All Forum Posts by: Greg Scott

No.  That is what auto insurance is for.

I would never want a condo as a rental.  There are a lot of reasons that is a bad idea.

On the other hand, if you could buy the entire condo and turn it into a small apartment, there may be an opportunity.  Not enough data to tell.

I agree cash flow is important but could never vote for anything with the title "Cash Flow Market".

I find Cash Flow vs Appreciation to be a dangerous discussion. The best investors get BOTH!

Since BP has this new funky advertisement in the forums that does not allow you to reply, (link above) I'll reply using the same title in hopes to generate some conversation. (Why don't they allow us to post a counter-argument????)

Data over the last century shoes REITs have a correlation to stock market returns.  Congratulations you are correlated and invested in a highly taxed asset class that went up recently.  Yay for you!

I've bought apartment complexes from REITs. In my experience, REITs are terrible at managing their property.  I would NEVER choose similar portfolio of REITs over those managed by experienced investors.  Moreover, you have much higher overhead than most experienced investors.

In a REIT you are missing out on all the tax benefits. You have no write-offs. Meanwhile, my investors that bought a property from a REIT had a 60% paper loss from just purchasing the property. They got cash in their pocket from distributions, and a huge tax write-off that you have no way of getting.

REIT returns are not comparable to direct investing! Is BP getting paid by REITs? This is a huge disservice to the real estate investing community to post this drivel!

Most office is not suitable for transformation to multifamily.  Unless you know exactly what you are doing, you could be financially destroyed.

Listen here: https://www.victorjm.com/2022/05/office-to-residential-conve...

I can't speak for California, but I am aware of federal laws.

Due to its cost, this would NOT be considered a reasonable accommodation.  In other words, you would not be required to make those changes.  Some times a tenant is willing to pay for changes.  If they wanted to pay for the updates and agreed to restore the property to its original condition (if you wanted them to) after they left, you would need to allow it.  However, this is unlikely in your case.

So what is there to do?  A reasonable accommodation would be to let them out of their lease without penalty once they find a suitable residence.

Don't waste any mental energy thinking about what the Fed does.

Find good deals.  Find deals that work based on current mortgage rates.  Find deals that grow your net worth and cashflow.

I have never paid a property manager anything when a house is vacant. 

On the other hand, it appears you are using them as a GC.  If the property was in really rough shape when you handed it to them, I could see why they might want to have some income to manage all that work. 

The downside is you now have a situation where they make more money the longer it takes to get your house rented.  They are incentivized to go slowly.

I have had section 8 tenants in both SF and apartments. We still have a few legacy section 8 tenants.  Since they have been good residents, they can stay as long as they like, but we are not accepting applications for new section 8 residents.  Otherwise, our properties are now 100% market rate.

Why?  The reasons are many.

1) My top reason is that I can't stand bureaucracy.  If you invite the government into your business, you get the good and the bad.

2) In my experience,(and I may get some hate mail for this) the average section 8 resident is harder on the property.  I am speculating as to why, but it could be a lot of different factors.  Perhaps it is because hey have none of their own money on the line so they may not care for it as much as someone who does.  By definition, they are from a lower income bracket.  While there are amazing and awful people at every level of income, generally the lower the income, the more likely you are to have a rougher tenant.  Being harder on the property means more intensive repairs & maintenance, particularly on a unit turn.

3) If your focus is just cashflow, this may be a good strategy because the tenants tend to stay longer and the rent is backed by the government.  However, I like to focus on both cashflow and appreciation or forced equity.  I do that by upgrading the property, making it a more desirable place, which often allows me to get higher rents too.  That is harder to do if you have a rougher tenant base.

Related to the above, I've had much better experience with section 8 residents that pay a portion of their own rent.  They seem to be more responsible, and the setup gives you some flexibility that you don't get with either market rate or tenants with 100% paid by section 8. 

We had an elderly woman who was partly section 8 and her rent was $200 below market.  We applied to section 8 for an increase and they said they would pay $150 of it.  We did not want to raise our tenant's out-of-pocket by $50 so checked and were told section 8 would pay $150 more regardless of what we set the rent at, so we only raised the rent $150.  In this case, we got to keep a great resident, give her zero rent increase, and also improve the financial performance of the property.

Most of the NAA-based leases that I have seen have specific language about how long a guest can stay.  Does yours?

The absolute best thing you can do is reinforce and enforce language that is in your lease.  That way it is not nagging or scolding. You are simply making them uphold their end of the contract.