- On June 29, 2018
When perusing the market, the price tag on low income areas can be very attractive. Simultaneously, the drawbacks inherent make many a potential buyer stay far away from such investments. An obvious deterrent for most is the higher crime rates that often come along with lower income areas. It’s best to install reliable security measures, and keeping a close eye on what’s taking place inside your property isn’t a small fear. Reliable tenants can be harder to come by, and thorough screening is very much advised. Individuals often live paycheck to paycheck, and an unexpected expense in their personal life might cause them to become delinquent until they can make up the loss.On the flip side, good tenants tend to stay for a long time, as it may take them several years to accrue the funds necessary to buy a house. These tenants are generally less demanding and more appreciative than their higher-income counterparts.
Speaking of appreciation, another oft mentioned downside is the fact that buildings in low income regions tend to not appreciate well. Obviously, if the neighborhood is gentrifying, that would not be the case, but it’s certainly something to consider if the area seems to be remaining as is. However, besides the property itself being cheaper, the taxes and cost of rehabilitation is also less expensive. Poorer properties are often a great cash-on-cash investment, with the potential to yield a great cash flow that can be utilized for other projects.
Ultimately, the benefits of purchasing low income areas is balanced by the supervision needed to ensure its success, and the risk of getting a returns. Finding the diamond in the rough and getting it to shine takes quite a bit of effort, but may well be worth it.