A square is a rectangle, but not all rectangles are squares.
Bad neighborhoods are filled with low-income housing, but not all low-income housing is in a bad neighborhood. Some low-income tenants are bad, but a lot of low-income tenants are good.
There’s a lot of glamour in mansions, flipped houses, and tiny homes, as evidenced by HGTV shows, but when it comes to low-income housing, there’s an undeserved stigma.
Many investors assume that with low-income tenants come late rent payments, vandalism, and all sorts of problems. All of those are real threats, but they’re real threats with tenants of all incomes.
Countering the Drawbacks of Investing in Low-Income Areas
As mentioned above, there’s a huge difference between low-income housing and bad neighborhoods. There ARE some neighborhoods you want to avoid.
For example, I once owned a property that had its windows broken in almost weekly. I ended up remedying the situation by replacing the glass with plexiglass. A better solution would have been to recognize that this low-income neighborhood was a bad neighborhood.
Look out for signs of growth, like new businesses or developments, before you invest. If companies are leaving or if a lot of units are available for rent in the building, it may not be the best to invest in. When construction is making a lot of noise, it brings down property values. That’s the perfect time to buy. Once the construction is done, the new store or amenity will improve your property value.
Look up crime statistics in the area. Specifically, avoid areas with lots of break-ins, vandalism, or violent crimes. Those are difficult to rent or maintain.
Call references for potential tenants. If past landlords liked them, you’re golden. If a past landlord didn’t like them, take the hint and move on. There are plenty of reliable, low-income tenants for you to rent to.
Related: “Low Income” vs. “Bad” Neighborhoods: Yes, There IS a Difference. Here’s What Separates Them.