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Author Topic: Investing in "slums"  (Read 22866 times)

Offline propertymanager

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Re:Investing in "slums"
« Reply #15 on: September 16, 2006, 09:46:05 am »
smithinvestments,

Yes, that's exactly what I'm telling you.  You are NOT guaranteed a Section 8 check each month.  It is true that if the tenant stays in your apartment; doesn't complain to Section 8 about their unit; your unit passes inspection; etc that Section 8 will send you a check.  However, Section 8 tenants do stupid stuff - very stupid stuff - on average just as often as Non-section 8 tenants.  For example, last month I had a Section 8 tenant that had been in the unit for only 2 months suddenly move out (violating her lease) because she wanted to shack up with her boyfriend.  She lost her deposit and her Section 8 voucher over this, but the Section 8 checks stopped even though I had a 1 year lease - JUST LIKE REGULAR TENANTS.  A while back, I had another Section 8 tenant get arrested and went to prison.  Her "guaranteed" Section 8 check also stopped.

Next,  Section 8 tenants are NOT screened by HUD, at least not in the sense that a landlord would screen a tenant.  Section 8 tenants can be just about anything - from convicted drug dealers to someone with multiple previous evictions.  It is very difficult for HUD to kick someone off the program and very easy for them to get re-instated.

Finally, your information that the tenant's portion of the rent being small in comparison to Section 8's portion is factually incorrect.  The proportions can be almost anything.  I have tenants paying anwhere from zero to 86% of the allowed rent.  The amount they pay is determined in large part by their income.

I would strongly suggest that you learn the facts about rentals before doing any further investing.  Ignorance is not bliss when it comes to business.

Mike  

www.1MinuteToRentalPropertyRichs.com 
This No-Hype, No-Nonsense Book is a step by step course in making money and building wealth with rental properties!  Everything from buying properties at a discount to dealing with terrible tenants.  Now In Paperback!

Offline smithinvestments

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Re:Investing in "slums"
« Reply #16 on: September 16, 2006, 07:43:43 pm »
Mike,

I am on this website to gather information. I put this original post out there to be a little better informed. Thanks for calling me ignorant. I really appreciate that. Do me a favor and NOT reply to any more of my questions!

Offline nonrei

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Re:Investing in "slums"
« Reply #17 on: September 16, 2006, 07:56:59 pm »
I think he is only trying to help you keep from making a expensive mistake. I am not even a noob but I see what he is saying to you.
I invested in the "slum" and don't regret it.
« Last Edit: September 16, 2006, 08:02:01 pm by nonrei »

Offline henryinma

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Re:Investing in "slums"
« Reply #18 on: September 16, 2006, 09:08:10 pm »
I'm sorry you were a little offended by Mike's reply, but basically he's got some good advice. If I had a choice, I would choice a regular cash paying tenant over a section 8 any day. Of course I also run a credit check and if you run them on your section 8's you'll probably find that it's not so great. And of course with anyone who doesn't have good credit or doesn't care about it, you run a great risk of them either doing damage or skipping out on you.

You should check out the local section 8 website for your area, mine also says that the section 8 tenants are NOT screened and it's up to the landlord to screen them. Also my two section 8 tenants are usually late with their part of the rent and one of them is only paying $150 for their share, usually at least a week or two late. I mention it once in a while, but they always seem to have some kind of an excuse. Of course sometimes my regular tenants are also late.

Also check out one of my other messages, the worst part about section 8 is the annual inspections. I breezed through the last couple of inspections with just a few minor items, but the last one I dunno, I think the local office was going through some kind of audit and they came down on me like a ton of bricks, picking apart lots of little things that were also there last year but the inspector never said anything about. I think they exceeded their requirements and I'm currently in an arguement with them on whether various items should be labeled as failed while last year they were deemed marginal and passed.
Realtor/Rental Property Owner
Boston, MA

Offline propertymanager

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Re:Investing in "slums"
« Reply #19 on: September 17, 2006, 06:35:14 am »
Smithinvestments,

I'm sorry that you were offended by my post.  Being ignorant simply means that you don't have the facts and that is certainly nothing to be ashamed of.  However, failing go get the facts when you clearly don't understand them IS a shame and will doom you to certain failure (like the vast majority of other newbies in any business).  Most internet sites, REI clubs, investment groups, etc. are full of newbies.  These newbies will often recite any piece of information that they have, whether it is accurate or not.  Sometimes this inaccurate information is corrected by a more experienced investor and sometimes it is not.  Every important piece of information that you read should be checked with a reliable source.  For example, nearly every piece of information that you posted on Section 8 (and a lot of the information that is posted on this newsgroup about Section 8) was/is wrong.  Why?  Because it is second hand information and someone's opinion instead of the facts.  A better way to get that information would be to get it directly from HUD.  The same is true of the expense information.  You can get it from the various gurus, who have a primary motive to sell you ever more expensive courses and bootcamps and therefore have every reason to minimize the expense numbers and maximize the profit potential.  Alternatively, you could get the expense info from the National Apartment Association or another trade group, who have every reason to publish accurate information for their members.  

