All Forum Posts by: Jennifer Donley

@Nicholas Balcom, I agree with Jude generally - way too thin in my opinion.  For me, a multifamily needs at least $100 a door, more if it's only a duplex.

Some thoughts on the calcs though.

Rentometer says your average & median rents on 1/1s are around $530 a month so there's some room in the rents for increase long term.  You may be able to raise on the existing tenants to get there, maybe not.  If you have to move the existing out to get those numbers, it may not be worth the turnover costs.

I see that a bunch of utilities are included in your costs and I would inquire on whether those can be passed on to the tenants.  Again, depending on the lease and the setup of the property, whether everything is separately metered, etc., this may or may not be doable in the near term.  I pass all utilities on to my tenants.  In my multis, I pay for lawn care.

I think your insurance may be low but if you have a quote from an agent, maybe not. 

In general, I think 5% vacancy is very doable BUT it works much better when you have larger portfolio.  When you only have a few properties, the math doesn't really pan out and having 1 vacant is EXPENSIVE because it kills your cash flow and you don't have enough properties to spread out the vacancy costs.
Let me know if I can help further.

Section 8 for the win!  Done right, I think it's the most stable & profitable niche out there.

@Daniel Alfandre Hey there - I'm a Section 8 landlord in St. Louis, so I can't answer your Baltimore specific questions but I can answer a few others.

I would say that the answers largely depend on the area, purchase price, your goals, metrics, etc.  I would be somewhat surprised if 2 bedrooms are in larger demand than 3 bedrooms but I could be wrong.  In general, what I find is that demand for Section 8 housing, is extremely high, and supply, especially decent to nice Section 8 housing, is extremely low.

Here in St. Louis for instance, the ratios are typically better in the 3 bedroom space than the 2. One of my rules for my rentals is that they have to cash flow between $200 and $250 per month after all expenses, PITI, reserves. Our average 2 bedroom rent is around $800 so it's just difficult to get that much cash flow because there's not enough total cash to pull from!

I suppose 2 bedrooms are slightly less to renovate but here, I'm typically looking at 800 sq ft aprpox for a 2 bedroom and around 1,000 for a 3 bed.  So while paint and floors are a little more, it's not a lot more dollar-wise.  All the other systems cost the same so my reno costs don't vary a ton.

Hope this was helpful, reach out if I can help further.

@Xela Batchelder Yes they do - I hope I'm answering your question here.  

Any person who has been accepted and has a voucher will have a copy of their voucher.  On the first page, it will list the person's Voucher Number, unit size (bedrooms they're approved for), the issue date, the expiration date, the name of the person, the agency they're working with and their caseworker.

This is a CRITICAL document to get from Section 8 applicants for 2 reasons other than proving that they have an HCV.  First, it tells you how many bedrooms they're approved.  Typically you want to take a voucher that is at least equal to the number of bedrooms you have in your house.  Otherwise, you run the risk of not getting as much in rent because Section 8 rents are set based on number of bedrooms.

Second, you need to know if the voucher is still active - if it's expired, they are out of their period where they can move to a new place. I just had a person apply and her voucher was expired.  She swore up and down that it was wrong but I just emailed the caseworker listed on the voucher to verify.  The caseworker confirmed that the voucher was expired and the person could no longer move due to that.  Good thing I didn't waste my time screening her further!

Let me know if you have more questions.

@Eric Schroeder hey there, Section 8 landlord from St. Louis here.  Section 8 is all I do so I'll try to answer as best as I can even though I'm not in your market.

Check first to see if the municipality, county or state has a law against discriminating for "source of income." This isn't a protected class federally but it sometimes is at the state or local level.

If they do have such a law, you have to take a Section 8 voucher (conversely, if that law exists, people in your area couldn't do what I do, which is ONLY take Section 8 tenants).  If they don't, you are free to say - we don't take Section 8.

If there is such a law, you have to change your criteria for Section 8 voucher holders.  How, frankly, I don't know but I don't think your 3x requirement would hold.

