The Bloody Apartment is owned by Dwayne Forge, and is located in Northwood. A long blood trail runs through its corridors, the source of which is never revealed in game.
The blood trail begins as a single blood splatter just outside the apartment's entrance, becoming several blood splats in the corridor leading to a pool of blood on the living room floor. It is believed that while Dwayne was in prison, many hobos could have moved into his apartment and started fighting each other. What supports this idea is the fact that Dwayne never locks his apartment doors. Another theory is Dwayne has killed someone in his apartment, which could also be one of the reasons he went to prison, along with whatever "crack" (cocaine) offense Dwanye committed which sent him to prison, as Playboy X mentions during the mission Blow Your Cover.
Several photos of LCPD cops can be found in the apartment, meaning that a police officer was either living there, or Dwanye knows the officers personally, or the officers were somehow involved in Dwanye's arrest and he holds resentment towards them.