We all know that some neighborhoods are better than others and this typically affects the prices of the homes and sometimes the desirability of the house as well.
Some investors hate buying houses in bad areas, others love it. There’s drawback and there’s also some hidden opportunity.
If you are considering buying a house in a less desirable neighborhood, consider these two things first:
1. Are you buying to sell it and make a quick profit?
2. Are you buying it for ROI (Return on Investment) and cash flow?
Sometimes buying a house in a bad area is a great option, you might be looking for a quick profit and this opens up some possibilities. Quick flipping a house like this might be your best choice.
On the other hand, if the house is in good shape and you have the cash to buy it outright, you can get a 20 percent ROI on your cash purchase by renting it. Then, you could buy and hold it.
Here’s how to know if this house is worth the buy and hold:
1. You gotta know your numbers- If the rent in your area is a lot less, then you have to make a decision as to what’s acceptable to you.
2. Pick something that’s close- Don’t buy anything that’s more than a one-hour away from where you reside.
3. Consider leverage- Some would rather own a low-end house in a bad neighborhood free and clear, than have a leveraged house in a nicer neighborhood. There’s nothing wrong with leverage, but as long as you have a mortgage, you are at the mercy of the lender. Not the best position.
In general, if you are starting out in real estate, you want to start out buying and selling/ wholesaling to build up your cash, and then take that cash and buy something free and clear for high cash flow.
Wholesaling is a good way to stay liquid in the market, it limits the time you spend managing and it relieves liability from what may go wrong with your properties.
Look at the market conditions in your area. If you think you are headed for another bubble, then recognize where your market is at and adjust accordingly. If you feel it’s time to cash in before a price correction takes place, then adjust accordingly.
Always stay present and keep an eye out!
If you want to learn more about quick flips then make sure you check out the free eBook on flipping houses with little to no money down here!