Author Topic: Buying a house in a 'bad neighborhood'  (Read 18518 times)

druth

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Buying a house in a 'bad neighborhood'
« on: June 26, 2015, 01:07:04 PM »
Do you think the cost savings is worth it? 

Specifics:
Looking for somewhere to live in myself, not rent out.  West Frogtown, St Paul(for those of you in MN) is on a new light rail line, very good access to both our works(one in downtown Minneapolis, one in downtown St Paul) and still very accessible to errands and amenities that come with a 'nice' neighborhood a mile away.  It may or may not gentrify in the future due to light rail, but I'm not going to bet on that.

It seems like an obvious choice to me.  A house for 130k instead of the same house for probably 300k in a better neighborhood, or the actual alternative of a lesser house for 190k in a better neighborhood.  But my agent and my parents think we are nuts.  This neighborhood used to be much worse than it is now, so I think they may be coloring their opinions on that.

I didn't actually feel unsafe in the area, just that the neighbors were a bit trashy.  My only concern would be raising kids in the area, though St Paul has school choice so I don't see that as a big deal even.

Would you be willing to buy a house in not as nice part of town for the savings, or would you run?  Especially those that know the area?
« Last Edit: June 26, 2015, 01:27:21 PM by druth »

salmp01

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Re: Buying a house in a 'bad neighborhood'
« Reply #1 on: June 26, 2015, 01:14:40 PM »
I own a bunch of homes in Minneapolis and western suburbs.  My cash flow for properties in "questionable" areas is better but the time I spend on these and my cost for turnovers are quite a bit more.  If you move forward with this just plan to spend more time and make sure you have a very good screening process in place. 

ShoulderThingThatGoesUp

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Re: Buying a house in a 'bad neighborhood'
« Reply #2 on: June 26, 2015, 01:16:08 PM »
If I'm reading correctly you're planning on living there, right, OP? As long as you're not worried about safety I say go for it.

druth

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Re: Buying a house in a 'bad neighborhood'
« Reply #3 on: June 26, 2015, 01:26:41 PM »
If I'm reading correctly you're planning on living there, right, OP? As long as you're not worried about safety I say go for it.

Yes, sorry if that wasn't clear.  I'll edit the top post.

Gray Matter

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Re: Buying a house in a 'bad neighborhood'
« Reply #4 on: June 26, 2015, 01:35:41 PM »
Personal choice, like so many thing.  One thing I will say is that once I had kids, it became about much more than schools and choice.  I'm a fan of kids going to neighborhood schools--it builds community and it's wonderful for kids to have friends who lives near them.  And once I had kids I found I wanted a neighborhood that felt safe enough that I am comfortable with them playing outside alone (at a certain age), walking to friend's houses, meeting up with friends at the park a block away, and where if they leave their bike in the driveway overnight it's not guaranteed to disappear.  That, to me, is worth paying extra for a house (not necessarily in the nicest neighborhood, but something in between).  In your case, I might move West a bit further to Midway, around Hamline or Newell Park, and pay a little more.

But again, personal choice, and if you're comfortable, go for it.

jooles

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Re: Buying a house in a 'bad neighborhood'
« Reply #5 on: June 26, 2015, 03:44:40 PM »
Yes is the short answer.

Then call the police dept and ask about the crime stats in the area.  Acutally go over and talk to the neighbors, as many as you can, even a block or two away.  Look on FB for community pages and see the goings on.  Go to the local school and talk to the office staff, teahers and principal.  Ask everyone ever question you can think of - what do you like about living here, what do you dislike about living here, would you advise other to move to this neighborhood, etc. etc. etc..  Buying and selling costs money.  The first impulse of "yes, I would live here" should be followed by collecting as much information as possible so that you don't run up against "well now that I know what's it really lives like to occupy this space I'd like to move".  Learning through the experience of others is much more convenient and free!

jooles

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Re: Buying a house in a 'bad neighborhood'
« Reply #6 on: June 26, 2015, 03:46:41 PM »
Another possible choice is to simply live small in a good neighborhood.  There are many ways to march to the beat of your own drum.

