Unless you know what you are doing, I would suggest you don't sell Class C property, especially if low income or Ghetto property. These properties typically have great potential and too often look like good deal but they are not right for unsophisticated buyers. Here are some of the issues
- Higher turnover - Turnover can kill a good project. When a tenant leaves, you have turnover costs such as clean up, advertizing, vacant for some time, etc, etc. Also, many low income tenants live a very unstalble life, so turnover is more frequent
- Lower deposits: Typically low income tenants do not have the capital to put up substatial deposit, so if they don't pay or damage the property, the landlord loses
- Higher Expenses: A well run property normally has expenses starting around 40% of Income. Low income property is much higher. You will have more instances of broken stuff. In some cases, tenants will actually steal everything in the apartment before they move out. And, vancant apts are especailly vulnerable. I remember one case where the teens who were dealing drugs, would knock all the lights out in the back of the building.
- More deliquencies: Low income people, are less finacially stable, so expect more problems.
- Probably needs professional manager: It is not uncommon for beginning investors to manage their own property, to learn the business. This may not be practical in a rough neighbor. Are you going to go by in the winter, when it gets dark at 5 pm, to collect the rents that are past due? Obviously, this leads to higher costs.
- Probably needs an onsite manager: For the same reasons stated above, unless you have someone onsite at all times, you will have more incidents.
- More crime: Most new investors can't effectively handle the increased level of crime in these type properties. I know of one investor who called me to ask if the SWAT team was required to repair the door they knocked off when the made a drug raid. In another case, prositutes were operating out of a vacant apartment, until the police raided. I had another investor ask me if he had to disclose gun fire to a potential buyer.
Now before you make this about racism, that is not the case here. These are the truths about owning low income property. If your buyer is not willing to undertake such a project, don't sell it to them. If they are, many of these properties have great potential.