Risk of investing in a socie-economically bad area?

Based on my own experience I've shared a bit about my thoughts on investing in lower social demographic areas here - may or may not help but I thought to put it out:
What I learnt out of buying 7 properties

Investing in lower social economic areas won't be suitable for everyone. Nobody knows when it will gentrify for CG to kick in so it then comes down to tenant selection (which PM plays a big factor), steady stream of rental income and having the right insurance in place to mitigate potential tenant damages, like in my scenario.

Cheers,
David

 

well summarised!

second that,
1. not for everyone
2. Know your risks
3. PM is super important
4. CG vs reward
5. cashflow is severely affected by tenants behavior

 

Hi John,

From your point view, an apartment/unit in an higher socio ecnomic area appears more profitable than a house block in the lower one? I attempt to challenge this by looking at the the annual growth as well as the strata cost on apt/units/townhouses.

Personally I'm fine with the life in an apt/unit I'd rather prefer to live in an apt near the city, while realistically as an investor I apparently favour houses especially in a long-run.

Maybe I'm not right though.

 

Thanks for sharing your experience and thoughts, which I'm studying right now.

 

Well, not all land is created equal, and generally inner ring land is more valuable. I am saying that inner ring units can outperform outer ring houses (in Sydney). But that is a very general statement, and I am not too sure about Auckland.

If you have some plan to live in the property, then obviously personal preferences will come into it as well.

 

It all depends on the tenant. Some are great, some aren't. That said, i find lower socioeconomic areas require more flexibility.

For example, a property i have in a low socioeconomic area has rent paid by the tenants in dribs and drabs. Even if they don't do it all at once or are a week late, they always make up for it, always have.

My former prop manager kept hassling them and sending them warnings 1 day after rent was due. When i met the tenants one day during a maintenance issue i found out they were elderly, one is on a disability pension and whenever the prop manager rang them they were terrified they were getting kicked out.

I ended up taking over the property myself and its much better. If they're late paying rent they'll send me a text, if theres an issue I'm welcome to come over with a trade to fix it up.

That said, if i had 2 people on benefits who weren't so flexible and welcoming then I'd %100 get a great property manager who is used to the area and the usual tenant issues that come with it.

 

Thats quite a unique situation,
Most of the consistently late tenants arent late because oops they forgot.

They cannot manage their money and dont think in advance and have the wrong priorities

Its just the nature of the beast that those are willing to be consistently lste will give you more headaches