All Forum Posts by: Mike B.

Alan G. Are the rent increases (section 8) limited yearly as you're saying? I guess I was thinking of asking for a market rate adjustment. Or you're saying that isn't possible? If so.. good to know. I've been trying to contact hud to confirm what would be allowed. Having a hard time getting in touch with someone to answer my questions.

Douglas Krofcheck the 15K reno is paint, laminate/vinyl floors, some ceiling fans, and a few kitchen upgrades. $50K is what a full gut higher end Reno would run for a retail buyer.

All great points (@Steve Babiak, @Will Gaston, @Cody L.) and I appreciate it. 

@Dylan B. - I agree, low ROI, but I'm hoping with getting rents up to 900-1000/month would yield the better ROI. Market rent (private rentals) in the area fetch up to $1300/month for a high end unit. With about $15K of work, this unit would easily be a good $1200 month rental.

FYI (and to answer some questions) ---> The story I'm told is that the current owners (friends in a partnership) who purchased 6 years ago and acquired this same tenant, didn't plan on doing anything for a few years (hoping market would appreciate) and I agree, silly of them not to apply every 2 years for the rent increase from HUD.. but they didn't. And now, the partnership is arguing about what to do with the property and since they can't agree on anything.. they're liquidating to dissolve the partnership. Definitely a plus in my books (RE: making a lower offer).

I'll inquire about the voucher, thanks @Steve Babiak

Will Gaston thanks for the advice. I think my main issue is whether to deal with the section 8 tenant or not as the house would appreciate more (and have instant equity after closing per say). But for the condition the home is in, can't get any worse with the tenant in place. I am leaning more towards keeping it but from a financial standpoint I find it hard to walk away. Other suggestions or thoughts as to why (valid reasons) I should leave the deal?

Steve Babiak good point. Same tenant for 6 years, original lease was for 650/month. How can I confirm the voucher? Would HUD freely release this info to me? Also is there any section 8 veterans you recommend I reach out to? Thanks

Hi all,

I usually do well analyzing deals but this one I'm on the fence, so asking for feedback from BP community!

Here's the deal on the table:

• Off-market listing via a wholesaler, Asking $75K
• 3/1, 1000 sq ft, Section 8 tenant in place on month to month lease (Rent=$650/month which is way under market)
• Home condition: Nothing I would live in, but no leaks, walls in tact, newer mechanicals/systems (hot water heater, home has a gas furnace) are all in good condition and are fine for a section 8 tenant.
• Lease agreement verified.. I'm awaiting copies of transactions to confirm HUD is actually still paying the owners

PROs:

• At $75K.. it's under market value.  Sold comps (within last 3 months) avg 89-100K for a property of this size and in this condition
• Section 8 tenant in place may want to renew, and current market rate for a 3 bedroom is in the $1,000 range.  Thus I could get a PM to manage and apply for rent increase which would be instant equity boost.  Oh and tenant pays ALL utilities (this is spelled out in the lease)..thus no payments for owner (just maintenance if anything)
• Also if keeping the same tenant.. I would literally have to do NO improvements/changes to the home.  Just sit back and collect rent (appliances all work, overall place is clean and you can tell tenant is taking care of place)

Cons:

• To rent it privately, at a good market rate, I would need to gut-renovate (easily a $50K job for this place), so I COULD flip it, but this area is slowly appreciating so I may only make $20K when all is said and done (PITI, holding costs, renovations, etc)

My thoughts:  Try and get for closer to 65-70K, keep current tenant, increase rent to $1,000/month and re-evaluate in 2 years (when lease is up) if market is better.. renovate and flip at that point in time.

• Costs if holding for 2 years:
  • Rent collected=$1,000/month (projected)
  • PITI=$650/month
  • Cap-Ex and emergency fund savings=$150/month
  • Property Manager fee= ??$100/month?
  • net monthly payment (to me)=$100/month

Deal or no deal?  I'm ok with more of a buy and hold on this given the area is quickly appreciating (homes 2 years ago were in the $60K range).

For extra net gains, I can also PM the property myself, but I am debating having someone else handle this since it's a section 8 tenant.

Thoughts? Recommendations?  Feedback welcomed and appreciated.

@Aaron Rowzee - I hired a company to come in a do it.  They sanded and painted the tile.  I don't know too much about the process other then that.

Floor tiles --> the paint/epoxy can come off the tile with scuff (e.g. walking on it) thus elected to replace the floor tile. Also at the same I leveled the floor which was severely slanted so it was a 2-4-1 reason why I replaced the floor tiles.

Marlon Long for closing costs for purchase of a home I always calculate 4% for homes under 250K. It's worked to give me a rough idea of closing costs. On the sale side I assume 8% (3 for each realtor + 2 for regular closing). Again.. rough estimate but overall has been close and worked for my scenarios. Rental comps etc I see what's available via padmapper.com or HotPads.com to show me what's doing in a particular market. I check neighborhoods im interested in monthly to stay in tune with how seasons affect rental prices and also shows new inventory and what finishes landlords have in their homes.

@Bobby Nilsen great story and outcome!  Place looks great! 

Justin Kill thanks! Tenants initially wanted a 2 year lease but that meant if they vacated property would be available during the winter so we settled on 18 months which brings us to the summer (better rental market). Can't complain. Great deal!