Slum Lording

Discussion in 'Chit Chat' started by Sky123987, May 17, 2009.

  1. I know this doesn't pertain to trading, but I was wondering if anyone has any experience renting out houses to low income people, what % of the time can you allocate it will be rented out, providing you offer a "reasonable low price"??
  2. kroponer


    LOL this post probably belongs in chit chat.

    If you are going to rent to low income, instead of renting to people paying out of their own pocket you are better off renting to people who have HUD Section 8 vouchers which are good for one year and are renewed every year. Theoretically, if you had to kick out a tenant/they had to leave, you could have another Section 8 tenant in there within a month and a half, depending on how long you take to put up ads for another tenant/clean house (repair any damage)/how long the inspection period takes. So for every 12 month period, you are probably looking at maximum 1.5 month loss, which is 12.5%, or flipped around means you should have the house occupied 87.5% of the year.

    I think. If you have never rented to low income people before, though, rent to good middle class people, odds are they won't fuck up your house.
  3. I have never rent to anyone before. also what are some number you can allocate to "maintaince"
  4. kroponer


    Well to be honest I couldn't give you an average maintenance cost for a average year, been meaning to do that for my own records...

    But, your 'normal' maintenance costs are

    1. A/C Fix

    Note this is all relative, but say you are renting a 3 bed/2 bath, 2,000 ad. sq ft., you are looking at a 3-ton AC unit. Probably every 2 years there is a routine problem that will be a $150-$300 repair job. Note, as the unit gets older, the routine repair jobs become more frequent. Long term, probably have to replace a unit every 8-15 years (I just replaced a 17 year old unit 2 months ago)

    2. Plumbing

    Plumbing jobs are usually just leaky faucets, toilet doesn't flush properly...can't be more than a $200 job.

    4. Appliance/Electronic fixture

    Fridge, Washer, Dryer, Ceiling fans, honestly I couldn't give you an average cost. You could have everything from an ice maker repair to the duct on the back of the dryer is loose, to just needing a new fridge ($400+).

    3. Natural Disaster

    Depends on your location. I'm in South Florida, so hurricane season is my main concern. Yours maybe tornadoes/flooding. Roof damage/leaks are public enemy #1 round here, obviously you have your homeowner's insurance to cover costs, but, naturally, going through the claim process is a bore. Also, obviously your tenant would have to vacate the premises if it's a lengthy repair job.

    4. Move-out repairs

    When you are in between tenants you will 'see' your costs more clearly, lol. You'll see baseboards that need to be repaired, walls that need to be repainted, re-do grout in the bathroom, change locks, you name it. Costs range.

    One thing you can see from this list is that if you have some handyman experience, you can cut your maintenance costs handily. I'm 22 and was kinda pushed into the rent business, so the only maintenance I can do is cut the grass while the house is vacant lol.

    If you don't have maintenance experience, getting a reliable handyman is your next task. If you have a weekly mail circular (in So. Fla it's called 'The Flyer') you can call around and get quotes, have people come out for an estimate. I have separate people, one guy for A/C, trusty old guy, and one guy for general repairs (plumbing/paint/tile, etc.)
    If you are trying to do a spreadsheet of income-costs, remember to do your homeowner's insurance/property tax. Usually you can see if renting will be profitable/breakeven/loss with just those three variables (rent-homeowners-property tax).
  5. cool thanks for your help
  6. yes, it's a terrible business.

    unless you are a badass, then you can do ok.

  7. Eight


    I knew a guy that had section 8'rs in his rental for a year. They refused to let the inspectors in for the annual and he had to return a year's rent to the agency... another one had some gang bangers in his house, he had to evict, they burned the place...

    I've heard experts say that you ought to allocate 40% of the rent to maintenance. I never figured out why that should be so high but maybe it's to cover worst cast stuff like the above stories.

    My wife manages our one rental, she does a much better job than I ever could. She rents to people she knows and she gets just enough to cover the mortgages, giving her friends a substantial break on the rent. That ensures that the occupancy rate will be 100%, maintenance costs will be low and we will still get to participate in the price rise if real estate makes a come back, that's the real game, participation in the price runups that happen every 7 to 11 years...
  8. do you know from first experience it is a bad business?
  9. Yeah cause that worked out so well for all those people that bought in 2005-2007, right?

    The real way to play the game is that you need to make money with your rentals every month and assume that housing prices will NEVER go up and rent will NEVER go up.

    If you want to play the appreciation game, then do rehabbing were its alot more likely, its short term and you can make alot more.
  10. If your going to rent to low income people/being a slum lord, I suggest you read something pertaining to the life cycle of the ghetto and people without choices.

    Imo, there are only two paths, appreciation or cash flow. Low income rental the objective is cash flow and to wring every last cent out of four walls and budget Zero for maintenance, there is no return on that invested dollar, except what is coming in the next rent check.

    If you could buy a well maintained (whatever) to convert to a rental unit that was in a declining (early stages) neighborhood for a distressed price, just let it fall apart or contain the damage from your tenants.
    #10     May 19, 2009