Hi, I’ve been patiently waiting for the prices to start bottoming in Cleveland, OH. Now, I feel we will have about a year’s window to scarf up some good low income rental deals. I.E. less than 35x rent with repairs. So my questions are this:
Is there less drama with Non-Section 8 low income rentals?
Assuming a 5-10% discount below market rents, Are there still enough decent Non-Section 8 tenants that qualify to keep vacancies low? I realize this is a local market question, So I’m trying to get a consensus.
So far I’ve heard a few horror stories about Section 8 in Cleveland, OH, so I am going to try avoiding it.
Can everyone chime in about how many hours per month they spend to maintain and manage their Non-war zone low income rentals for how many units. I.E I have X units and I’m spending about X hours per month. Or if you don’t want to disclose how many you have, Just give the " I average X hours per unit per month" number. I’m trying to figure out how many I should/could buy while keeping my total man hours down to about 20 a month.
1. Is there less drama with Non-Section 8 low income rentals?
No. Maybe just a little more with Non-Section 8 as you will get stiffed on rent. Drama pretty much goes hand and hand with low income. BUT you have to get MANY houses before it really becomes burdensome. But if you’re talking about doing section 8 in a slightly better neighborhood than there would be less drama.
2. Assuming a 5-10% discount below market rents, Are there still enough decent Non-Section 8 tenants that qualify to keep vacancies low? I realize this is a local market question, So I’m trying to get a consensus.
You’re right, local question. I my low incomes about a third of the applicants are section 8 (I advertise that section 8 is OK), a third have some kind of disability check, and the rest work low income jobs.
So far I’ve heard a few horror stories about Section 8 in Cleveland, OH, so I am going to try avoiding it.
3. Can everyone chime in about how many hours per month they spend to maintain and manage their Non-war zone low income rentals for how many units. I.E I have X units and I’m spending about X hours per month. Or if you don’t want to disclose how many you have, Just give the " I average X hours per unit per month" number. I’m trying to figure out how many I should/could buy while keeping my total man hours down to about 20 a month.
Think about it this way, it starts making sense to hire a property manager when you have over 25-30 units or so. They at that point would have a part time job on your property. If you are buying houses that need to be fixed up prior to renting them you will spend quite a bit more time doing some of the work or at the very least managing the people doing it. You will spend a little time renting a house but when rented you can go for months not having to do a thing. Then you get a call about a plumbing leak and send your jackleg over there to repair it. And you will have some tenants that you need to physically go down to the house on Friday and collect your rent money from because they have this little problem of blowing it right when they get their paycheck.
You will have around 20 hrs a month on 25-30 units if you are not doing any maintenance yourself AND if you are not buying property that need rehab as management of that can be a little time consuming. It depends a lot on how well you manage your properties and the people living in them. How well you do at picking the right tenants, etc.
What criteria do you use to determine that you have to do this “babysitting”? Do you threaten eviction first to try and straighten them out?
I have a clause in my lease that if they become late on a payment I can at my discretion require them to pay rent on a weekly basis. This is the largest problem of these low income people. They don’t know how to save money out of each paycheck to make their rent. And they are short at the end of the month. I will try at first setting them on the weekly thing and if they have problems with that too I will go down and get it. Then when their lease comes up to the end I will not renew it because they are causing me time.
Rent is due on the 1st. By the 5th I put a note on the door to move out. By the 10th in Virginia I can get started on the eviction. AND I DO. If they come up with the money between the 5th and the 10th is when they go on the weekly thing if I feel they need to be on it.
How often do you go “through” a “rented” low income unit for inspection to keep up on maintenance,abuse, etc?
It depends on the tenant and what kind of “feeling” I get from them. Sometimes I will have other tenants in the same multifamily or a neighbor rat on them. In that case it will be right away. In most cases I will do a 6 month checkup on the place. If they damaged anything I will fix it right away and it will come out of the deposit. They will have 15 days by my lease to replenish that deposit or they are in violation and I will evict.
