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All Forum Posts by: Randy E.

Randy E. has started 18 posts and replied 1279 times.

Post: I have a house, I only WANT section 8 persons to apply...

Randy E.Posted
  • Rental Property Investor
  • Durham, NC
  • Posts 1,301
  • Votes 1,311
Originally posted by @Jay Hinrichs:
Originally posted by @Randy E.:
Originally posted by @Charlie Moore:

Let’s see WHO can help me and answer this UNIQUE question!!!!

- I have my third rental.. I want it to be SECTION 8.

How can I go about this? Is it discriminatory... to ONLY allow section 8 to apply?

 List your rental on the GoSection8.com website.  Each city has it's own listing section.  

If you list your rental on that site and nowhere else, almost all of the people who contact you will be Section 8 voucher holders.  There is no law that says you must advertise the listing everywhere.

Charlie, be aware that Section 8 is not "automatic", hands-off, guaranteed rent as some unknowing landlords assume.  As a landlord, you should conduct a vigorous vetting process.  Check the tenant's creditials.  Credit-score won't be as important, but you should still view it.  It's one thing to have a score around 610 because of prior debt.  It's another to be 510 with a list of newly unpaid debt.

As part of the vetting process, pay attention to prior evictions of the applicants.  It is best to rent to someone who has never been evicted via the court system.  You may choose to take a chance on someone with an eviction from many years ago, but you would be foolish to approve someone with an eviction within the last 3 years.

Also, although many landlords assume Section 8 pays 100% of a tenant's rent, that is not always true.  Many tenants are responsible for a portion of their rent.  Sometimes Section 8 pays 90% and the tenant is personally responsible for paying the landlord 10%.  Sometimes, the split is 50/50.  Sometimes, the tenant pays most of the rent.  For this reason, it is imperative that during the vetting process, you verify the applicant's employment status. 

Lastly, as a landlord renting to a Section 8 tenant, you should definitely visit your property on a regular basis.  Be it monthly, every 3 months, or every 6 months.  I would not do it any less frequently than every 6 months, and actually every 2 months might be best for someone like you just starting out with the program.  You must keep up with repairs, especially as the 12th month renewal period approaches.  A Section 8 inspector will inspect your property and if it fails the inspection your payments will cease but the tenant will remain -- it will be your responsibility to evict the tenant.  But you can avoid that by simply maintaining your rental.  And you will have a more difficult time maintaining it if you fail to visit on a regular basis.

Section 8 is not a automatic win (or loss, for that matter) for landlords.  The landlords who approach it the right way can find smooth success.  Those that don't approach it the right way, will likely suffer.

great post Randy  much misunderstood aspect of section 8  part of that is sellers will advertise Guaranteed rent.. buyers who are not experienced with it don't know any better.   I don't know about that market but section 8 in many markets pays quite a bit more than market rent.. so just stating your rent amount could be all you need.

 Jay, you would think listing a $1100 rent in an area where most tenants pay $750 (or less) might work out like you said.  But I've tried that before and received a lot of interest from non-S8 tenants.  

Some low-income applicants simply don't understand the 3Xrent statement and/or assume they can talk the landlord into a lease without having a voucher.  Sometimes, yuppies with adequate income apply because they want to live close to downtown but don't want to pay the $2K-3K price for a condo half the size of one of my SFRs, but in an admittedly already gentrified part of the near-downtown.  I've learned a well-rehabbed unit will attract interest from many types.

Many middle-class renters are deathly afraid of any and every low-income neighborhood.  Some middle-class renters understand the difference between low-income working-class and a truly dangerous neighborhood.  Those that understand the difference are eager to enjoy the proximity to a downtown's activity without the price-gouging of already-gentrified neighborhoods.  The early-adopters are not the norm, but they exist. I know, because they've called/emailed me sometimes.

Post: Commercial Loan Expectations

Randy E.Posted
  • Rental Property Investor
  • Durham, NC
  • Posts 1,301
  • Votes 1,311

Thanks for the rapid response, @Greg Dickerson.  

We have complete financial information available, but we need to assemble it into a loan-request-ready package.  

We have deposit accounts at 3 banks in this town and we plan to shop those first.  The first one is requesting personal guarantees, but half the board is not likely to agree to that.  It's good to know that, at least hypothetically, it is not unreasonable to hope for a strictly-business no-personal guarantee might be arranged.

-Randy

Post: Commercial Loan Expectations

Randy E.Posted
  • Rental Property Investor
  • Durham, NC
  • Posts 1,301
  • Votes 1,311

A brief overview.

40-year old S-Corp with a stable history and no past financial problems. Assets: $700K-$1M. Debts: Zero. Vast majority of assets are commercial, with less than 10% SFR. Clean, complete books and accounting.

If this entity went shopping for a commercial loan or a business LoC, what should its expectations be in regards to interest rate and collateral?  Would a lender loan with all/part of the assets as collateral?  Or, in addition to the property collateral, would a lender demand personal guarantees from some/all members of the board?  Would this vary based on the amount of the loan?  Or the expected use of the loan? 