Cassie

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Re: Buying a house in a 'bad neighborhood'
« Reply #7 on: June 26, 2015, 04:11:21 PM »
When our kids were little we bought a house like you describe. Once they started school after trying it for a year even the school psychologist told me to get my son out of there before he was ruined. WEll we couldn't sell it & get our $ out of it so sent our kids to a private school that was expensive. eventually 3 kids went there. It took 14 years for the value to go up enough to sell it.  WE learned our lesson & never did it again. I would go smaller in a better neighborhood.

druth

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Re: Buying a house in a 'bad neighborhood'
« Reply #8 on: June 26, 2015, 04:30:30 PM »
When our kids were little we bought a house like you describe. Once they started school after trying it for a year even the school psychologist told me to get my son out of there before he was ruined. WEll we couldn't sell it & get our $ out of it so sent our kids to a private school that was expensive. eventually 3 kids went there. It took 14 years for the value to go up enough to sell it.  WE learned our lesson & never did it again. I would go smaller in a better neighborhood.

Was that because of the school or the neighborhood itself?  I'm not too worried about getting a decent school due to school choice, do you think just having the neighborhood friends be from the bad neighborhood was it's own major issue or was the private school largely enough to solve your issues with the area?

I will probably end up exercising the school choice no matter where we live, I cant afford even a small house in the parts of the city with good schools, and I don't want to live in the suburbs, so it's more of a question of does the neighborhood itself have an impact.
« Last Edit: June 26, 2015, 04:32:48 PM by druth »

Bearded Man

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Re: Buying a house in a 'bad neighborhood'
« Reply #9 on: June 26, 2015, 05:51:55 PM »
My first house was in a bad neighborhood, but 5 years later it's gentrifying. My only real issue with the house was the semi busy side street it was on and noise. Yes, there were a few incidents in the 2.5 years I lived there, but just surrounding me, not directly affecting me other than a renter next door that was a PITA but got in trouble after the landlord and cops got involved.

I ended up moving to another house not on a busy street, and not in an unsavory neighborhood per say, other than the high number of section 8 rentals. The ghetto section 8 neighbor across the street ended up leaving me wanting to move to a more desirable  neighborhood.

I think the moral of the story is that a bad neighborhood is really block specific. Your neighbors really make the difference, as does the specific house. I now talk to the neighbors when I buy. Several of them, not just one. I research the recent crime statistics, ratio of renters, income and education levels, etc. I've also found the grocery store a good meter of the neighborhood, since the characters there are representative of the types of people that live in the area.

I'm actually considering moving back to the "ghetto" just so long as the house is vetted well; not on a busy street and no ghetto neighbors nearby. Also keep in in mind, neighbors change all the time. At my first house the neighbors to the left, right and behind me changed in less than 2 years. Foreclosure on 2, renter in the other. Just pick the house carefully. Just pick the house carefully. Driving through the ghetto is one thing. Living next door to it is another...

MayDay

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Re: Buying a house in a 'bad neighborhood'
« Reply #10 on: June 26, 2015, 06:07:48 PM »
What about further west towards Midway? Still fairly affordable but nicer, in my opinion.

Dont count too heavily on school choice unless you're ok with not getting bussing. Also the Montessori schools are impossible to get into. Also #2, if you happen to end up with a special needs kids you're probably going to be much better served in a suburban district, fyi.

All that said, I'd buy there, but be prepared to rent it out and move elsewhere in 5 years if necessary.

druth

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Re: Buying a house in a 'bad neighborhood'
« Reply #11 on: June 27, 2015, 07:51:57 PM »
Thanks for the advice everybody. 

We decided to go forward with the 'bad neighborhood'.  Basically we are taking the very cheap house with the knowledge that we may decide to sell or rent it out in 5+ years.  We will still be coming out way ahead of renting on that time line. 