A key point in any venture is to determine "who you're listening to".   Find out where you can get accurate information.   Just this little bit of work will really enhance your chances of surviving in business.

Mike
www.1MinuteToRentalPropertyRichs.com 
This No-Hype, No-Nonsense Book is a step by step course in making money and building wealth with rental properties!  Everything from buying properties at a discount to dealing with terrible tenants.  Now In Paperback!

Offline REItobe

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Re:Investing in "slums"
« Reply #20 on: September 19, 2006, 07:56:18 pm »
how about when your tenant puts a  keyed on both sides dead bolt on the front door ? SEC8 dinged ME a whole MONTHS rent for that........

If you go SEC8, be prepared and have all your ducks in a row.

Offline aak5454

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Re:Investing in "slums"
« Reply #21 on: September 20, 2006, 09:30:28 am »
how about when your tenant puts a  keyed on both sides dead bolt on the front door ?

that's a major fire/safety hazard to have a deadbolt that requires a key to get out.

Offline REItobe

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Re:Investing in "slums"
« Reply #22 on: September 20, 2006, 09:47:32 am »
that's a major fire/safety hazard to have a deadbolt that requires a key to get out.

yeah I know but why should I pay? I put ALL new locks in when the tenant moved in. Then the dumb B*#@^ changes it without telling me.

That property was a huge learning experience.....

Offline Bluemoon06

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Re:Investing in "slums"
« Reply #23 on: September 20, 2006, 10:08:46 am »
how about when your tenant puts a  keyed on both sides dead bolt on the front door ? SEC8 dinged ME a whole MONTHS rent for that........

If you go SEC8, be prepared and have all your ducks in a row.
My leases don't allow the tenant to change the locks.  If they have a concern they have to notify me and I will change them.  In Texas we have to have on every outside door a deadbolt that has no key on the outside and a hand turn on the inside (like a hotel).  That way the landlord can't come in if they are inside.
Real estate to Retire you
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Offline aak5454

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Re:Investing in "slums"
« Reply #24 on: September 20, 2006, 12:43:57 pm »
yeah I know but why should I pay? I put ALL new locks in when the tenant moved in. Then the dumb B*#@^ changes it without telling me.

That property was a huge learning experience.....

two words---security deposit!

Offline gmtmaster

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Re:Investing in "slums"
« Reply #25 on: October 02, 2006, 01:50:46 pm »
SmithInvestments,

You've been reading too much guru nonsense.  I truly wish that the only expenses were the ones that you listed - BUT THAT'S ONLY A DREAM!!!  In reality, you'll have legal fees, court costs, evictions, set-outs, lawsuits, damage done by angry tenants, exterminations, entity maintenance, office expenses, fuel for your vehicle, and many, many more!!!  The real world operating expenses are 45% to 50% of gross rents.  With what's left, you subtract the mortgage and finally you have the cash flow (or lack of it).

Good Luck,

Mike

I have to respond to this post because propertymanager is completely dead on. These by the book formulas go out the window when investing in slum properties. I am telling you this from experience...

People in slums care less about credit
People in slums care less about eviction
People in slums don't care about legal matters

These three things spell disaster, you know why? The housing laws protect people like this and hurt people like you. Are you going to recoup money lost in repairs when some idiot gets drunk and smashes the walls? Nope! Are you going to get money back when someone doesn't pay rent? Nope!

Your turnover rate of 10% is so off the mark its comical. If you think you're only going to have a 10% vacancy with a property like this then you should just pack up and move on. If the area is so bad that you HAVE to hire a managment company then you're just asking to fail. What happens when the management company gives up? Don't worry, it happens...it happened to me. What are you going to do if you can no longer find a manager and collecting rent from abusive tenants becomes a dangerous venture?

Rehabing slums is not a good idea; the only way slums work is if the cash flow is off the charts. Your cash flow would be suspect if this was a prime neighborhood. The bottom line is that people in slums will NOT take care of the property, you will spend most of your profit evicting tenants. Also, buying this property you know going into it that appreciation is going to be nill...

Please walk away...

Offline Cate

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Re:Investing in "slums"
« Reply #26 on: October 03, 2006, 10:47:40 pm »
Excellent information all . . . propertymanager . . . you nailed it all the way down the line.

