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Low-income neighbourhoods

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MagJoe | 07 Nov 2014, 09:54 AM Agree 0
What’s the pros and cons of investing in low-income neighbourhoods? I hear of strong cash flow properties in the ghetto but I’m worried about crime. Is it worth it? Are the tenants often too flaky?
  • retrackers | 26 Nov 2014, 10:51 AM Agree 0
    It's fine if you screen your tenants well. You won't have the appreciation that you would get in other areas but your cost of acquisition is also less. Here is an example (I don't know where you live but this is based on the GTA).

    House in Scarborough (great area to invest in) = $500,000 purchase price that will rent for $1800/month (you would need to put 25% down to make it cash flow at all) = $125,000 and it will likely appreciate 5-7%/year ($22,500-$31,500/year)

    House in Oshawa (lower income but great rental pool) = $200,000 that rents for $1200/month (you would need to put 25% down for it to cash flow) = $50,000 and it will likely appreciate 2-3%/year ($4,000-$6,000/year)

    With that being said; you can afford two of them with the same cost of acquisition. In Oshawa you can find some decent legal duplex's around $250,000-$350,000 which your rental income could be as much as $1,800-2,000/month providing a better cash flow and roi when compared to the on in Scarborough. However, Scarborough is "a better area" and will give you a better sales-proceeds cash flow. I can explain further if you would like...
  • MagJoe | 26 Nov 2014, 01:54 PM Agree 0
    This is perfect. You’ve given me some logistics and things to consider. I appreciate your advice. Anyone else with other hotspots for a property like this?
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