All Forum Posts by: Greg Scott

Yes, you can househack a single family, duplex, triplex, or quad and qualify for low-money down through FHA.

Here is a link for you

FWIW, here is the link to the HUD guidelines for ESA.

@Alecia Loveless it is worth parsing the technicalities here. 

Only people can be in a protected class.  If you deny entry of a service animal, you have discriminated against the person, not the animal, and people with a disability are protected by Fair Housing. 

The main problem with Fair Housing is if someone files a complaint, you have to defend yourself even if the complaint is false or the evidence inconsistent. The complaintant does not have to prove their case first.  Fair Housing has become a very expensive law for landlords, and arguably unfair to the industry.

So many things wrong...

1) The partners should not be staying there "frequently" unless they are on the lease as occupants.  The property manager should have required a full application, plus credit and criminal background checks. If they are not on the lease, why are they being allowed to stay there?

2) How do you know they are emotional support animals? If they aren't even occupants, I doubt your property management has the correct documentation. If your property management says they verbally told them they were ESAs, fire your property manager immediately. They don't know what they are doing. If they have documentation, ask your PM if it complies with the guidelines published by HUD. So many PMs are total whimps when it comes to ESAs. Know the law.

3) One of the guidelines for ESA, published by HUD is that if an ESA shows any aggressive tendencies (arguably lunging towards the neighbor counts) the ESA designation is immediately voided.

I'm guessing the main problem is you have an incompetent manager. 

You do not need a reason to non-renew someone in most locations.  Recently, certain jurisdictions have started requiring those, but only in the most left-leaning areas.  The fact that the leases expire concurrently is not important.

Having a vacancy and turnover adds a lot of cost, and we do the mental math.  If they are sucking up our resources so much that it is worth the cost of a unit turn, we non-renew.  If they are hurting the peaceful enjoyment of the property for other residents and we are concerned they will drive people to move, we non-renew.

If they asked why we non-renewed, our staff just tells them we do not need to provide a reason.

I would be very surprised that the ARV would be the same for a 4/2 as a 5/2. You may want to look more carefully at that before making a decision.

In the scheme of things, this is a fairly minor problem.  You can choose to let them stay and know that you will get lots of text messages, some meaningless.  If you are just done dealing with that, I would non-renew them.  

Here is a simpler way to put it.

#1 priority must be the ability to hold.  Being able to hold in up and down markets, whether you have a great job or got laid off, is important. Holding buys you the option to experience future appreciation.  This is why cashflow is important.  This is why reserves are important.  Those that get crushed in real estate are the ones that MUST sell in a down market.

#2 NEVER count on appreciation.  Your scenario A & B make me squirm.  About 5 years ago on this forum I got into a heated debate with many people about Appreciation Markets vs Cashflow Markets and we were talking Austin TX.  I was the lone voice saying you can't count on appreciation.  Everyone else was saying "high tech jobs", it has to go up. Guess what?  Austin SF prices are coming down.  That said, I only buy in areas with job growth and population growth because you are more likely to get appreciation.

#3 Know your returns.  If you can realistically produce a 10% or 15% return, doesn't it make sense to borrow money at 7%?  Yes!  People talk about paying off their rentals, but if my property is making a 20% rate of return, why would I ever pay off a 7% mortgage?  If I'm good at finding deals, it makes sense to have an ever-increasing amounts of debt.  I hope to die with over $100M of debt!  

From the beginning, the 1% rule was a problem, even back in 2014.

My first few rentals from way back in 2010 met the 1% rule.  Even though they were in decent areas, and I made money on them, those properties were not my best performers. Why?  Because I paid full-price for the property, thinking that because it had cashflow, that was all I needed to do.  These days I always try to buy under-performing property and add value.

As real estate started to up in value after the GFC, people that followed the 1% rule slowly got relegated to the very worst parts of the city.  I saw a post on LinkedIn recently from a guy in Chicago that said SF rentals are for clowns.  He had followed the 1% rule and bought Section 8 properties in crime-ridden, drug-infested part of town and then wondered why he wasn't doing well.

The 1% rule may have hurt more people than it helped.

Brokers can add a lot of value because they may have multiple lenders and they have enough volume that they may have the ability to negotiate better rates and terms.  But, they need to get paid for their efforts.

If they don't charge you a separate fee, you've probably paid for their services in the loan.  It could be through loan origination fees or a slightly higher interest rate or a handful of other mechanisms.

I would recommend any FDIC insured account. I heard about a small management company that invested funds in Bitcoin. When Bitcoin hit a dip, they didn't have enough cash and it took down the business.

In a dispute, a judge may want to see you have properly managed the security deposit.  Some people like to have a separate bank account for holding security deposits.  If you have several properties, it becomes a lot of work if you one bank account for each tenant, so most people just switch to tracking the amounts through an accounting package but still holding all the security deposits in one separate account.

On our apartments, we have all those funds in the operating accounts and keep careful track of each resident's deposit in our accounting package.