The main goal of investment is to turn a profit, but that investment can also bring about a positive change in some situations. Investing in low-income neighborhoods can make a difference to the community as a whole and also to the people who live there.
According to several reports, companies investing in low-income communities can help increase the income levels and job retention in those areas by as much as 10%, but often more.
A heavy investment paired with comprehensive community development will also improve the overall quality of life and lower the rate of crime in low-income communities.
In the modern world, information and data help people understand the impact of their actions. There is a massive amount of research that proves investing in low-income neighborhoods decreases income inequalities.
For those interested in comprehensive community development, investing in projects and programs in a low-income community is the best way to effect measurable change that will offer benefits for several generations.
More than just creative partnerships, responsive plans that start at the grassroots level are able to drive fundamental positive changes that are also long-lasting.
Table of Contents
What Happens When You Invest in Low-Income Neighborhoods
It is always a question about the quality of life that a community starts out with and when it will end up when choosing to invest in low-income neighborhoods.
Depending on the type of investment, real change is possible in marginalized communities.
For example, when investment is made into community centers and other centers for activities for youth, the amount of crime tends to go down dramatically. Giving youth in these areas options to express their creativity and hone their talent will reduce the amount of time they are out on the streets to run into a rougher crowd.
Investing time and money into providing quality shopping centers, healthy food outlets, and other commercial points will bring more commerce and also more jobs to low-income communities that will benefit directly from the growth.
Investing in job training and trade programs in low-income areas also gives people in that community a way to improve their circumstances while also improving their local area’s look and quality of life.
There is a clear and measurable correlation between investments in improvement programs and community centers and the income levels of these same communities.
Investing in healthcare clinics, libraries, and even wellness centers also helps improve improvement rates while cutting down on preventable diseases.
Low-income communities are highly resilient, and the people living in them often are able to maintain their ground when faced with a wide range of challenges.
Instead of being decimated, investing in such communities results in quality-of-life gains that trickle up not only in the local community but also on a wider scale.
See Related: How to Measure Social Impact (Step-By-Step Guide)
How Investing In a Low-Income Community Can Spur National Change
Investing in a low-income community as a personal investor or as a business is a great way to help others while also increasing your profits. The main goal should never be only profit because there is always a chance that you will never do anything other than break even.
However, investing in a low-income community is certain to help improve the quality of life for those who live there. Often, there will be several years of loss before a profit is made, but the benefits of investment for locals are generally immediate. You can use an app like Dealcheck to analyze a potential real estate investment in your area.
The raw data in the improvements can also be used to encourage other investors to come to the area. It is also a useful tool that can be used to work with policymakers in government when trying to convince them to allocate more resources to a specific low-income community.
Many foundations and developers will request research and hard data when they are interested in scaling up their investments in low-income communities.
This can also help to revive a low-income community locally while also encouraging similar investment in community development projects all across the country.
See Related: Best Impact Investing Jobs | Make a Difference
Challenges You May Face Investing in Low-Income Neighborhoods
Investment of any sort comes with risks and challenges, and the same holds true when investing in low-income neighborhoods. The main challenge of investing in lower-income communities is slow gains and opposition from some parts of the community.
Investment can be viewed with suspicion by those who are used to hearing promises of advancement only to be taken advantage of by those with more means.
Older people are also more suspicious of change, and it can be hard to win them over in the beginning. If you want to invest in low-income communities that have a typically higher crime rate, you will face some losses and even threats from criminal factions in the area before things start to balance out.
While these things may seem hard to overcome, it is critically important to keep moving forward. Investing in low-income neighborhoods decreases income inequalities between the middle class and the very poor, which offers long-term benefits to both classes.
Progress will typically be slow, and the gains you do see will often be uneven. This is true for every low-income community, regardless of what type of investment you choose to make. For the quickest social gains, investing in a healthcare center or community center will give the quickest benefits as it helps those in the community who may be overlooked otherwise.
Economic inequality is deepening all over the nation, and for real change investing in infrastructure upgrades and job training centers will offer the most dramatic effect. These types of comprehensive community development programs and investments may be slow to develop, but they produce results that will bridge that gap over the long term.
