Buying Rental Properties in Poor Locations
They say that the number one rule in real estate is Location, Location, Location. That said, what if you see value in buying rental properties in poor locations. Are there factors about poor locations that should consider before buying?
Buying Rental Properties in Poor Locations
Resale:
Eventually, every property you own is subject to possible resale. That is why you need to at least consider the resale value whenever you buy a property. You don’t need to be in real estate to know that people want to live in good locations. They will generally pay a premium for a nicer neighborhood and subsequently not pay as much for a weak market. When it is time to sell, you may be looking at a limited buyer pool.Tenants:
Rentals in poor locations generally come with poor tenants. Any landlord who has ever dealt with a bad tenant before knows just how much of a challenge this can be. Your life will be filled with continually chasing rent, responding to phone calls and texts, and resolving disputes. Bad tenants will slowly reduce the useful life of the property and become a constant bother. It is because of this that many investors shy away from these properties because they don’t want the burden of poor tenants.Rent Increases:
;Remember when you are buying real estate, the value of an object is created by supply and demand. With properties in weak markets, you may not be as able to increase the rent when you want to even if the market is on the upswing. Poor markets are not a desirable place to live, and you are at the mercy of your demand.Evictions:
;Dealing with an eviction is one of the worst things a landlord could go through. Tenants with limited income have little margin for error in the event of an unexpected financial expense. If the sudden increase is significant enough, it may impact your rent. All the while you are trying to get the eviction dealt with, you need to find a new tenant, which takes time and money and is difficult with a tenant in place. The chances of an eviction increase the worse the market.
If you see value in buying rental properties in poor locations, these are some of the potential issues you may face. I don’t want to generalize and say you’ll find them in every property, but the potential is there.
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