Forums / Property Investing / General Property / Should you buy in lowlife areas?

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  • Profile photo of Steven BSteven B
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    @steven-b
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    I was wondering if you should buy in low income problem suburbs. Because more people would be looking to rent in these area just that tenants maybe a risk and trouble

    Profile photo of shangrila00shangrila00
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    @shangrila00
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    I've been asking myself the same question. Knowing my risk profile (very risk-averse), I've decided to do it. A good property manager (and landlord's insurance) will take some of the hassles out. If tenants are paid via Centrelink (e.g. a pension), you can have an arrangement with Centrelink where the weekly rent is sent directly to your account (don't have to rely on the tenant to pay you each week – it's already been done for you). Yields are generally higher and if you keep the property in good condition, good quality tenants will come around.

    Check out the growth history of the suburb and what it's been doing for the last decade or so. There are good and bad pockets in low socio-economic areas – drive by and you'll see what's what. Talk to agents and put yourself out there. There's always an element of risk with investment, regardless of which area you buy in.

    Profile photo of TheFinanceShopTheFinanceShop
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    Which areas have you been looking at?

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    Profile photo of Steven BSteven B
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    Western Sydney kingswood mount druit etc 

    Profile photo of landt64landt64
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    I've invested in Frankston south of Melbourne which is one of the not so nice areas you talk about. It all comes down to the tenant though. Our property has risen nicely in the last few years, and although the tenants may fall behind in the rent from time to time they don't wreck the place. You've got to find a good investment and then get a good property manager to manage it for you.

    Profile photo of jmsracheljmsrachel
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    landt64 wrote:
    I've invested in Frankston south of Melbourne which is one of the not so nice areas you talk about. It all comes down to the tenant though. Our property has risen nicely in the last few years, and although the tenants may fall behind in the rent from time to time they don't wreck the place. You've got to find a good investment and then get a good property manager to manage it for you.

    Landt64, you’ll be laughing in a few years. Frankston will be up there with time.

    Profile photo of TheFinanceShopTheFinanceShop
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    @ Steven B – I had a feeling you would name those areas. They may be 'low income earners but there is plenty of opportunity in those areas. There are larger pieces of land that could be subdivided or will allow for multi dwelling development. Rental yields are also quite strong whilst you are waiting for your plans to be approved in council. The area has a major shopping centre, tdecent train and bus services and a several medical centres. 

    Regards

    Shahin

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    Profile photo of PLCPLC
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    Location does play a part in investing but it is not the be all and end all.

    There is no issues with investing in suburbs with a lower than normal economic-social profile if there is potential for nice yields and capital gain.

    Cheers

    Tom

    PLC | Phoenix Loan Consulting
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    Profile photo of PaulliePaullie
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    Profile photo of Jamie MooreJamie Moore
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    Investors have, and will continue, to make money out of lower socio economic areas.

    Some buy undervalue, some add value – and some buy in areas that are experiencing a gentrification process.

    Cheers

    Jamie

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    Profile photo of Scott No MatesScott No Mates
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    You don't always get a less than desireable tenant in these areas but you have to be prepared for some of the bumps along the way eg: unemployment, relationship breakdowns, first time out/no credit history etc.

    So it comes down to what you expect from the tenant and what you get as payback (risk).

    Profile photo of landt64landt64
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    Thanks Joe we're now thinking that we'll develop the block and build 4 town houses which we'll hopefully be able to keep.

    Profile photo of Jacqui MiddletonJacqui Middleton
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    Understand your customer.  Quite often in low-socio-economic areas there is a very healthy rental demand since not everyone wants a mortgage (or can qualify for one).  Understand the needs of your customer.  Don't presume to know the needs.  Ask point blank what they are.  (You can do this by asking tenants straight out "What is annoying about this place, or other places you have lived….. or you can attend open for inspections for rentals and listen to what the prospective tenants are saying as they wander through.  They will not be saying "Gee I wish the walls were freshly painted"… they will be saying "Oh cool, look, there are hooks on the walls… I'll be able to hang my pictures") You might think "ew, yukky brown kitchen" and prospective tenants might instead be saying "hey cool, check out how much storage space there is".  Perhaps your customer will be thrilled to bits with a property that has lots of storage, within a 100m walk of the shops, and not to have to battle plumbing issues every day.  I am investing in low socio-economic areas, and in areas that are not low socio-economic but in dwelling types that are pitched towards lower-income tenants.  If you can understand what your customer needs, what has distressed them about past dwellings they have lived in, and communicate clearly that you are happy to provide an appropriately maintained dwelling, and that in return, paying rent and looking after the property is not optional but compulsory, then …. what I find…. is no problems.  Ultimately, if after all that someone wants to mess with you, then so be it.  But you can choose not to renew the lease, and they will find that when they try to find alternative accommodation, they slam into a brick wall because they are on the TICA blacklist.  You are not running a charity… if someone chooses to mess with you despite you providing a suitable product, then you can fire the customer.  Your mortgage repayments are not optional, and accordingly neither is the tenant paying rent and taking reasonable care of your property.

    Remember that people on low income will probably be home for a fair whack of the day due to either being unemployed or working part-time rather than full time, and as such might spend a decent amount of time utilising the internet, tv or xbox.  As such it is essential your property doesn't have issues with the tv aerial or phone points for instance.  Also, window coverings need to bring in light but also provide privacy (which is true for all dwelling types anyhow).

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    Profile photo of Tony FlemingTony Fleming
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    Kingswood= great place many of my early starts were here. Just need to pick the streets normally anything north of the train line is  danger zone anything near the uni is good $ in time.

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    Profile photo of TheFinanceShopTheFinanceShop
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    @ Dark night definitely agree – there are massive 1000sqm + blocks of land in Werrington and Kingswood going for low $300k.   Plenty of opportinuty. 

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    Profile photo of JpcashflowJpcashflow
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    Rich area vs Poor Area!!

    The last three investment properties I bought have been in areas where "most"  people wouldn't want to live…

    But the returns in such a small amount of time have been really good.

    Try and keep a open mind when investing, You can have a bad Tennant in "high income areas too"

     

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    Profile photo of Jamie MooreJamie Moore
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    Probably not best to refer to them as "lowlife" areas…..lol

    Cheers

    Jamie

    Jamie Moore | Pass Go Home Loans Pty Ltd
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    Profile photo of DWolfeDWolfe
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    You get good and bad in all areas!

    Considering that DHS have houses in even the ritzy suburbs!

    Just understand what you are buying there are some great comments above. The employment thing is important,  one of our tenants have just lost their job and are vacating this month. Get a good property manager an they will know well in advance any hick ups that are on the way.

    Cheers

    D

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    Profile photo of christianbchristianb
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    If the amenity is good – transport, shops and activities.

    And the area is close to the CBD.

    Then great things often happen.

    The artists are attracted to cheap rents.

    The artists bring the commercial creatives.

    They, together, bring the people who want to be near the action.

    Then, off it goes!

    This happens in most cities, and it's a moving feast.

    Once it takes off, the artists can't afford it any longer and they move onto the next hot spot.

    Footscray, to me, looks like this type of area.

    Profile photo of DerekDerek
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    @derek
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    Lowlife = lower socio-economic areas?

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