Renters in Low Income Housing - Any Advice

[Vanessa Wright]

I am really drawn to the idea of building a large portfolio in low income and affordable housing areas. Areas were 90% or more of my tenants will be on sec 8 and government assistance programs. Some of the concerns I have will be resell value of the property even tho I am contemplating a buy and hold strategy. I am also cute plating what differences will i need to consider in my business model, such as quarterly inspection system? on site management? periodic policing patrol? are there any investors who have made this business model work and can give me some insight on this to consider and tips on how to make it profitable and beneficial for these neighborhoods?

[Michele Fischer]

Vanessa,

I'm pretty sure three of the podcasts have the topic of low income investing, you may want to check those out.  I have also reviewed several books about poverty on my personal BP blog site that you may want to check out.

If you go this route, you should plan on no appreciation, just selling them for what you put into them. The money is made on cash flow. The exit strategy is selling to other investors, so you may as well look at multifamily, although the SFR have less lawn care and disputes to referee. I would find out if any of the low income areas are being revitalized and concentrate there.

Frequent inspections are necessary.  But even if a place looks great one month, two months later it can be a disaster, we're finding.  Screening is essential; if a tenant seems too good to be true they won't stay long, we have the best luck with people who already have roots in that neighborhood.  Strategies for partial rent payments is important too, you or a manager will spend more time collecting rent, and you can't automate it easily.  I'd focus on a broad spectrum of tenant types - working poor, section 8, other assistance programs.  We partner with the police, they have  a landlord program, and make sure the neighbors know how to reach us.