Why I Don’t Buy Cheap Houses or Apartments in Bad Areas
It is very easy to be driven to chase high returns in bad areas. I have learned over the years, first by owning a bridging company and actually falling into that trap myself. It is very enticing to look to buy a property that can yield 20% or greater in a rough area of Manchester such as Burnley or Nelson. However, I can promise you it will be beyond tough to manage. Do you like sleeping at night?
Trying to buy in rough areas will affect your sleep. I would tend to believe that must properties in these areas have gone through several owners in the past several years. All of them tried to re position the property, and all of them failed.
Anyhow, the other guys failed, but we’ll succeed, right?!
Maybe. Here’s the thing I needed to understand:
Are people not choosing to live in this community because of the poor physical condition, or is there something more sinister going on? The building we can fix, but many other problems we cannot. Success or failure in this business is a function of understanding this.
Crime…Drugs…Distance?
I have first hand experience when speaking to an accountant from London who thought he was very clever buying 10 properties North West of Manchester. When I met with him with my JV partners, we heard war story after war story. I am sure there are people who are successful in rougher areas…but it is simply not for me. I can earn on a Gross basis on my professional HMOs the same or better returns. I have quality tenants that are thrilled to be on our Professional HMOs. These tenants stay longer at our professional HMOs and most importantly because we make our professional HMOs in Manchester to a high style we are able to charge a high rent. Depending on the area we get 110 to 125 per week. In all honesty, that is alot of money.
I do not have to chase cheap houses in bad areas. Simply myself and my JV partners need to increase value and demand in properties already in good areas…
Thoughts?
Questions?
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