Class D Property: Be Aware of the Risks – Video
Kathy Fettke: I can’t tell you how different people are when it comes to A, B and C properties. I have been to neighborhoods that were clearly B in my opinion, but for the broker was calling them A. But, you have to understand, again, it’s subjective.
Let’s say the broker you’re dealing with grew up in a C neighborhood, they may think that B neighborhood is the cat’s meow, they might just think it’s the nicest place in the world because that’s not a neighborhood they’re used to. In their mind, it’s an A neighborhood, but in your mind, it’s like, “No, this is clearly middle class, this is a B neighborhood.”
Again, the same thing goes, there are people who are real comfortable in D neighborhoods so they won’t see any problem with a C minus neighborhood that looks real good to them, but to you, it’s like, “Wait a minute, this is high crime. This is scary, I’m not used to this.” Let me be real clear. Those C minus, D neighborhoods that are high crime, it could be real hard for you to collect your rent because you’re going into areas where you may not be welcome.
Always check with a property manager before ever investing in a high crime neighborhood, because there’s a chance you might not even find a property manager who wants anything to do with that neighborhood. You may be stuck with a property that no one wants to manage, but you’re afraid to go in.
There’s pockets of the United States that are really not nice; very dangerous, very unwelcoming. There can be a lot of racial tension in some of these neighborhoods. Again, be very, very careful. It’s tempting because the properties are cheap, cheap, cheap, and they look cute on the internet. They really do. I’ve seen some D neighborhoods that, man, it’s very deceiving. It looks lovely online. Do not trust it, don’t trust anything online.
You’ve got to go and see it for yourself, or walk the neighborhoods to really understand. If you’re still confused, if you still don’t know, just take a little drive over to the police station and find out what’s going on in that neighborhood. Take a little drive to a property management company and they’ll know for sure. Another little tip is to go over to the fire department because they know what’s going on too. They go to these neighborhoods, and they know what’s going on. A lot of times if there’s not a fire, they’re just hanging out there and might be willing to have conversation with you.