We had considered living somewhat further west in a nicer area, but considering that even those nicer areas have schools that I wouldn't consider acceptable, it seemed like an unecessary expense - if the schools become an issue we would end up moving either way.  We definitely dont want to live in the suburbs, and can't afford even the worst houses in the city neighborhoods that have good schools, though we will be able to easily by the time we had school age kids (especially since we will be saving more money with the cheap house for now).

kendallf

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Re: Buying a house in a 'bad neighborhood'
« Reply #12 on: June 27, 2015, 09:16:32 PM »
I don't know anything about your specific area, but our current house is in what many of my friends consider to be 'the hood'.  We love it.  We have some friendly neighbors, a lot of foot traffic on the sidewalks and people sitting on their porches and steps at night, and generally less of the "get up early, drive your car somewhere far away, come back after dark and go inside your air conditioned box".

Hope you make it work out well for you!

NoNonsenseLandlord

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Re: Buying a house in a 'bad neighborhood'
« Reply #13 on: June 28, 2015, 08:34:14 AM »
It really depends.  Property crime will be a a lot higher, so you may want a security system.

As far as tenants go when you rent it out, it will be an interesting experience for you.

You will soon learn what the real estate term "Location, Location, Location" is all about.

Another Reader

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Re: Buying a house in a 'bad neighborhood'
« Reply #14 on: June 28, 2015, 09:25:34 AM »
Yep, Eric (NNL) is spot on.  In neighborhoods with bad or marginal schools and a lot of people that hang out on their porches or stoops, you will find that tenants are of much poorer quality than the owner-occupants.  That's because the owner occupants are at least somewhat concerned about and committed to the neighborhood, and many have lived there for a long time.  Those people are not your tenant pool.  The rent gradient between marginal and better neighborhoods is not very steep, so tenants that care about things like schools and neighbors will spend a few dollars more in rent to get the better location.  You get the leftovers.

I had a family sized house in what was a reasonably middle class neighborhood.  However, the schools were not very good, and most owner-occupant parents took advantage of the charter school program to keep their kids out of the neighborhood schools.  The last tenant the property manager put in before I sold the property had teenage boys.  It became evident the parents had no interest in the schools, because the boys were home smoking marijuana in back yard in the afternoons and bullying the other kids in the neighborhood.  We evicted them because the house was damaged in multiple instances of domestic violence.  As that was the second eviction in six years for similar issues, the house was sold.  I have had better luck with small houses with lower rents in that city, because the tenants tend to be young couples with no children or single mothers with young kids.  Those folks are also unconcerned about schools, and are most concerned about proximity to their jobs, so I get a better applicant pool.

The nuances of location are complex.  Before you buy a rental or convert your existing house to a rental when you move, study the rentals in the neighborhood.
« Last Edit: June 28, 2015, 09:27:53 AM by Another Reader »

NoNonsenseLandlord

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Re: Buying a house in a 'bad neighborhood'
« Reply #15 on: June 29, 2015, 07:22:29 AM »
Yep, Eric (NNL) is spot on. 

Thank you!

 
The last tenant the property manager put in before I sold the property...

Imagine that.  A PM brings in a poor quality tenant, gets a commission, and has no risk.  Meanwhile, the owner suffers.  No offense, this is a common theme with a PM.  The PM maybe even got a commission for selling the house or helping with a purchase.

Another Reader

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Re: Buying a house in a 'bad neighborhood'
« Reply #16 on: June 29, 2015, 07:58:24 AM »
The tenant passed the credit and background check.  I don't think they applied a 625 minimum credit score, because the property management companies hadn't figured out that the warm body approach they used from 2005-2007, when anyone in the Phoenix market could and did buy and there were no quality tenants, was no longer required.  No commission was paid, just the ever-present leasing fee, which is much less than the standard rental commission in that market.

Eric, I'm not stupid.  I have been doing this for almost 20 years.  I would never employ a property manager to handle a purchase or sale, they won't provide good representation.  I manage the managers, almost daily, and there is still leakage.  I just factor the leakage into the cost of doing business from 700 miles away.  In this case, the neighbors never complained (although I heard plenty after these tenants moved out, including the stories about the teenagers).  There were no citations from the City and the HOA did not tag them either.  I drove by the house a couple of times early in the occupancy and saw nothing amiss.

When the domestic violence exploded into broken windows and a kicked in front door, an inspection was made and the eviction notice served.  Lesson learned.  Unless you regularly inspect the properties or the property management company does, you will not catch this stuff.