For instance, would a $50K LoC/Loan requested for CapEX come with different requirements than a $250K LoC/Loan intended for property acquisition?  Would a $500K loan be a reasonable request?

If personal guarantees were required, would the lending institution have the same credit-worthiness requirements of each personal guarantor as with a personal loan?

Any other financial tips would be appreciated. 

Thanks.

Post: Tenant damage to floors?

Randy E.Posted
  • Rental Property Investor
  • Durham, NC
  • Posts 1,301
  • Votes 1,311

For the ice maker, if you don't want to be responsible for repairing an appliance's features, you have two options.  Don't include that item in the unit when you lease the rental.  Or include a clause in your lease that states "Landlord will not be responsible for repairing/replacing ice maker."

For the floor, if the new tenants are already in and the floor is not an issue for them, it might not be an issue at all.  Are the floors warped and in dire need of being replaced?  Or is it simply some discoloration?

Post: I have a house, I only WANT section 8 persons to apply...

Randy E.Posted
  • Rental Property Investor
  • Durham, NC
  • Posts 1,301
  • Votes 1,311
Originally posted by @Charlie Moore:

Let’s see WHO can help me and answer this UNIQUE question!!!!

- I have my third rental.. I want it to be SECTION 8.

How can I go about this? Is it discriminatory... to ONLY allow section 8 to apply?

 List your rental on the GoSection8.com website.  Each city has it's own listing section.  

If you list your rental on that site and nowhere else, almost all of the people who contact you will be Section 8 voucher holders.  There is no law that says you must advertise the listing everywhere.

Charlie, be aware that Section 8 is not "automatic", hands-off, guaranteed rent as some unknowing landlords assume.  As a landlord, you should conduct a vigorous vetting process.  Check the tenant's creditials.  Credit-score won't be as important, but you should still view it.  It's one thing to have a score around 610 because of prior debt.  It's another to be 510 with a list of newly unpaid debt.

As part of the vetting process, pay attention to prior evictions of the applicants.  It is best to rent to someone who has never been evicted via the court system.  You may choose to take a chance on someone with an eviction from many years ago, but you would be foolish to approve someone with an eviction within the last 3 years.

Also, although many landlords assume Section 8 pays 100% of a tenant's rent, that is not always true.  Many tenants are responsible for a portion of their rent.  Sometimes Section 8 pays 90% and the tenant is personally responsible for paying the landlord 10%.  Sometimes, the split is 50/50.  Sometimes, the tenant pays most of the rent.  For this reason, it is imperative that during the vetting process, you verify the applicant's employment status. 

Lastly, as a landlord renting to a Section 8 tenant, you should definitely visit your property on a regular basis.  Be it monthly, every 3 months, or every 6 months.  I would not do it any less frequently than every 6 months, and actually every 2 months might be best for someone like you just starting out with the program.  You must keep up with repairs, especially as the 12th month renewal period approaches.  A Section 8 inspector will inspect your property and if it fails the inspection your payments will cease but the tenant will remain -- it will be your responsibility to evict the tenant.  But you can avoid that by simply maintaining your rental.  And you will have a more difficult time maintaining it if you fail to visit on a regular basis.

Section 8 is not a automatic win (or loss, for that matter) for landlords.  The landlords who approach it the right way can find smooth success.  Those that don't approach it the right way, will likely suffer.

Post: Advice on 150k liquid cash

Randy E.Posted
  • Rental Property Investor
  • Durham, NC
  • Posts 1,301
  • Votes 1,311
Originally posted by @Kenny Ramsey:

I’ve been blessed to work myself into a situation to reap 150k in liquid cash with a near perfect credit score. 

I’ve very interested in real estate bc I’ve been in the construction trades my entire life (enjoy it as well). I can literally do any repair and specialize in HVAC & Plumbing.

Located in Charlotte, NC.

What I want out of this/these investments are never have to work a 9-5 again. I would like to be the maintenance and property manager. 

What should I do with this 150k?

 Kenny, is it mandatory that you invest in Charlotte or would you be willing to invest in say, Winston-Salem or Greensboro?  That will make a difference, because RE prices differ by location.

Also, seeing as how you want to more-or-less cease your employment status, it matters how much monthly/yearly income you need to keep you afloat.  Everyone is different.  Some investors swear they cannot make it on anything less than $10,000/month or even more.  And other investors say they clear $1500/month and that they are living their fantastic dream lives.  There is no one-size-fits-all answer here.   If you need $10,000/month, you probably can't make that happen with $150K cash in Charlotte's market.  If you need $2000/month, you should be able to make that happen fairly easily.  I'm speaking about buy-and-holds.

OTOH, if you plan on being an active repeat flipper, you can get started with with that amount and, if you avoid losing money on your first flip, you might build up to being able to survive on your profits.

As @Blake Edwards said, there is no way any of us can give you a quick answer on what's the best way for YOU to proceed.  At best, we can tell you what any ONE OF US might do with $150K cash.  

