All Forum Posts by: Greg Smith

I have 3 houses with section 8 in 40210 and one in 40212.  In my experience they are most thorough in their initial inspection and less so in their annuals.  Usually they ask for little things that are not expensive.  

Pros: I have never had to evict a section 8 tenant.  Now admittedly I had a small sample size over just a few years but tenant relations are generally much better.

I get paid on time every month.

If a tenant breaks something, they have to fix it or  lose their section 8.

There is a lack of supply it seems so tenants jump on vacancy's and stay put.  Even if they want to move, they renew because there’s not another house in their price range.

Cons: sec 8 always sides with the tenant.  

They can fail you at any time and withhold payment (though I have always received back pay when the issue is resolved)

They tend to find something every time (more like 2 out of 3 times). Always on an initial inspection.  I’m tempted to leave a couple obvious things so they can get some easy wins.

Sometimes they find dumb things like tree limbs or moles(!) in the yard.

Section 8 reevaluates tenants periodically and adjusts their contribution amount.  I had them do this retroactively on a tenant increasing her portion $150 / month.  This put her in a hard spot for months.  That has been my biggest problem.  Without sec 8 they cant afford to live there.  If something goes wrong the person can enter a bad spiral.  I waived late fees and was patient and things worked out but it was hard. I was still in the black without the $150 so it was hard knowing the best move

I agree with Dennis.  Section 8 wants to provide the tenant with a clean, safe home.  If that is also your goal you will find more stable tenants and consistent rent.  Landlords who maximize profit by neglecting maintenance find issue with them.  You likely have many years of deferred maintenance right now but it will get easier and you need to do that stuff anyway. 

And as an aside,  The tenants do not want to violate their lease because doing so jeopardizes their section 8. I have a much easier time with those tenants than class c tenants not on section 8

@Chris Seveney

@Alan Rohrer

Thank for the advice.  Sounds like I might be creating unnecessary complications / overthinking things

I ambuying a house through my LLC with mostly personal money. Can i buy a house, pay 20% from the LLC account and then make a loan to the LLC for the balance? Is that necessary? I try to keep personal and company money very separate.

Letting a tenant pay late when she was in a tough spot.  It ruined her.  She's always in a tough spot now, always wants to pay late and knows I have authority to let her.  I think I will need to hit reset and not renew her lease. 

I had a job in high school working for a foreclosure attorney.  My job was to go to the commissioners sales around Kentucky and represent the bank.  I would go with a list of the houses I was to bid on and was given the amount owed.  The bank would never let the house sell for less than they were owed, even if it was more than the appraised value.  The lawyer would tell me ahead of time which ones were likely to be sold to someone else.  4 out of 5 would just go right back to the bank.  Everybody hated me because I was keeping them all from getting good deals.  It was a strange feeling being the big guy with all the money.

I never went to Jefferson County though because it was cheaper for them to just send someone from the office.

I've been happy with Steve Plaut.  I've been using him for 5 years or so.  

H. Steven Plaut, CPA
Plaut & Associates, PSC

6004 Brownsboro Park Blvd., Suite B
Louisville, KY 40207

You can google his contact info.  BP wont let me post it.

 I don't know.  I know that's not helpful.  You don't want to refinance for 80% of appraisal after having paid points on the first loan.  Big banks won't give you a 2nd loan on an investment property that highly leveraged.  You could try a smaller bank / credit union.  Your other option is private money.  I have no experience in that.  You can check out the book on that.

I always thought of leftover paint as going with a house (assuming it is from the building).  A little touch up paint is always a bonus. The other junk not so much.  It looks like much of it might fit in that big trash can though if the guy doesn't show.  

Congrats on the place.

 I second this.  In Brandon's book he runs the numbers on one house owned outright vs. several with debt payments.  If you can find deals, you come out way ahead.

OPTION 1

$90K house earns $1000 / month lets say minus:

$200 capex
$60 vacancy
$60 Repairs
$200 tax & insurance
$100 management

$380 / month NET

OPTION 2

Lets say you can find $90K houses for $75K. At 20% down you can buy 5 more.  Now you have:

6 x $90K houses earning $6000 / month minus:

$1200 capex
$360 vacancy
$360 Repairs
$1200 tax & insurance
$600 management
$700 HELOC (this is about what I'm paying on mine)

$1580 / month NET

In the leveraged option, your are more diversified - very low odds that 100% of your houses will be vacant at the same time.  You're getting killer tax benefits and (people on this board tell you to not count on this but ignore them) you get appreciation on 6 houses instead of one.  Under option 2, you're a millionaire in 30 years.  In Option 1, you have a house worth $200K.  Make other people's money work for you!