All Forum Posts by: Bradley Bogdan

Hey @Aaron S. , glad you're ready to get your feet wet!

I'm not an expert on mobile home REI, but I do know a lot about Section 8, and I would be very cautious about banking on this property being able to pass an inspection and be rated a 3 bedroom under the Section 8 guidelines.

First off, just in my listening to the BP Podcast and reading the blog, it sounds like the 3rd bedroom in many mobiles is VERY small. I don't remember the minimum sq ft. for a room to qualify as a bedroom for HUD purposes, but I don't believe those small extra rooms will count. Do your due diligence and ensure that all three bedrooms have the minimum sq ft to qualify.

Second, in general, mobile homes can be difficult to pass under the Section 8 inspections. If your prospective one isn't particularly new, you could have major issues. Many of the hurdles your have to clear to finance a mobile home on through a mortgage, such as foundation requirements, etc. are similar for Section 8. Just a heads up.

Third, know your area for Section 8 rentals. If there's a decent amount of rental stock that will accept Section 8, it could be VERY hard to bank on renting your mobile. Most people with a 3 bedroom voucher will be trying to rent an SFH rather than a mobile.

Finally, your base 3 bedroom rent is very low in your area, which means that after the utility considerations are taken into account, you will probably only be looking at rent in the $600-$700, depending on the income of your tenant. 3 bedroom units get tagged with significantly higher utility costs than 1 bedroom units. 

Now, this isn't all bad, despite the list of things I just noted. First off, if you're set on Section 8 being your ticket to tenants, you could hope for that third bedroom to be too small. 2 bedroom SFH rentals are generally much tougher to find than 3 BR, so people are more willing to look at mobiles as an opportunity to have no shared walls.

If you're not wedded to the idea of Section 8 or straight rentals, you could consider buying the property and selling it to a local buyer, carrying the financing yourself. There are a few podcasts and blog posts about this that would be good for you to listen to. It is essentially a rent to own situation for the buyer, but you can probably structure it in a way to ensure you have good profit and protection. 

Hope this helps and let us know how it turns out!

Hi all, 

I've been reading various places that banks have wildly different rules/rates for counting rental income as income in qualifying for a mortgage. 

Just so I know what range is reasonable to expect when looking at lenders, what % of current portfolio rental income or proposed income of the to-be-purchased property do your bank lenders give you credit for in a mortgage app?

Thanks!

Looking for a bit of advice on the math I'm doing on a MFH I'm looking at buying for my first property. 

Its a converted house with 4 units that is fully rented. Doing the math, it would cashflow wonderfully on its own as an investment, between $200-$300 a door/mo after 50% rule and mortgage, with some updating and raising rents closer to market rate as a result.

The catch here is that I would like to owner occupy my first purchase, partially for ease of managing the property, partially for some lifestyle flexibility (namely pets) that come with owning your residence as opposed to renting.

Do folks looking to owner occupy their rentals work out the math on a property including they rental they plan to occupy as part of the cashflow/door calculations or is it more common to try to make the numbers work under the assumption its a 3 unit property? I will continue to work full time for the foreseeable future, so in theory, I can understand either set of assumptions, as my own "rent" can go straight to savings for a 2nd property, but I'm curious to hear what other people think. 

Wow, I would love to hear the logic behind this move. Perhaps they're hoping it will depress land value and encourage a buying spree from folks looking for a primary residence? But if the area is that depressed to begin with, and homes need a substantial amount of work (as assumed from the councilwoman's statement about landlords not wanting to live in the neighborhood), I doubt you'll have even people of modest means beating the door down to buy. Poor people want to live in a crappy place about as much as rich people do. 

Conversely, I would think that some neighborhood improvement policies and actions would be most helpful in attracting buyers that would invest in their properties. Penalties for folks that are slumlording it, tax breaks for improvements post purchase in the neighborhood, etc. Properties becoming rentals isn't something you want to encourage in neighborhoods, but I feel that stopping rental conversions doesn't really fix anything. 

I would love to hear from folks in the area who know some detail about the city/neighborhood and perhaps some other details that make this policy seem a bit more logical. 

Great to hear @Clayton Ballard ! Good luck with the rest of the process and let us know how it all wraps up. 

While I haven't ever seen this particular situation come up before,I don't think that an unused tank is, by itself, an issue. Obviously, if it blocks safe access to things, looks dangerous, etc. it will be an issue, but the simple fact its no longer a necessary part of the apartment shouldn't be. I have seen a couple local homes have water heaters or furnaces that were installed before completion of a wall, making them virtually impossible to remove once they're dead. The owners in both cases installed the newer, smaller units next to the old and just left the old units in place. Neither place had an issue with inspection. 

If you want to double check, call up your local PHA and ask. Phrase it like you already own the house and you're making sure it will pass for a currently interested tenant. They should be able to patch you through to an inspector (or THE inspector, if its a small office) who will give you the answer that matters most. Alternatively, if you have a good relationship or would like to build one, show up at the PHA in person with your question. Like any agency, phone tag happens sometimes, but if you're there in person, you'll likely walk out with an answer, a smile, and a handshake. 