Cate
"Life's a banquet and most poor suckers are starving to death."  Auntie Mame

Offline surrealstate

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Re:Investing in "slums"
« Reply #27 on: October 06, 2006, 01:15:32 pm »

There's some terrific information being shared in this forum  ;D.  This is the best website ever!  

Offline Delawheregirl

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Re: Investing in "slums"
« Reply #28 on: July 22, 2014, 10:00:25 am »
Wow, Investing in "Slums", is that how most landlords view Section 8 Tenants? Or the quality or lack there of of Section 8 housing? I am a tenant renting a Section 8 property that is being foreclosed on. I have made this my home under the guise that I was okay to live here for the next 15 years. I upgraded the home much to the delight of my landlord. I planted a garden and enrolled my grandson in school, bought a pool. Now I am told I have 60 days to vacate the property. I always pay rent, have never had a problem until now. Now I see that there is only Slum lords renting to Section 8 and this house is a castle compared to what I have seen searching Section 8 properties. I am devastated to say the least. I believe that Section 8 needs reform. (To protect tenants from predatory Landlords!) We are just viewed in terms of positive cash flow? Our stability doesn't account for a hill of beans. Which my landlord will probably harvest once I move because they are planted in the garden that I have to leave behind. Just saying maybe instead of Investing in the Slums you could maybe invest in People while you are at it. Hey here is an idea, Maybe you could just plain Invest in quality housing for Section 8. Why is it only Slums? Why not Urban and Rural areas? You get what you pay for is what I was always told if you want a better quality of tenant you need a better quality property!

« Last Edit: July 22, 2014, 10:20:35 am by Delawheregirl »

Offline javipa

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Re: Investing in "slums"
« Reply #29 on: July 22, 2014, 04:41:24 pm »

Wow, Investing in "Slums", is that how most landlords view Section 8 Tenants?

Or the quality or lack there of of Section 8 housing?

I am a tenant renting a Section 8 property that is being foreclosed on. I have made this my home under the guise that I was okay to live here for the next 15 years.

I upgraded the home much to the delight of my landlord. I planted a garden and enrolled my grandson in school, bought a pool.

Now I am told I have 60 days to vacate the property.

I always pay rent, have never had a problem until now. Now I see that there is only Slum lords renting to Section 8 and this house is a castle compared to what I have seen searching Section 8 properties.

I am devastated to say the least. I believe that Section 8 needs reform. (To protect tenants from predatory Landlords!) We are just viewed in terms of positive cash flow?

Our stability doesn't account for a hill of beans? Which my landlord will probably harvest once I move, because they are planted in the garden that I have to leave behind.

Just saying maybe instead of Investing in the Slums you could maybe invest in People while you are at it.  Hey here is an idea, maybe you could just plain invest in quality housing for Section 8.

Why is it only Slums? Why not Urban and Rural areas? You get what you pay for is what I was always told, if you want a better quality of tenant you need a better quality property!


That's fascinating feedback from a Section 8 tenant.

Congratulations for taking care of your house.  That's rare, especially for Section 8 tenants.  Just saying.

There's a lot of issues you bring up, but the biggest one is the fact that the owners of these rentals only owe you what you paid for, and agreed to accept, and nothing else. 

If you made the assumption that you could live there for fifteen years, but didn't get that in writing, it's ridiculous to complain otherwise.  There is no 'guise' of living anywhere, without some legal documents to back the 'guise' up.  I mean pfft.

Meanwhile, you padded your nest with pools and gardens, and that's your business, and you got fives years of enjoyment out of it. 

However, again the owner had no obligation to make 'sure' you enjoyed it for fifteen years, or any length of time, unless you negotiated that element into your lease agreement.  Did you? 

If not, it's just sour grapes based on false expectations.

At the same time, you said you were foreclosed on.  Was this your term for a 'notice to vacate,' or was the house literally foreclosed on?

If it was a true foreclosure, the owner probably didn't want to give up the place, since it was fully rented.  And if he had decided to sell to avoid foreclosure, he would have already asked you to move, regardless of your pool and garden situations.

Of course, the owner could have warned you that the house was in foreclosure, but then I'm betting Section 8 would have stopped payments immediately, or you would have on your own (as most tenants do, when they discover their unit is being foreclosed on).  And so, in that case, you'd be out that much sooner.

However, you got to stay to the last possible moment, with Section 8's assistance, and given two whole months to find a new place to live.

I think you did pretty well, considering the circumstances.

Next time around, maybe you can negotiate a 15-year lease, so that your pool and garden installations are more secure.

Good luck with that.
« Last Edit: July 22, 2014, 04:45:07 pm by javipa »
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