Ask any real estate investor, and they will surely tell you that the path isn’t always filled with roses. Most of the time, they face major dilemmas at least once or even a few times throughout their careers.
Imagine this: you found a lovely property with excellent value. But what if its location is far from ideal? What if there are high crime rates or the nearby houses in the neighborhood are rundown? What if it’s in the ghetto?
Should you purchase a house in the ghetto in the first place? Would it be worth the risk?
Location Always Makes a Big Difference
This dilemma is perfectly understandable and even common. As they always say in the world of real estate, location is the most important word in the field. But as expected, successful investments in real estate is never as straightforward as that.
Some investors do thrive in lower-end or poor markets, but others try to stay away from sketchy neighborhoods as much as possible. At the end of the day, it ultimately boils down to professional experience and personal preference. It means that you will be the one to determine if the potential rewards will be worth the risks or not.
The Good
Before anything else, your success will ultimately depend on what you plan to do with the house itself. If you feel confident about buying the property, giving it some fixes and repairs, and flipping it as fast as possible to make some profit, then, chances are you won’t be facing a lot of risks.
If you plan to buy the house, renovate it, and rent it out, you need to consider more things before you make your final decision.
Even a nice property in the ghetto will possibly come with a cheap price tag, and this happens to be one of the best appeals of investing in this particular market. You will have an easier time paying off your mortgage, property taxes, and other costs involved with home ownership.
Most importantly, buying a house in the ghetto can also help grow your rental portfolio. As long as you do it right, you can also expect high ROI or returns on investment.
The Bad
Just like anything else in the world, nothing ever comes without a negative side. For starters, houses in the ghetto tend to have lower rent or resale prices. The higher risk of crimes can also affect the cost of your insurance. And if the neighborhood you choose has a downward trend, you might end up dealing with poor or no ROI at all.
Study and Monitor the Trends
Just like other real estate investments, it would always work to your advantage if you consider and factor in the past, present, and future of the specific neighborhood where you plan to buy. For all you know, even if it looks a bit run-down today, positive community initiatives or gentrification may soon help it up.
It means you can purchase a house for a cheaper price and later on, it might see a drastic increase in appeal and value as the neighborhood becomes more in demand and desirable. You can even snatch up a few cheap properties that you can fix and attract more tenants that can revitalize the community down the road.