The point in telling this story is that there are nuances to every rental market.  The list of important features of a property and a neighborhood are different for tenants than for owner-occupants.  Unless you are aware of what appeals to quality tenants, you may end up buying a property in what appears to be a good neighborhood that attracts only low quality tenants.  If you make a mistake, you risk getting burned. 

dcheesi

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Re: Buying a house in a 'bad neighborhood'
« Reply #17 on: June 29, 2015, 08:05:59 AM »
I bought in a "transitional" area: another town with good schools etc. starts two (residential) blocks away in one direction, while "the hood" starts just across one main road in the other direction.

It can be a crap-shoot. I've been lucky, in that the area has been quiet and stayed that way (except for one obnoxious couple down the street who like to have their arguments outside at night /facepalm). OTOH, my friend who bought decades ago in another area has watched his neighborhood steadily deteriorate, with drugs and vehicle thefts and multiple crazy neighbors, etc. And his property values reflect that decline.

Cassie

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Re: Buying a house in a 'bad neighborhood'
« Reply #18 on: June 29, 2015, 10:45:05 AM »
The neighborhood kids were not the problem. It was that many kids from the ghetto also were zoned for that school & the constant discipline problems kept the others from learning.  Putting the kids in private school fixed the problem.  Back then there were no other options (37 years ago).

mooreprop

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Re: Buying a house in a 'bad neighborhood'
« Reply #19 on: June 29, 2015, 01:45:57 PM »
I would recommend that you not rely on school choice.  This was implemented recently in my state and within a few years, the result was that you cannot get your kids into the better schools easily.  I teach at the best school in my county and we have had to cut off applications for new students due to our policy of accepting siblings of kids already attending.  We are at capacity for our buildings since we have such high demand, so parents are back to having to buy a house in the district if they want their kids to attend since we still allow anyone living in the area to send their kids.

If you have decided to buy the house in the bad neighborhood, I would recommend that you sell it if the neighborhood has not improved by the time your kids start school.  I began my career as a landlord with houses as you describe.  I got quite an education, but if I had to do it over again I would wait until I had enough money to buy the houses in better neighborhoods.  I sold them in 2007 and bought houses in good neighborhoods even though they cost more.    I have practically no turnover and great tenants.  In the bad neighborhoods, I had constant turnover and repair costs.   Screening was a joke because the good tenants did not want to live in those neighborhoods, so I was stuck with the unstable people.

Vwjedi76

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Re: Buying a house in a 'bad neighborhood'
« Reply #20 on: June 29, 2015, 09:46:13 PM »
I want my kids to be able to free range and play outside without me being worried sick. I prefer feral children that come home tired and muddy from unstructured play. We moved to a "bad area" to save money but we are trying to sell to get someplace a little nicer....and no one wants to buy in this area so we are stick until we can pay more down to lower the price even more than rock bottom.... Ymmv.

Edited to add the word "worried".
« Last Edit: June 29, 2015, 09:49:56 PM by Prairiefire81 »

Vwjedi76

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Re: Buying a house in a 'bad neighborhood'
« Reply #21 on: June 29, 2015, 09:46:59 PM »
Another possible choice is to simply live small in a good neighborhood.  There are many ways to march to the beat of your own drum.

+1

Vwjedi76

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Re: Buying a house in a 'bad neighborhood'
« Reply #22 on: June 29, 2015, 09:47:27 PM »
When our kids were little we bought a house like you describe. Once they started school after trying it for a year even the school psychologist told me to get my son out of there before he was ruined. WEll we couldn't sell it & get our $ out of it so sent our kids to a private school that was expensive. eventually 3 kids went there. It took 14 years for the value to go up enough to sell it.  WE learned our lesson & never did it again. I would go smaller in a better neighborhood.

Edited because I hit post when I sneezed...

+1. I hope it doesn't take us 14 years but so far it's been 3.

Cassie

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Re: Buying a house in a 'bad neighborhood'
« Reply #23 on: June 30, 2015, 10:29:21 AM »
I can assure you we never made that mistake again. It was a painful lesson.

