager or not.

 Find a property on the edge of the neighborhood:

Try to find a property at the edge of a neighborhood rather than right in the middle, especially if you’re buying a cheap rental property. If the part of the neighborhood is improving where you’ve invested, you can also request for zoning change option. But this is not an easy procedure because it’ll require the court hearing, however, you can still consider investing on the edge.

Don’t reconstruct the property:

Do not try to reconstruct or renovate the property after you purchase it. Fresh paint on the walls will be enough, so keep it simple because the tenants wouldn’t expect anything like brand new carpets or fancy kitchen cabinets.

Find a lawyer:

You may have to face many challenges, especially with tenants, when you invest in the low-income neighborhood. A good lawyer will help you review and negotiate for you if something goes wrong.

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1 Comments

  • raees

    December 29, 2017 AT 05:48 AM

    You have provided very good information. Being a successful landlord is an investment of time and money.

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