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The Benefits of Buying Real Estate in a Bad Neighborhood

Aug 29, 2007
When people call me, typically one of the first requests they make is for a house in a "nice" neighborhood. And this makes sense to want a neighborhood that is safe and enjoyable. But there are some benefits to buying real estate in the rough part of town or on the wrong side of the tracks. This article highlights some of the benefits of buying in a "rough neighborhood".

- There is less worry of your neighborhood going downhill because it is already downhill. Good neighborhoods can get bad and bad neighborhoods can get better. Since the price usually reflects the current condition, buying in a neighborhood that has room for improvement might be a good idea.

- If you are buying a rental, you usually get better cash flow in rough neighborhoods. If you are renting your property, there are more renters and they are more long term. It's difficult to rent in good neighborhoods because fewer people are looking to rent and those who do are generally there short term while they look for a house to buy. While its easier to manage a rental property in a nice neighborhood the investment benefits (better cashflow and appreciation potential) of buying real estate in a rougher neighborhood might make the extra work worth it.

- You can look better in comparison to other landlords. Landlords in rough areas frequently don't maintain their properties as well as people in nice areas. Therefore, if you maintain your properties, you can blow away your competition. The benefits of this is that your tenants will be more likely to stay longer.

- If you are in a rough neighborhood, you can propose that your property change will improve the neighborhood and you have a better chance of getting a different zoning. Conversely, if you are in a good neighborhood, it's hard to make the same argument.

- You can buy more property. If you want to spend 500k, you can either buy one house in an upscale neighborhood or six or seven houses in a rougher neighborhood.

- They're more recession proof. When the economy goes south, real estate in rough neighborhoods is less affected.

In summary, I am not saying you have to buy in a bad neighborhood. But simply that if you are looking for a long term real estate investment sometimes its a good idea to wander over the tracks and look around a bit.
About the Author
Working in Central Texas Escapeso Austin Real Estate is a small team of realty professionals. Their website provides a description of the different Austin Condos and Austin neighborhoods.
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