Investing in retail or business is the riskiest of all in low-income areas, but the returns are much greater if you can tough out the rough years. Creating jobs and providing a service the community needs will allow them to spend their earnings locally to improve their community.
As local opportunity grows, low-income families will have a better chance to do more than just survive, and they can thrive.
See Related: Things to Know About Climate Refugees
How Companies Investing in Low-Income Communities Can Spur Change
There are so many options for investment when it comes to low-income communities.
Private investors and those looking to flip houses help but can only go so far. Companies who choose to invest in low-income neighborhoods can spur lasting and impactful change that is worth noting.
Companies are in a better position to make unconventional investments that are more sustainable.
For example, if there are existing community-based programs and businesses in the area already, instead of investing in new competing services, companies can invest in improving those that are already in existence. This not only supports community growth but also encourages community-based growth.
Thinking about the target will also tell you how to invest in low-income communities sustainably. It is easy to buy land or open a store, but to invest in something that sustains itself takes a bit more effort. Companies that target needs in the community that also align with their values, then a sustainable improvement can be made.
For example, big pharma could invest in local pharmacies and healthcare programs for low-income people. Not only will this serve a need, but the nature of these services makes them sustainable. Big companies investing in low-income neighborhoods decrease income inequalities, and they also help generate bigger changes.
See Related: ESG Investing Trends
Tips On Real Estate Investing in Low-Income Neighborhoods
The property prices in any neighborhood are generally a good reflection of the income level of the residents in that community.
Low-income communities tend to reflect low property prices in both the residential and commercial areas. While this may seem like a bad thing, it is actually a great opportunity for a savvy investor who is also interested in helping decrease income inequalities.
Real estate investing in low-income neighborhoods is not only profitable, but it is also a way to help transform the neighborhood for the better. We have some tips and suggestions that will help you be successful.
When considering real estate investing in low-income neighborhoods, it is important to understand the community before purchasing. The chance of profit always exists when dealing with real estate investments, but the margins are what will differ when the community is low-income.
Place-based investing is an art form that requires proper research and planning in order to be successful. For those who only have a little bit of investing or are looking for quicker returns, upper-level low-income communities are an ideal target.
For those who have more time or more money to invest, blighted and to-be-avoided communities are a great target. Both offer prime opportunities to improve the communities while also offering a profit to investors.
Buying property in low-income areas is not very difficult.
You can acquire properties from foreclosure sales or actively search for homes for sale from buyers looking to relocate. In some cases, you can even purchase property from tenants who can no longer afford a mortgage but would gladly stay in their current home as a renter.
With so many people out of work and those on a limited income generally carrying more debt than they can handle, investing in real estate may be the quickest way to improve a community without changing the demographics of the existing population.
Buying properties for their rental potential offers a faster way to see profits, but some risks are involved. Purchasing property for Rehabbing is more costly, but the returns will also be greater.
The same is true for purchasing commercial property in a low-income area. You can often find land or even buildings below the market rate. Investing in this land and then developing it to create commercial centers for the community is a great way to earn money and provide a service to the community.
As more jobs open up in an area, more people will also move in, which will help the community’s income levels overall. Depending on the amount of money you have to invest or the type of connections you have, it is possible to bring in a group of investors that can overhaul a low-income area more effectively.
For example, a group of investors can buy land big enough for a small mall or retail park. You can then contract retailers and other community growth organizations to engage the community and set up shop on that land.
The investment will pay off by spurring economic growth and offering locals a way to spend their earning in their local community instead of traveling elsewhere to spend the same money.
Dealing with tenants in a low-income neighborhood is a delicate matter. In most cases, people who make less are able to afford only minimal rent amounts. Although they are low income, most work very hard.
You will need to have clear rental terms and policies that protect your investment and take the community’s needs into account.
Choosing a property located near schools is the best choice for lower risk, but those located near retail centers and highways are also great choices. These areas are the easiest to improve and also have the biggest ROI potential.