All Forum Posts by: Chuck B.

@Jon and Vince - excellent points and I'm starting to understand the point. I might need to rethink how I'm doing this in order to take advantage of this. I really need to start using leverage as well instead of sweating it so much.

@Rusty - I'm afraid I'm not very analytical but I think they're doing pretty well. I try to find really dirty fixer-uppers (3/1 or 3/2's) that have great bones or potential that I can buy and rehab for less than 45K or so and then rent them out section 8 for around $800 a month. It takes a while to find the right tenant (60 days or so) but that's a function of how many applicants I discard and the fact that these are NOT great neighborhoods. they're not full on war zones, but they're close to war zones. It also takes a lot of hustle and work and negotiating to land one as cheap as I want them. I made a post called PLEASE LOOK AT MY PLAN that has a lot more detail in it. Any feedback is MUCH appreciated.

Best,
- Chuck

@Patrick - I couldn't agree more. Carpet is a waste of time and money. Wish I'd learned that lesson sooner.

@Kathy - Thank you, thank you! The towel "backer" bar (and wire rack wood backers, toilet paper holders, etc.) came to me only after repairing the fifth hole where some of these had been pulled from the drywall, leaving a nasty spot to patch.

I do put up those plastic blinds or curtain rods in every place I rent. Mainly because I don't want the tenant attempting it themselves (big mistake) and because they're so incredibly cheap. I also want all the windows covered between tenants so no one can peek in. I typically buy the cheapy plastic blinds from home-depot that come in fixed widths but you adjust them yourself for the proper height.

I've also discovered that sometimes buying decorative cloth shower curtains are cheaper than curtains and they work great for tall windows. I even cut one in half, down the middle, not long ago to cover two narrow windows. I'm so cheap, but the end result looked pretty good! (This sort of stuff is fine for Section 8 rentals)

Best,
- C

Jeff,

I've read a lot about people doing much more expensive rentals, and there are lots of folks in town here doing them as well (further east, where property costs a lot more) but I've never understood the math. It takes me (I'm not a realtor) so much work to find these things, then to rehab them, then finally to get a tenant into them, that I think it would be too daunting if I was looking at much more expensive property. The money I'd need just to get in the door would be much, much higher. Ugh!

I'd feel differently if I could buy a 100K house that would bring $1,500 a month in rent, but to get that sort of rent around here you're looking at something like a $175K home.

Best,
- Chuck

@Jon and @Rich - Thank you for the elaboration! I follow you guys pretty closely here and would love your input on my other post regarding my progress/plan to-date.

@Rusty - I think I see what you're saying. I guess I'm looking at this from the perspective of what I've been doing, which I'm sure is not how everyone else is doing it. I look for two or three months to find a good deal and once I've landed one, it takes me anywhere from 30 to 75 days to rehab it (I do some of it myself like demo, paint, landscaping, etc.). I do this mostly part-time as I do have a day job (more or less). For me to close 8 deals a year like I've been doing them, I'd be working 60+ hour work weeks and unable to earn a living doing anything else in the meantime. That's why I said I'd starve to death on the way there. I think I could retire comfortably if I had 14 or so units, fully paid for, that were getting something around ~$800 a month each. I'd still have maintenance and I'd still have taxes, but without a mortgage myself I think I could live pretty well.

I think I'm answering some of my own question by banging this email out. That is, why have 8 units that you're only getting $100 a month from each when you could have two units that you're getting $400 a month from each. The answer I imagine is appreciation, long-term you'd have much more equity. I've just been thinking about it from a pure cash-flow stance. You'd also have a lot more work involved, but nothing is easy, right?

Best,
- Chuck

Dear Pocketers,

How do you harden / bullet-proof your rentals?

While I've never had anyone utterly trash a rental of mine, I've seen the damage they can do first hand (typically when buying the rental and seeing what the previous occupants did to it). Here are a few of the things I do:

One of my favorites, and easiest to do, is that I "frame" all wire racks, their support rods, towel holders, toilet paper holders, etc. using backer wood that is mounted to studs. If it's very visible, we'll route the edges and paint it like trim. If it's in a closet, it just gets wall color. This way, if the kids hang off the coat racks or someone abuses the towel holders, they may yank the hardware down, but it doesn't leave holes in the wall. It's also much harder to destroy them in the first place. Note the towel holder mounting:

When first buying a property, if it's easily accessible, I'll replace copper with Pex (plastic) plumbing from the get go, even if the copper is OK. I don't have to worry about it freezing and it's not a crime target.

