While every neighborhood is unique in its own right, some offer particular circumstances that make investing more difficult. Distressed neighborhoods offer several obstacles and benefits that many may be unaware of. However, is investing in distressed neighborhoods a good idea?
Some of the most price relevant neighborhoods for real estate investing are in significant distress. So should you stay away, if not for personal safety, because rents will be virtually impossible to collect, or nonperforming rentals will see investment properties devalued?
Regardless of where you choose to acquire a rental property, profits can be made in any market. The deciding factor should be how comfortable your are working in each respective neighborhood. So where do you draw the line?
First, consider your personal safety. It is important to know you are in a safe environment. Because this is such a subjective topic, make sure you feel safe in the neighborhood you are acquiring a property. Some people move comfortably in distressed neighborhoods with little fear, providing that they have some understanding of the area. However, others may be skeptical of a potentially dangerous area. They would be advised to hire an appropriate property manager that is familiar with the area in question.
Second, know that rents in these areas are definitely collectible. With low cost properties in these areas, large cash flow opportunities are readily available.
Savvy investors dedicated to revitalizing these areas can do a lot to improve communities and be paid well for it. Work with local governments and you may be awarded several tax breaks. Work with local business owners and community groups to improve the appeal of the area. Branch out to commercial properties and benefit from the whole area receiving a revitalization.
With a little commitment, hard work and a big heart, you could find real estate investing in distressed neighborhoods to be the most financially profitable and rewarding experience.