Hi all,

I'm wondering if anyone has a rule of thumb cost for splitting a SFH into a MFH under the following assumptions:

- Splitting Power/Gas between the two new units where the circuits for the home don't need to be rearranged, just separately metered. 

- No major floorplan changes (ie legal external doors exist for both units) other than converting 1-3 doors or archways into walls between the new units. 

- No work done to the Water/Sewer for separate metering. Leaving that as a landlord paid utility. 

- Average legal/city filing costs for splitting a home (if any?)

Mostly, I'm curious if this is usually an economical option to convert the large stock of SFH to MFH locally, rather than competing for MFH properties. I see a decent amount of evidence that its been done in town before, so someone must have thought so! Thanks!

Pros: Partial (or total) guaranteed rent, based on your tenant's income. 

- You're providing a public service to renters who are often discriminated against. 

- The good tenants tend to be very long term, due to the complexity and hassle of moving with a voucher.

- In the right areas, high demand for your housing. Some PHAs will allow you free advertising via their office or newsletter for your rental. 

- In the right areas, at or above market rent for your neighborhood, with the proper strategy. 

Cons: You're dealing with a third party. This doesn't have to be a con, the PHAs I've had a lot of experience with have been great, but any time you involve another party in your business model, there's the potential for issues. 

- You need to be familiar with a pretty lengthy book on how both the program and PHA work. Each PHA is a bit different, as they're independent, special class non-profits that are basically contracted by HUD, and as such, they have leeway on how they can administer programs. Many landlords don't know as much as they should about the program before they jump in, as it seems simple. Usually it works out fine, but anytime you don't know what you don't know about your business, that can be dangerous.

- You're dealing with low income renters. They're not generally bad people, but on average, they're tougher on your place and have more issues than a medium to high income renter. Screen well and you'll do fine, but do screen well. 

- It really helps to know your local housing assistance non-profits. This is another area of knowledge that adds to what you should know, which is a con, but good knowledge and relationships with those agencies, churches, etc. can easily turn to a plus of an endless renter stream, deposit assistance for your tenants (ie higher deposits for you), rental assistance if someone falls behind on rent, and support for issues tenants may have that otherwise would blow up and lead to a messy eviction. 

Finally, look into your local HUDVASH program. Its a Section 8 program for veterans that includes Social Worker support and regular home visits, and in larger urban areas, dedicated medical and mental health teams. It mitigates a lot of the risk that comes with many low income renters by providing you a resource to call and address problems before they become evictions, as well as having renters with a large number of options for support open to them. Often, vets in the program are discriminated against, when, ironically, they have a tremendous success/retention rate in housing. If you call up your local program with a one bedroom rental or two to pilot the program for yourself, I suspect you'll be pleasantly surprised. 

@Kyle J. You're right, just like @Account Closed I should have been a bit more specific. Obviously, I'm not advocating anything illegal, however, IF he was associated with criminal activity that was disruptive to other tenants, that probably violates his lease. I'm not familiar with the exact laws of Florida, but that usually gives you options, especially if you have a month to month agreement rather than a fixed length lease. 

Now, individual PHAs have a fairly wide range of responses they are allowed to take when someone is merely INDICTED (doesn't need to be convicted) on charges. They do not have to do anything, but usually gun and drug related charges bring a quick boot from the program. If they are associated with the actual rented premise, or are of certain particular natures, they will likely ban the person from the program forever. What I'm suggesting, for your financial protection, is to make sure that you understand exactly what the PHA will do in this circumstance, so that you know how to make sure to protect yourself. PHAs don't usually have a system that flags them when participants are involved in crime or incarcerated, so this can lead to them paying rent for months after such an event, as they assume everything is normal. DO NOT LET THAT HAPPEN, they're the gov't, and they'll want their money back when they retroactively revoke the voucher. Again, not advocating anything illegal, and I understand the situation is potentially more complex with domestic violence issues possibly involved, but definitely get a handle on what is going on and what the PHA is planning on doing. 

@Will Wu while the exact circumstances of his (likely) arrest will determine the details, it is very likely that any extended incarceration with trigger a revocation of the Section 8 voucher. From a strictly financial perspective, I would begin looking at whatever options are available to you in Florida to remove the tenant from the unit and rent to another person. This doesn't seem very likely to result in anything other than a messy overpayment situation from the PHA, where they don't find out about the arrest/incarceration for an extended period of time after it happens, and then retroactively revoke the voucher and want some of their funds back from you. At the very least, call the PHA and get instructions from them on what will happen in various scenarios. They will usually not be able to give you advice (technically illegal for them to do so), but they can explain what will happen if X, Y or Z is the case and you can draw your conclusions from there. 

All that said, if you know the tenant, there is a human interest side to this as well. Obviously only you know whether there are any moral factors weighing in on an abrupt eviction based on all this, but I just want to throw it out there that your financial interests aren't the only factor in all of this. 

Final note, if this turns out to be a domestic violence issue of some sort, and there are other people in the rental other than the primary renter, that invokes a special set of rules from the PHA, so definitely look into whether there is a wife/children etc. that are part of this and are residing there. 

Best of luck, let us know how this horror story plays out?