Investing in a War Zones?

investing_war_zoneOne of the age old debates of real estate is should an investor buy properties in the “war zone” areas.  These properties usually go for very low prices because a majority of investor won’t touch this area.  The numbers almost always look good on paper, but what happens if your property gets vandalized, what happens if your neighbors are gang members?

From what I have read the definition of a “war zone” varies greatly.  Does it depends on the neighbors?  Does it depend completely on the city the property is in?  Do you base it completely on what other people say?

I will not invest in what I consider war zones, but I will drive by questionable properties and make my own decision.  My main factor is, do I feel safe getting out the car and looking insde the property.  If I am comfortable getting out and taking a look at it, it usually passes my test.

Neighborhoods Can Be Deceiving

Some of the properties we have bought seem like they are in great areas and the longer we own them we learn that the area is not very bad.  House #3 was in what we thought was a great area.  The house was built in the 80’s, not too many properties for sale in the area and what seemed to be good neighbors, all great signs.  Once we finished the remodel, the staging furinture got stolen and someone broke in the garage and was sleeping there.  If you go to a property in the evening you sometimes a get more accurate representation of how safe it is.

This works both ways though.  Sometimes what seems like a bad area on paper is actually pretty good.

When the Market Recovers War Zones Go Up in Value Faster

Buyer’s call the shots right now.  They want to buy the best inventory at an affordable price.  This forces banks to unload “war zone” property at a steep discount.  As the market starts to recover, buyers will get more aggressive and trying to acquire property the condition and neighborhood will become less of a factor.

If the property is somewhat safe, war zone investors can do very holding the properties.  As long as carrying costs are not huge (renters damaging properties, vandalism etc).

Remember to give every property and city a fair chance.

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