Posted by Chris in FL on September 09, 2011 at 09:40:48:
That landlord trade-off question will be eternal… Should I settle for less neighborhood or not, because it certainly cash flows better? I have a friend/investor that told me, “Chris, there is cash in the trash”. Always stuck with me. You can make uncommonly good money in marginal areas, but make sure you don’t go into war zones! I deal in many lower end rentals (have some better houses too), and my rule of thumb is, if a decent home in the area won’t draw decent people to want to live in it, I don’t go there! If I don’t feel safe collecting rents there, forget it (though I seldom ever collect rents at my properties)! I find it easy to be in working class neighborhoods, still get good homes at good prices, but avoid war zones/ghettos.
Agree with one other poster - it sounds like maybe you should deal with a property management company that handles rent collection, etc., if you are not comfortable handling it yourself. If you have enough properties long enough, guaranteed sooner or later you will have to deal with someone not paying. Make sure you qualify people on likelihood of paying on time, and don’t ever put someone in without full first month’s rent and security deposit. Personally, I find property management way too easy to pay someone the 10% going rate just to collect rent and handle occassional phone calls. I have some residents mail their rent, and I have a few that deposit directly into one of my bank accounts. I bank with several local banks with lots of branches, so that makes it easy. I also keep separate accounts for these deposits, and keep low balances in them… I don’t need any monkey business happening to an account with a large balance, and I don’t need tenants seeing on their deposit receipt that I have a $50K balance (it could set off sirens in their head - ‘how can I get some of my landlord’s money?’).
Personally, I use a method I learned from my landlord back when I was renting - I blend with my tenants. I don’t dress fancy, flash cash, act rich… I act like what I am - decent, hard working, responsible… I let tenants know I am running a business that requires rents paid on time to work correctly, and to pay mortgages, taxes, insurance, and repairs, and to support my family. What they don’t need to know is that I also do quite well financially…
As far as Section 8 goes, I think it varies by location. Where I am at, Section 8 is not in high demand by landlords… Overall, Section 8 tenants come with their good and bad, the same as other tenants. I will say, most people on Section 8 are motivated to pay their part of the rent, and keep their place okay, because if they get evicted, they also get kicked off Section 8 (lose their financial assistance)! Locally, Section 8 allows landlords to post information about vacancies at their offices, but I never had a ton of response to that. My method is to make my place decent, clean, and inviting… Put a sign in the yard and maybe a few directionals, and if the phone isn’t ringing enough, an ad in the local paper… If Section 8 people apply and qualify, great. If someone else qualifies (pays their rent on time and takes good care of their place), great. Section 8 is a little more red tape (paperwork hassle), but that is offset by the higher likelihood of no issues getting paid.
Enough Landlording 101 for today!!!
Chris in FL