Try to find some local landlords who are successful with Section 8 (not the ones who hate it - their advice is no good here) if you end up wanting or needing to take it determine what the rent rates would be.  In general, the rents should be about what the market rents are but that can vary and there is a ceiling due to the "fair market rent" numbers for your area. 

Each Housing Authority uses their own process for setting rents.  Also, what I generally see around the country is Section 8 rents keep up with market rents in B, C and D areas.  They're usually not as high in A areas due to the fair market rent standards.  Once in a while, Section 8 rents will be slightly higher than market rents but again, you'll need some local intel to know where that is.

Lastly, I'm obviously not a lawyer and I don't play one anywhere, even here on BP so if you're concerned about it, check with a local lawyer who specializes in landlord/tenant stuff.  

Good luck!

@Karen F., I'm sorry to hear this.

For me, these kinds of things were more emotional when I had fewer units.  Once I got a decent sized portfolio, they became less emotional.

I don't provide essentials like you did for your tenant.  If they tell me some similar story, I say - "I am so sorry to hear that.  Have you called United Way to see what assistance they may be able to provide?"

I don't do this to be mean but I find in general that some people will take, take, take so as long as I draw boundaries, stick to my lease and treat everyone the same, I have a lot fewer problems and less emotional brain damage.

@Jon W., I'm not in your area but specialize in Section 8 and pay a lot of attention to how it works around the country.

Bottom line is this - every Housing Authority (there's usually one per county or area, depending on size) follows the same basic processes but administers the program, particularly when it comes to setting and raising rents, differently.

  You've got to find someone who is successful with Section 8 in your area.  They will be best to give you insight on rents (I know this was the goal of your post but since it appears they may not be responding, you may need to look elsewhere).  Here, getting increases to market rents is very easy but can only be done within certain time frames around the renewal each year.

In general, Section 8 is a great program.  Landlords succeed with it when they make it their mission to learn the processes for the program and maximize those.  Landlords tend to fail with it when they miss out on opportunities to learn the process, hate dealing with government bureaucracy and/or aren't good with systems and processes.

It tends to work better in some areas than others. Here for example, it works best in B, C and D areas. Not in A areas because of the way HUD sets Fair Market Rents - the rents we get from Section 8 aren't' anywhere near market rents for A areas.

Meticulous & consistent tenant screening is critical, like with market tenants.

As Jennifer mentioned, how much each person pays depends on their personal situation (income, family size, etc.). However, the rents should be the same for every unit, assuming each unit is the same bedroom count and has the same amenities. The split of HUD payment and tenant payment is what will vary.

Feel free to reach out if I can help further.

@John Whitfield, welcome to REI and BP. I'm a buy and hold investor in STL specializing in Section 8 properties. I have 26 doors, all in North County, except for 1.

As you probably know, we have a very active and generous bunch of investors in St. Louis.  Make sure you're active on the Facebook pages (search St Louis Real Estate Investing and they'll come out of the woodwork).  There are lots of REIAs and meetups.  FasterHouse Buyers Club, Southside Investment Club, Three Doors, Master Investor Tribe, Core Properties are just a few. 

Good luck, reach out if I can help in any way.

@Joshua Rowland, I agree with the rest regarding strictly the numbers.

But I stay away from condos for 1 simple reason - I don't have full control over how my property is run and maintained.  Some HOAs are awesome and well managed.  Others are not.  And just because one is run well now doesn't mean it will be forever.

@Andy Giles, here in STL, we don't have to apply to be a Section 8 landlord.  I acquired my first Section 8 rentals through a purchase and just completed the paperwork that you're talking about.  No background check or approval or anything.  Every Housing Authority follows the same basic processes but operates on their own so their specific processes will vary from one to the next.  If they haven't told you you have to apply, you probably don't.

Anyway, I'm not sure what's confusing you about the form without a little more detail.  Can you specify what's confusing?