Pros and cons of buying investment property in the "bad part of town"

When people call me, typically one of the first requests they make is for a house in a "nice" neighborhood. And this makes sense to want a neighborhood that is safe and enjoyable. But there are some benefits to buying real estate in the rough part of town or on the wrong side of the tracks. This article highlights some of them.


- You could be killed. Just wanted to get that out of the way. Heck, nowadays you can get beaten, robbed, or yes even killed in the nicest neighborhoods. Having a CCW is not a bad idea when going to check on properties in the bad part of town though..

 -There is less worry of your neighborhood going downhill because it is already downhill. Good neighborhoods can get bad and bad neighborhoods can get better. Since the price usually reflects the current condition, buying in a neighborhood that has room for improvement might be a good idea. 

- If you are buying a rental, you usually get better cash flow in rough neighborhoods. If you are renting your property, there are more renters and they are more long term. It's difficult to rent in good neighborhoods because fewer people are looking to rent and those who do are generally there short term while they look for a house to buy.

-Section 8 can be a VERY good thing..Guaranteed money that arrives  like clockwork from Uncle Sam.

- Theft.. No doubt about it things tend to disappear faster in the rougher neighborhoods.

- You can look better in comparison to other landlords. Landlords in rough areas frequently don't maintain their properties as well as people in nice areas. Therefore, if you maintain your properties, you can blow away your competition, and charge more for it.

- If you are in a rough neighborhood, you can propose that your property change will improve the neighborhood and you have a better chance of getting a different zoning. Conversely, if you are in a good neighborhood, it's hard to make the same argument. 

- You can buy more property. If you want to spend 300k, you can either buy one house in an upscale neighborhood or six or seven houses in a rougher neighborhood.

- They're more recession proof. When the economy goes south, real estate in rough neighborhoods is less affected.

In summary, I am not saying you should buy in a bad neighborhood but definately don't be afraid to do so. If you are looking for long term investments sometimes its a good idea to wander over the tracks and look around a bit. I've had rental properties in good and bad neighborhoods. At the end of the day the key is finding good tenants so ask lots of questions like an interview and hopefully your gut instincts won't lie to you. Good luck and happy investing!