“A journey of a thousand miles begins with a single step.” ~ Lao-tzu
A few years ago we picked up one house on a street where most homes were vacant and boarded up. Gangs of local street thugs set up shop inside these abandoned houses and basically “owned” the whole block.
We understood the risk involved, but it was calculated.
We saw the potential for low purchase prices, relatively inexpensive cosmetic repairs, desirable geographic location, with lots of room for potential appreciation.
As we got one brave family to move into the first house, we had already started repairs on the second one. Before long, we were on our third, fourth and fifth. By now, the entire neighborhood has been transformed. The gangs have all moved away to less desirable areas.
About a year ago, our CEO spoke with the mailman on that very street and recorded a video of the conversation they had. This moment was especially rewarding for us because he let our team know that choosing to invest in one particular home changed the entire street!
To date, we have actually purchased and rehabbed 5 homes on that particular street to further improve the neighborhood. Sometimes all it takes is one home to get the ball rolling!
This week we dove deeper into the topic with the CEO
Q: What would you say is the biggest benefit of being the first on a street to fix up a home, taking that step and believing in the neighborhood?
A: The biggest benefit for investors is the fact that you are buying a home at the lowest price possible. As long as you see the potential on the street, other people will too. However, you want to be sure that the neighborhood doesn’t have multi-units or anything that can jeopardize the home’s future appreciation. Multi-units come with a long list of management and crime-related challenges.
Q: Are homes on “rough” streets a lot cheaper, but promising for the future as the street improves?
A: A street could be considered rough for a number of reasons. If it’s because the properties are abandoned, this could have tremendous opportunity for investment. If it’s because there is a lot of foot traffic and crime, that is not good. You have to study the area and the trends to know what type of “rough” property is doable and profitable. We excel in understanding the trends and identifying the opportunities that reduce risk and support good business/investment decisions.
Q: Do you have multiple clients that have done this (invested in a less than ideal neighborhood but were the first to clean up the place, and others followed)?
A: Yes. We have a lot of clients that have benefited from purchasing low-price homes that have now doubled in value over time! Also, clients that go this route often benefit from securing the best tenants in the area since the properties are rehabbed. They are the nicest on the market in that particular area, yielding what we call the “high end of the low end.”
Q: Is fixing the outside of a home (what everybody sees) a top priority, or is it the inside of the home because that’s where the potential tenant will live?
A: Curb appeal is the number one priority. Without it,you have a hard time getting people in the front door. However, both are equally important. You’ve got to win over your potential tenants in both areas.
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