For example, one tenant I have right now just moved into a place and I have already noticed damage. Her kids are pulling on the blinds and breaking them so she will get charged $25 per blind to replace them. I also was told my my maintence guy that her kid got into his silver roof paint and smeared it on the foundation wall. So she is going to be charged for my jackleg to paint the entire foundation because I can’t think of a way to get it off. I don’t think my pressure washer will do it. AND a few weeks ago the tenant told me that she was pushing her new washing machine across the kitchen floor and it ripped a “little” hole in the vinyl. And it “didn’t matter to her if it didn’t matter to me”. LOL. Well, I was up there with my maintenance guy and the rip is huge and there are two. So now she is pretty much going to be completely out of the $595 deposit and will have to repay the entire thing. I will do a formal walk-through on the property when she reaches 3 months. I am doing this early because I don’t want her to owe me too much. If I waited until her year lease was up she could have damaged hundreds more and I would be the one who gets screwed.
So, that is a good example of why you want to do walk throughs from time to time.
Rent is due on the 1st. By the 5th I put a note on the door to move out. By the 10th in Virginia I can get started on the eviction. AND I DO. If they come up with the money between the 5th and the 10th is when they go on the weekly thing if I feel they need to be on it.
So what is your policy if they come up with the money between the 10th and the court date?
I’ll cancel it upon an agreement that they ALSO pay me back the money I already had to pay the court to set the date. But do it twice and they are gone. The key is to show them that you are not playing with them. That there will be no “working with them” on getting the rent on time. Never let them talk you into paying late. I have been bamboozled on multiple occasions from doing this, AND when you do, you now have EVEN LONGER to get the deadbeats out.
OK, Thanks! I’ll certainly apply this policy. I like your way of thinking. Work with them a “little” until it stops making sense or takes to much time. I have to say I’ll not have much patience with having to pickup weekly rents. Have you ever experimented with bi-weekly rents even if the tenant gets paid weekly? It’s two less trips a month.
I sell products into the Buy Here Pay Here (BHPH) industry. Some have been able to use bi-weekly instead of weekly. Most have not though. They have the benefit of using a walk up pay window. I.E. no going to pick up payments. OT, But interesting, One dealer in GA. used to cash payroll checks for his customers for free to get them to come in and pay the payment. He does this “without” a pay window. When I was there doing a training session they went to the bank every other hour to go pick up as much as 9k. Needless to say when I found out what they were doing, I got’em trained and got the heck outta there lickity split. Funny thing was they couldn’t understand why I was nervous. :rolleyes
Anyway, Thanks so much for your insight Hooch. You sound like you’ve been doing this for a while and got the policies set from solid experience.
Section 8 means you’re guaranteed to get your rent each month (if the gov’t is paying the full rent amount). That part is nice. My experience with Sect. 8 so far is the people are basically just lazy. They’re content to stay in their situation and let the gov’t give them more hand-outs. That’s really about the only difference I’ve seen. Our local Sect. 8 office is very easy to work with. I’ve heard bad things about some offices in different locations.
If you provide a good value to people, you should have no problem filling your units. If you start trying to push the market to get extra monthly rent, you’ll likely have longer vacancies. Remember just one extra month of vacancy will eat up a year’s worth of that extra $25/mo you’re trying to get.
We’ve got several units now. Maintaining them is not a big deal and doesn’t take up a ton of time. The thing taking up all our time is getting new places ready to go. I can only work on weekends and late at night on these places so it takes me longer than it should. I’d love to find more places that are move-in ready, but you either pay a premium for that or you put in the work to get it up to a good standard. We are not slum-lords by any means and make our properties the best they can be at an economical price. If someone wants to a renter in a dump, it would obviously take less time to get ready. We’re basically working our tails off right now to build our portfolio and make these places decent so at this point, we’re spending WAY over 20 hours per month but it’s mostly for rehab on new acquisitions.