All Forum Posts by: Jonathan Taylor Smith

@Jess Hammersley - as long as you've lived in your current owned home for a year, nothing should prevent you from purchasing a 4-plex as your new primary residence, and renting out your current home along with the other 3 units. And you should be able to count a percentage (likely 75%) of the projected rental income for those units to qualify for the new 4-plex purchase. And the lender may require at least 1 (if not all) of the 4-plex units to be in livable condition at the time of purchase if using an FHA loan.

@Sandra Hughes - That may be possible depending on the seller and if they are willing to provide you access to the property prior to closing. It also depends on if the property is in inspection ready condition or if it will need work / upgrades to be able to pass inspection. If so, you'll likely have to wait until after closing before you can make modifications to the property. What you can do now regardless is register yourself / company as a landlord with the housing agency. And note... I'm not certain of Harris County specifically, but in my location, an inspection cannot be scheduled for a property until AFTER you have a prospective tenant for which you have submitted the Request for Tenancy Approval (RFTA) to the housing agency. They will then process the RFTA, tell you what rent the tenant is approved for, and ask if you'll accept it. Then once accepted, the inspection is scheduled. So if Harris county also handles it this way, you'll not be able to get the inspection even scheduled until after you have already listed the property for rent and gotten an application from someone with a voucher.

@Steve Saenz - This depends on your state (I'm in NC); however, the first time I did a private lender funded deal, I had the same attorney who was handling the closing, also write-up the deed of trust and note for the private lender. In NC, the note establishes what is owed, to/from whom and under what terms and the deed of trust binds the note to the property. From there I've repeatedly used slightly edited versions of those same docs on multiple subsequent private lender funded transactions.

@Alan Held - I purchased my dream waterfront lake house via my LLC using a hard money loan. It was initially unfinished, but once it was done we refinanced it into my wife's name, moved in, and sold our prior home. Then after living there for the required year, we found another distressed house, bought it via my LLC using another hard money loan and we're currently doing the rehab. Once the rehab is done, again we'll refinance it into my wife's name and move in - keeping the lake house as a second / vacation home. There are also certain tax benefits from the time they were owned by my LLC. This works even better for us because my wife has sufficient W2 income to qualify for the loan by herself.

Welcome @JMar Williams - and CONGRATS on deciding to get into REI! I'm in Chapel Hill and invest mostly in the Triangle and Triad. Let me know if I can answer any questions or be of other assistance.

@Yoel Peyamipour  - OK, just wanted to make sure we're talking about the same thing... You'll want to go to: https://www.huduser.gov/portal... and see what HUD/Section 8 will pay for X bedroom rental units in the county you're targeting to acquire properties. Then determine if you can obtain properties in those locations for a price that will make them cash-flow positive at the indicated Section 8 rental rates. Then investigate the housing authority in that location to learn if they are a well-run organization - or a train wreck. How many employees do they have? How many inspectors? How long does it take for them to approve a request for tenancy approval? How long after tenant placement do they begin paying rent? Can you get someone on the phone? And if not, how long (or how many days) does it take to get an email response?

A poorly ran local housing authority can single-handedly make Section 8 not worth the effort. About half my rentals are Section 8, and while not perfect, I find the housing authority in my location to be decent and I'm glad to be part of their program. But I would advise you to find rentals that would work with Section 8 and/or non-subsidized tenants alike.

First, what do you mean exactly by "section 8 properties"? I invest in rental properties and I choose to rent some of them to persons with section 8 vouchers when and where it pays near, at or above what a non-subsidized tenant would pay in rent for the same property. But there is nothing special about the property that makes it "section 8" prior to obtaining it and placing a voucher holding tenant.

@Michael Kotylo - Everything depends on your situation and the specifics of the property. For me, when I first got into REI, I was paying ~$14K year after year in ADDITIONAL federal taxes beyond what was already being deducted from the paychecks of my wife and I. We bought our first two rental properties (one on December 30th of the year) and upon filing our taxes in the following year, we got a refund of $6,000! So that is a $20K difference in our tax situation. Now they didn't - but would they not have still been good purchases for us on taxes even if they had negative cash-flow? And we also got a state tax refund on top of that. Plus, both of those properties currently rent for about $600/mo above what they originally rented for... Now I am by no means telling you to IGNORE cash-flow or to proceed with a negative cash-flow deal. I am simply suggesting that year one cash-flow should not be your only determination of what is or is not a potential good deal. There are also other aspects that should be considered. I missed out on a LOT of what today would be excellent properties to own because the YEAR ONE cash-flow was not good enough for my calculation at the time - and today they would all be strong cash-flow performers... Just my $0.02.

I can't speak for certain on every state/housing agency, but I believe it is a general HUD rule and per the HAP contract that you cannot take any amount above the maximum payment standard as approved for that market/tenant. So, if they approve $2,500, that must be the rent - and taking anything above that from the tenant "on the side" is a violation. Now the part about utility deductions, in my market that has never been subtracted from my rental income, but it is used to determine the overall affordability of the home on a tenant-by-tenant basis. So, if the max approved rent were $2,500, and utilities deemed to be $200/mo, I would still get $2,500 if that tenant is deemed to be able to afford $2,700 with the subsidy assistance, which could be anything up to the full $2,500.