We cage all of our A/C units now using custom fabricated 2 inch square tube, typically mounting them into the wall so the bolts have to be released from inside. I also lock exterior A/C circuit boxes and label the units, cage and circuit box with A/C specific alarm stickers that I had made up.

I will frequently install an inexpensive alarm system (not monitored) which gives me peace of mind between tenants and acts as a selling point when showing the units.

I've doubled up on door stops (to prevent doorknobs from going into walls). While I use the standard springy ones that mount into baseboard still, they tend to be targets for kids and end up missing, so I back these up with the plastic circles that affix to the wall where the handle would hit. (These are also great for just covering a previously made hole where the door knob hit the wall) They're expensive though, so I've started buying large, bulk packages of plastic, foam-backed pads that you set furniture on, and simply using double sided tape behind these. These cost maybe 30 cents apiece where the purpose built ones cost $3 apiece.

If I have to renovate a bathroom, I no longer use the plastic/fiberglass shower inserts. I've seen people put holes into both the tubs and crack the walls of these. For just a couple hundred more I'll have an iron tub installed and we'll tile the shower. It's a lot more attractive and seems to be a lot more durable in the long run.

What tricks have you learned to "harden" your own rentals?

Best,
- Chuck

I'm not a pro painter by any means, but I use satin or egg shell on all the walls. Flat seems to get dirty too quickly. (Maybe I should move up to semi-gloss, as was mentioned above)

Also, I use Zinser primer on ceilings. It covers better than ceiling paint and covers any problems at the same time, though it does have a bit of a sheen/gloss to it.

Also, I've started painting all of our units a very, very pale yellow/linen color (the wife picked it out and everyone that sees it loves it) and the trim all gets hi-gloss white enamel. I think it makes the rentals look so much better than having a flat/white palette on everything.

Best,
- C

And just to elaborate on why I'm focusing on section 8 properties ... If I look to neighborhoods on the next "quality" notch above those I've been buying in, the houses that I could get $800 a month rent on would cost more like $70-$90K instead of $30-$45K.

Now granted, it takes me a while to rent these things, typically 60 days, as I end up discarding most applicants. There's also a lot of competition for section 8 rentals, with more every day, so this may not hold true forever. (What does?)

Dear Pockets,

I've read a couple of times about folks saying they look for deals where they can get $100 per "door". I'm not completely clear on the concept... does this mean that you're buying highly leveraged rental property and only putting $100 a month per unit into your pocket (after loan, expenses, etc)?

I'm having trouble understanding how this can work. You'd have to have 80 units be netting $8K a month. The time and effort to put all of that together sounds astronomical. So much so, that I think it'd be a full time job trying to get to that point and I'd starve to death somewhere around deal 40 in year five.

Am I misunderstanding what this means? Maybe someone can elaborate on the concept for me.

Best,
- Chuck

Dear Old Pros,

I'd love your critique of my situation and plan if you can spare the time. I'll lay it all out there in the hope that some folks might have some useful insights or advice.

I've been an "amateur" investor for most of my adult life, typically only having one or two rentals, with one unit being part of a duplex that I resided in. I live in Louisville, Kentucky, a city noteworthy for inexpensive real estate (and cost of living in general). As an aside, it's a very fine city and I highly recommend it to anyone. Especially foodies.

I sold my last rental (a duplex) just before the crash/recession (lucky me) and stayed out due to how frothy the market was. At that time and to this day I was living in a duplex as well and renting out the top floor. About 18 months ago my family convinced me to get back in as they had started buying foreclosures and had moved into Section-8 rentals. I was very dubious about this, having heard tons of horror stories. I'm pretty conservative and don't like drama so I wasn't sure how well I'd take to this sort of strategy. However, I did a lot of research and then bought my first foreclosure shortly thereafter, rehabbed it, and was able to rent it to a tenant I really like (and still have) about 60 days later. Since then I've done two more.

