All Forum Posts by: Scott C.

You also need to watch for neighborhoods that are resistant or won't allow Sec 8.  There are a couple of neighborhoods in my area that won't allow Sec 8 tenants. 

@Dooreuhn Cee

I quickly found out that screening for a Section 8 tenant is different than a conventional tenant. 

The first thing is that the credit check is mostly useless.  Most of them are going to have bad credit due to financial difficulties which necessitates them being in Sec 8 in the first place. 

The second thing is that the income versus rent rule is also less important.  Normally you wouldn't rent to someone if they weren't making at least 3X the rent.  That doesn't apply to Sec 8 because they are getting the housing subsidy.  That being said I do have them list their sources of income (job, disability, child support, etc...) on the application but it is never enough to qualify for the 3X rule.   I don't have a hard and fast rule but I like to see at least some income since they are going to have to pay at least their portion of the rent.  It is also made more difficult because most of my tenants also qualify for energy assistance so they get help with the utilities.

My biggest screening tools are the criminal background check, previous landlord call, and meeting them in person.  I don't rent to anyone with a criminal background. I also make them sign a form that I can call their previous landlords.  This part is a must. I have accepted and rejected tenants based on this. With a couple of my existing tenants the landlords were very sad to lose them so that is always a good sign.  Finally I always meet them in person when I show them the property. I make it clear to them that we are fair but have standards and rules.  I can usually get a pretty good feel for them in that meeting.

I hope this helps and I would love to hear other investor's experiences.

Thanks,

Scott

@Aaron Carter

I've never heard of that book.  Thanks for pointing it out, I'll have to check it out.

Thanks,

Scott

@John C S.

My first SFH rental was Section 8 and I have never looked back. In my area, Baltimore County, the Sec 8 rentals are above market prices. If you have a good screening process you should be fine.

Good Luck,

Scott

I recently won an auction on Auction.com.  The property is occupied but I have reached to the occupant and they should be out in a week.  They already have a place they were rehabbing to move into so hopefully they will be gone with no problems.

We are having one issue that isn't really related to Auction.com.  We are waiting for the deed to be recorded from the foreclosure before our closing process can begin.  I guess they went so quickly from foreclosure to auction that the paperwork hasn't caught up.  Not too big of a deal but I would like to get in, rehab, and get it rented ASAP.

Thanks,

Scott

 I guess that works one time. :) 

Can you use a HE loan to make use of that equity to keep investing?

@Matt M. how can a REI buy under the OO period? I have always had to wait for it to get to the "Extended" period?

@Ned Carey an Austrialian Fold Hero?  I knew those Aussies were weird! ????

That way should work for you.  As long as you are our figuring those costs in and it still keeps your properties at a positive cash flow.

We have done a similar thing to build up our portfolio (4 SF Townhomes and soon to be 1 more).  We bought the first two using a mixture of cash and home equity on our primary residence.  Then we got home equity loans on those two properties for cash reserves and buying power for future deals.  The last two were more conventional 15 year mortgages.

For our new one it will be a cash deal because it has to be because we bought it through Auction.com.  Then we are going to do an immediate cash out refi to get our cash back out of it.

Take care,

Scott

Welcome to BP and real estate investing!

Scott

Welcome, Troy!  It's always good to have another B'more area investor on the board.

Take care,

Scott