Valetta

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Re: Buying a house in a 'bad neighborhood'
« Reply #24 on: July 05, 2015, 07:47:48 AM »
We live in the exact area you are looking at that some would describe as "bad" - right on the border between Midway and Frogtown in St. Paul (south of University but north of 94 between Lexington and Dale). It is not even close to as "bad" as people think it is. We bought our house there 8 years ago and plan on staying forever. With school choice, there are some great options just south of the freeway which are still only about a mile away - we don't have kids yet but are planning on it so this was a consideration.

Our neighbors are all really nice, there's only one problem house but in the grand scheme of things it's really not that much of a problem.

The only tiny incident of crime we experienced was that someone broke into my car 6 years ago and stole the stereo (previous owner had installed a stereo). But that kind of crime happens everywhere. That same weekend a friend had his car broken into in Edina - for non-MN people, that's a really ritzy suburb.

Otherwise we feel perfectly safe and happy there. And yes it's just a short walk down to Grand Avenue or over to Cathedral Hill. All the same amenities but for 1/3 of the price for the house.

Strawberry

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Re: Buying a house in a 'bad neighborhood'
« Reply #25 on: July 05, 2015, 08:10:17 AM »
We live in the exact area you are looking at that some would describe as "bad" - right on the border between Midway and Frogtown in St. Paul (south of University but north of 94 between Lexington and Dale). It is not even close to as "bad" as people think it is. We bought our house there 8 years ago and plan on staying forever. With school choice, there are some great options just south of the freeway which are still only about a mile away - we don't have kids yet but are planning on it so this was a consideration.

Our neighbors are all really nice, there's only one problem house but in the grand scheme of things it's really not that much of a problem.

The only tiny incident of crime we experienced was that someone broke into my car 6 years ago and stole the stereo (previous owner had installed a stereo). But that kind of crime happens everywhere. That same weekend a friend had his car broken into in Edina - for non-MN people, that's a really ritzy suburb.

Otherwise we feel perfectly safe and happy there. And yes it's just a short walk down to Grand Avenue or over to Cathedral Hill. All the same amenities but for 1/3 of the price for the house.

THIS. I also live in a "bad" neighborhood. A colleague once commended me for being "brave" for living here. That made me laugh out loud, but it is true that I don't live in fear. Petty property crime doesn't stress me out too much. Also, bad neighborhoods are the ones where there are more kids out playing becuase they don't have the middle class helicopter parents. I'm actually looking forward to my kids having exposure to more than just suburban middle class white kids and scheduling 'play dates'. I'm more worried about them feeling entitled and consumerist than falling in with some sort of criminal elementary school crowd.  I guess I just don't get it with all the hand-wringing people do when they avoid marginal neighborhoods. It is actually a lovely place to live and we'll probably buy a larger house in the same neighborhood when we outgrow this one. My kids will go the local public schools unless they have specific challenges. We shall see.  Good luck in your bad neighborhood. I think you made the right choice!

ShoulderThingThatGoesUp

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Re: Buying a house in a 'bad neighborhood'
« Reply #26 on: July 07, 2015, 11:12:00 AM »
Someone spray-painted "FAGGOTS" on a garage door a block away from my house last week. Oh no, I better spend $50,000 more on a house and stop taking care of half my errands by walking.

Wait, I haven't lost my damn mind. I do wish the property owner would clean that up, though.

Bearded Man

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Re: Buying a house in a 'bad neighborhood'
« Reply #27 on: July 07, 2015, 11:19:40 AM »
Yes is the short answer.

Then call the police dept and ask about the crime stats in the area.  Acutally go over and talk to the neighbors, as many as you can, even a block or two away.  Look on FB for community pages and see the goings on.  Go to the local school and talk to the office staff, teahers and principal.  Ask everyone ever question you can think of - what do you like about living here, what do you dislike about living here, would you advise other to move to this neighborhood, etc. etc. etc..  Buying and selling costs money.  The first impulse of "yes, I would live here" should be followed by collecting as much information as possible so that you don't run up against "well now that I know what's it really lives like to occupy this space I'd like to move".  Learning through the experience of others is much more convenient and free!

This x 10.000. I do this now for EVERY property I buy, even rentals. I look at city data to see if the city is declining, I talk to the neighbors, cops. EVERYONE. I am like a fucking detective looking for a reason NOT to buy.