What Are My Options?

Question

Im going to explain my situation and maybe someone can help me out. Im trying to see if I have more options than I realize. I have a duplex. Currently have one side Airbnb and rehabbing the other side for Airbnb as well. Im thinking about switching to Section 8 for the guaranteed $$$$. I keep running out of cash due to rehab needed, so the second unit is stalled and not cash flowing. I am going to start wholesaling to build capital.  I do have great equity in the property as well, but my credit is not the best at the moment. I need to know am I missing something, what are some creative options I should consider?

Nathan Gesner · Answer

I would not recommend using Section 8 as your solution. With rent rates increasing, you may not make as much with Section 8 as you do with the open market. And - in my personal experience - Section 8 tenants are more likely to cost the owner money in the end than a standard tenant. Others have a better experience, but just be careful with thinking it's a magic fix.

Mitch Price · Answer

@Bruce Woodruff true. thanks for the information. Ill look more into it.

@James Baker never thought of that. will keep it in mind.

@Nathan G. Atlanta, GA. I have a property manager that I am working with so I will check with them further. thanks for the info!

Mitch Price · Answer

@Bjorn Ahlblad true. I guess it wouldnt hurt to talk to someone about tapping in to the equity I have.

@Jill F. I have a little bit of skill. its my patience that I may need to work more on. haha. but yes between my current knowledge and youtube and can do the basic stuff

@Nathan G. thanks for the response. Although you are right as far as getting top rent for the open market we are still in a pandemic so even that isnt guaranteed atleast with Section 8 I have peace of mind knowing that I am cash flowing. I plan on taking all precaution when it comes to finding a good tenant. My focus is consistency with both units.

@Bruce Woodruff I reached out to the housing authority today. Depending on how much I can get for each unit with determine if I switch from Airbnb to Section 8. I have a number in mind so we will see. I know the potential of Airbnb is tremendous but right now I dont want to bank on potential.

Mitch Price · Answer

@Penny Brown Thanks for that! That is great advice. I appreciate it. We can definitely connect, especially seeing that youre here in Atl.

Penny Brown · Answer

You're in a pickle for sure, but don't let emotion over rule good sound financial decisions.  Reassess your situation. Brandon always talks about the quiet time in the morning to reflect on your next moves.  Seems hokie to some, but may be crucial in your situation.  Calculate your true costs:  purchase, rehab, holding costs.  Add in what you expect to spend to finish the rehab on the second side.  Then look honestly at money on hand like the income from the airbnb, your next paycheck, savings, credit card limits, etc.  Then ask: Can you reduce your rehab, can you get materials cheaper, do you need to pay down a credit card to pop your credit score up to get a refi, etc. ? Then do a little market research. For example, find out what the home would sell for  (as is or if you finished it) or how much could you refinance it for with a no credit, no doc loan, then what are market rents and what are section 8 rents? Once all your numbers are in front of you, they paint a picture and your decision will be revealed.  You got this!  I'm here in Atlanta if you need a second set of eyes...best of luck!

Nathan Gesner · Answer

I don't know where you are, but the majority of the country is seeing double-digit increases in rent rates and demand is high. You shouldn't have any problems finding a regular renter willing to pay market rates.

James Baker · Answer

Have any contractor friends that need a place to stay? Free rent for 6 months if they finish the second unit in a given time frame?

Bruce Woodruff · Answer

If everyone is doing it, it's not 'potential'. As long as you have identified the correct area, you will be fine. And you can know if the area is right by doing your own research on AIR and VRBO...

Bruce Woodruff · Answer

My thought - Switching the AirBnB strategy for Section 8 on that one side will give you immediate cash flow, but you will be locked into that for a while. If you chose the area correctly, you know that AIR or VRBO can make you 3 x as much right?

Jill F. · Answer

Post some pictures of the side that needs work. One strategy might be to do smaller less extensive changes than originally planned. Do just enough to get it rented and cashflowing while you work on your wholesaling biz or improving your credit. Do you have any reno skills at all? These days we find that on a reno where we don't DIY, 2/3 of the budget is labor and 1/3 is material.

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