Me? I'd use it to buy three or four houses where I'd be all-in (buy+repair) at $35K-$50K each, and gross $2500-$3000 monthly.  Now that's gross, not net, but it would be a good start.  I'd then wait a few months to let the dust settle, then refinance those houses to pull the value out.  That would reduce my gross income from approximately $2700 down to approximately $1600, but it would allow me to buy three more houses.  With six houses generating roughly $5000-$5500/monthly minus the refi total of $1200/monthly, I'm left with approximately $3800-$4100 net monthly.  

From that, you'd first put aside an appropriate amount for CAPEX, taxes, insurance, and future repair costs, then "pay" yourself what's left. Some people would say "heck yes" to that $3000/month, others would scoff at it and the responsibility of being a hands-on landlord/maintenance guy. You decide what's best for you. But, that scenario is not possible in Charlotte, because the all-in costs would be higher than $35k-$50k

Right now, I don't think you can have a good idea of what you should do. You first must educate yourself on all the possible REI options. Asking here is a good first step. If I were you, I would not make an investment until I'd read/absorbed/learned as much as I could from BiggerPockets and other sources. This is a big opportunity for you, and you don't want to blow it by acting before you have educated yourself.

Good luck!

Post: So you want to make the neighborhood better, huh?

Randy E.Posted
  • Rental Property Investor
  • Durham, NC
  • Posts 1,301
  • Votes 1,311

@David Sosna, @Andrew Kerr, @Peter Dunne, @Anthony Gayden, @Ola Dantis

The NY Times had an article in the Sunday paper today that discussed this topic.  And it's focused right next door to me as I sit in Durham.  Reading it immediately reminded me of this thread.

NY TIMES: GENTRIFICATION IN INNER CITIES ACROSS AMERICA

RALEIGH, N.C. — In the African-American neighborhoods near downtown Raleigh, the playfully painted doors signal what’s coming. Colored in crimson, in coral, in seafoam, the doors accent newly renovated craftsman cottages and boxy modern homes that have replaced vacant lots.

To longtime residents, the doors mean higher home prices ahead, more investors knocking, more white neighbors.

Here, and in the center of cities across the United States, a kind of demographic change most often associated with gentrifying parts of New York and Washington has been accelerating...

...

In the frenzy, a real estate agent once told [her] that she wasn’t using her land to its full potential. She runs a child development center on the edge of downtown.

“Everyone has a price,” she was told.

She is baffled over the math of what the children are worth...

The article's focus is on Raleigh, but it discusses other parts of the country and has gentrification maps for Atlanta, Indianapolis, Philadelphia, Nashville, Denver, Chicago, Houston, Brooklyn/NYC and other places.

Post: My first rental deal, a short novel summary.

Randy E.Posted
  • Rental Property Investor
  • Durham, NC
  • Posts 1,301
  • Votes 1,311

@Joel Ray Cotton,

That is what I call Real World Information.  Forget the spell checks and grammar checks.  You put in the loan checks, and that's useful to those who haven't been through the whole charade.

Congrats on taking the leap and taking a chance and moving the ball forward.

Post: What key things do first time landlords need to know

Randy E.Posted
  • Rental Property Investor
  • Durham, NC
  • Posts 1,301
  • Votes 1,311
Originally posted by @Joanne Hanson:

what are those key things that a first time landlord should know.

 The biggest thing you will have to know is that a first time landlord will never know EVERYTHING she/he needs to know before buying that first property.  Accept you cannot know everything, buy the property anyway, make mistakes like all first timers do, and learn from your mistakes.

Learn what you can, but don't allow a perceived lack of knowledge to stop you from proceeding.  You'll probably never feel completely comfortable before you put the money on the table for that first property.  I know I didn't.  You will just have to overcome that nervous feeling and jump in anyway.

Post: Soon to be finance graduate seeking real estate career advice

Randy E.Posted
  • Rental Property Investor
  • Durham, NC
  • Posts 1,301
  • Votes 1,311

@Account Closed,

First, congratulations on the pending graduation!

I am no big time RE guru, but my two biggest pieces of advice would be 1) Start Young, and 2) House Hack with a multi-unit property.

Regarding #1, although staying in school an additional year will ostensibly prevent you from starting for another year, I'm a big proponent for education.  I would lean toward getting that graduate degree.  If nothing else, it will allow you to get a job paying at least slightly more than if you didn't have the MS.  And that extra money will help you save money faster and ultimately qualify for larger and/or multiple loans.

Regarding #2, this is the best way for new investors to get the ball rolling fast.  If you're young, single, and childless, there are no obstacles holding you back from doing this.  You can get one of these, move into one unit, wait a year, then buy the next property and move into one of its units.  If you do this right, in 3 or 4 years, you can own 3 cashflowing multi-units containing a total of 6-10 doors.  That would be a great situation to be in for a not-yet-30 year old.  From there, you would have many options open to you.

Looking at Wilmington now, I see 5 multi-units listed on MLS between $144 and $265K. Once you vet the locations and conditions, maybe one of these could be a good start for you.

Good luck to you.