Can You Bulk Up Your Portfolio by Investing in Low Income Neighborhoods?

 Posted on January 30,2017 in DuPage County Real Estate Attorney

While most investors focus on up-and-coming neighborhoods, others choose to provide housing and opportunities to tenants in low-income areas. Can you really turn a profit in these areas, though, and is the risk really worth the payoff? The short answer is yes - but there are a few caveats. The following information explains how you can mitigate against the risks of investing in low-income neighborhoods. It also provides some details on how to effectively protect your investments and your financial future.

Understanding the Neighborhood is Critical

Low-income neighborhoods come in many different ranges, going from completely blighted to upper low-income. All offer investment opportunities, but the challenges you are likely to face can be greatly impacted by the income level of the community. As an example, upper low-income areas typically offer relatively safe living environments for your tenants. Blighted areas may have serious issues. Some may even have environmental issues that could impact the health and/or safety of your tenants. Knowing how to handle this will be critical to your long-term success.

Avoid Troubled Properties

Some of the biggest issues pertaining to safety and health of tenants can be completely avoided with diligence and research. Avoid housing in areas near fire-damaged properties, and steer clear of those wth a long history of short-lived occupants. Many tend to become hot spots for illegal activity and can often pose a danger to tenants. Instead, focus on areas near schools, highways, and shopping centers. These areas, though still low-income, tend to attract families and people who want to better their lives.

Working with Your Tenants

Those who lease housing in low-income neighborhoods understand a couple of very important truths: the tenants cannot afford to pay much for their rent, and the risk of bad tenants is generally higher in such areas. This does not mean that all tenants in low-income areas are horrible. In fact, there are many who simply need a chance to start over. Others may suffer from a disability that hinders their ability to make a living wage.

You can find these tenants - the ones that are more likely to take care of your property and work as hard to meet their rent in a timely manner - with a few tips. First, make sure your expectations are realistic and then define and communicate them to your tenants in a clear and concise manner. Let them know, right from the start, how much you are willing to work with them (if at all) and always have a legal contract in place to protect your interests.

Second, run a background check on all prospective tenants. This can give you a glimpse into certain problematic issues, such as frequent moves (which may indicate a problem with paying rent) or a criminal record. Just keep in mind that some may be leaving behind a life you do not fully understand. Your judgment and instincts may be necessary when determining if a tenant deserves a chance.

Contact Our DuPage County Real Estate Lawyers

If you are planning on investing in real estate property in a low-income community, it is critical that you discuss your situation with an experienced real estate lawyer. At Stock, Carlson & Asso. LLC, we work hard to protect your future and investments. We can also assist with due diligence and drafting of any legal paperwork. Learn more by scheduling a consultation with our DuPage County real estate lawyers. Call 630-665-2500 today.

Source:

http://homeguides.sfgate.com/real-estate-investing-lowincome-neighborhoods-60825.html