“My grandfather kept a finger on the pulse of the neighborhood,” he says. “He found out that an older woman wanted to get rid of the three-story, single-family house she owned.” Ross bought the house for a nominal sum, understanding that it would need renovation.
“My father is a contractor,” says MontÃ©’s wife Michelle, 35, an elementary school teacher. “He helped us convert the home into a triplex that we could rent out.” They still own the property, which has appreciated substantially as well as generated positive cash flow.
For the Rosses, owning a property near downtown Philadelphia, better known as Center City, has paid off. “It has become a much more desirable area,” says Michelle. “People like the convenient location and the ability to find parking on the street. In addition, our area gets more frequent garbage pickup than other areas because it’s near Center City.”
Boyd, who owns and operates his own Web business, also began investing in real estate in an area he didn’t mind living in. “When I was out of college,” he says, “I went looking for a duplex. I needed a place to live and I wanted a tenant in the other unit so [their] rent could help pay the mortgage.”
It took him more than six months to find the right place, but it was worth the search. “I still own it 15 years later, [and now] both units are rented,” says Boyd. “It has been a fantastic investment. Besides the rental income all these years, the house — which I bought for $60,000 — is now worth around $240,000.”
The property Boyd finally settled on was
a few miles from the University of Minnesota in Minneapolis. “It’s a blue-collar, low- to middle-income neighborhood with older homes,” he says. “It’s a quiet area, near churches, parks, and schools. I was willing to live there myself, so I figured I would be able to get responsible tenants.” He says investors should look at the area within a five- to 10-mile radius of the property they’re considering to see if new development is under way: “If stores such as Home Depot are going up, that will help property values.”
Of course, not all good investment property will be found within city limits. “In the suburbs, there are fewer neighborhoods where you won’t want to buy,” says Ellison. “We look for a house that hasn’t been taken care of — often because something is going on, such as a death in the family or a financial reversal. We’ve had success tracking down owners of such properties from public records, buying the houses, and putting them back in good condition.”
Whether you’re investing in a city, suburb, or rural area, you should check out the surrounding area. “See for yourself if the neighborhood is being maintained or getting run down,” says Diane St. James, a mortgage counselor and underwriter in Allentown, Pennsylvania. “If there are houses on the street that are boarded up, you may want to pass. The same is true if you see a lot