All Forum Posts by: Larry Nielsen

@Larry Nielsen we manage almost 100 S8 leases.

Most important: THEY ARE ON SECTION 8 FOR A REASON!

Most S8 tenants have a history of bad decisions and from all that, many have only learned how to game the system.

We embrace S8 applicants, but screen them just like any other applicant.

Many have an entitlement mentality and try to leverage their S8 voucher and pretend to be helpless:

1) A percentage won't apply because they expect a landlord to waive application fees for them.

2) Many cry broke and expect a landlord NOT to charge them a security deposit.

3) Many of those same S8 tenants trying to avoid paying a security deposit, won't make an effort to call the list of nonprofits we send them that will pay their security deposit if they apply.

4) A lot of them try to avoid paying for utilities. S8 will include utilities in the rent payments to the landlord, BUT ONLY UP TO A CERTAIN AMOUNT. Many tenants abuse free utilities and stick their landlords with the amounts that exceed what S8 pays. Don't even get us going about S8 tenant retaliation via abuse of utilities!

5) Those that have to pay a portion of their rent - some don't. Again, they try to leverage the majority the landlord is getting, so they don't have to pay their portion.

6) We get the most maintenance requests from S8 tenants. Many won't lift a finger to do anything. They expect us to replace lightbulbs, won't change furnace filters and we also have lawn maintenance issues with them. Forget trying to walk them through a simple repair over the phone, to avoid sending a ServiceTech and saving an owner money. They always pretend to be confused and just want us to send someone.

7) Some will cause damages that S8 won't require to be fixed, but will threaten to move if you don't fix it. One demanded we paint the interior the color they wanted or they wouldn't renew their lease.

8) MoveOut damages typically exceed their security deposit. 

These are the horror stories.

We also have several S8 tenants that keep their homes immaculate!

So, proper screening is EXTREMELY important!

I have both.  I will take any tenant that meets the other requirements; between these two options the funding source doesn't really matter to me.

Well Larry,

You are in over your head on this LLC thing.

It can be pretty complicated from a tax standpoint or it could be rather easy from a tax standpoint to implement.

There are so many choices out there that you need to make, and you have to look at what you really trying to do with it, which is asset protection for your personal assets most likely.

There's also the issue about having an accounting system in place for the LLC and using the accounting system when you prepare your taxes.

Some investors, (and some attorneys are comfortable advising) running without an LLC for some people and instead having an insurance policy in place to cover most likely scenarios of paying.

Your personal tax situation, as well as your personal asset situation will weigh into this decision of how to set up the LLC And what to include in the operating agreement.

You will also have the need to have annual member meetings and annual manager meetings for the Shell (slang for the LLC).

Talking to your real estate tax person and an asset protection attorney and then making your decisions is a reasonable way to go about this task.

Also know that some LLC setups can make it very hard to borrow, which is something to talk to lenders about before you make your decision on what to do.

Good Luck!

How to have a single member LLC members meeting:

https://www.youtube.com/watch?v=U6WnUFLfg9Y

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.