Here's my current section 8's and some pictures I posted on them at one time. These are all very nice houses, but in dubious areas, not full-on warzones, but not too far from warzones either. They were affordable, which is what I needed:

2000sqft 5/2 - purchased REO and rehabbed for a total of 44K. Rented at $900 monthly. This was my first one and I will most likely never buy another 2,000 sq foot rental, doesn't make a lot of sense for what I'm doing and just makes for more house to maintain.
www.whizbang.net/shawnee

1050sqft 3/1.5 - purchased REO and rehabbed for a total of 32K. Rented at $700 monthly. This was my 2nd deal.
www.whizbang.net/cokestreet

1350sqft 3/1.5 - purchased REO and rehabbed for a total of 33K. Rented at $825 a month starting next week. This is my latest deal.
www.whizbang.net/41street

I also currently reside in a giant old house that we have setup as a duplex, living on the first two floors and renting out the 3rd for $700 a month. This house is currently for sale for $399K, which I may or may not be able to get in the current market, but I'm trying.
www.whizbang.net/eastbroadway

Financially speaking, I bought and rehabbed the first two section 8's for cash and I have a 19K, 8 year loan on the 3rd one.

I want to get more heavily into rentals and out from under my current mortgage, so here's my thoughts...

I owe 155K on my house, the duplex, and have listed it for sale for $399. I built-in 20K haggle room on that price, and it's listed through a realtor, so about 20K would go for commission. It's been listed for 5 months, had a number of showings, but no offers yet. It's a pretty unique house and is zoned for offices as well, so I'm hoping the right live/work professional will come along and want it. It's also in a very desirable part of the city, if you like city living that is. If I can't sell it as it's listed now, at some point I'll not renew the realtor's contract and do a combo FSBO/MLS listing and offer a 3% buyer's agent commission and drop 30K off the price. Maybe that will move it, I don't know.

I have enough cash and short term investments to buy another section 8 outright, but I would never want to not have the cash cushion, so I'm not comfortable even contemplating that. I actually wish I'd borrowed more when buying these as I'd have more cash on hand and feel less worried about doing more deals right now.

My idea is this... If I can sell my primary residence, I'll take the equity (after taxes/commissions/fees/etc) of about 190K and try to buy four more rentals. We'd move into the first one, with an eye towards being there for maybe 18 to 24 months, while I got the other rentals purchased/rehabbed and up and running. At that time, we'd have enough rental income (and almost no debt) that I could make the move into full-time real estate and investing, starting with getting my realtor's license. (I've worked in online web site development and programming for 20 yrs, but it's getting a little old and doesn't pay as well as it used to.) And ultimately, move out of the rental we occupied and into something we'd enjoy being in more long term.

A couple of big IF's here though... IF I can sell this monster we live in. IF the rental market holds out (lots and lots of rentals coming onto the market here every day).

In the mean time I don't want to lose my momentum so I'm looking at buying a "#&@$ Burger", as a friend likes to call them... maybe a little 2/1 that wouldn't cost more than 20K purchase & rehab, that I could just put $4K (20%) down on and get rented out for $550 or $600 a month.

Any constructive criticism or thoughts on any of this is MUCH appreciated. I've spent the last week (since discovering BP) trying to read everything ever posted here, so I'm all ears. Ha!

If you've made it this far, thanks for reading my novella and don't hesitate to chime in with any advice or thoughts you have on any of this.

Best,
- Chuck

Long time reader, first time poster... :-)

I'm really enjoying BP and hope to start participating in the forums now that I've created an account.

I'm a "professional" amateur, meaning I've been doing just a little real estate on the side since 1990, sometimes for flips, sometimes for short-to-mid-term rentals, always with an eye on appreciation in my own residence as well. I've 9 or 10 deals over the years. I'm moving into more of a buy-and-hold strategy now centered around section 8 rentals.

I currently live in a giant, old duplex and rent out the 3rd floor normally. I have 3 SFR section-8 rentals currently and hope to add another one day soon. I've also got my duplex listed and if I can get close to retail pricing out of it I plan on moving into more rentals in a bigger way.

If anyone in Louisville wants to yap or get coffee, don't hesitate to yell.

Best,
- Chuck