I say likely, because it's not official yet. A potential renter saw the property on Saturday and wanted to make sure I was ok with his dog before he signed a lease. Actually, he asked if I was ok with his malamute. My first thought was what is that, a ferret or something? A quick wikipedia search showed me what he was talking about. This dog doesn't bother me. I charge a $250 pet deposit, which should be enough to cover the extra cleanup that will need to be done when he moves out. (I'm expecting this dog will shed lots of hair.)
The management company is contacting him again and hopefully, I'll have a signed lease soon. He is paying the higher $800 rent, so I'm making some extra cash there. That will come in handy because my previous glee at finding out I was being charged a lower property tax this year turned out to be short lived. Over the weekend, I got an updated property valuation notice that my property tax will indeed be based on my purchase price, not the lower purchase price of the previous owner. This was to be expected and I used the higher tax amount in my analysis when I bought the place, but I thought I was going to get an extra year of the lower tax. No such luck.
I don't think this guy is a Section 8 tenant. I gave the management company the go-ahead to accept Section 8 tenants, but I think this guy found the place before the Section 8 inspection / approval process was finished. I'll have to verify this the next time I speak with the management company.
Showing posts with label Section 8. Show all posts
Showing posts with label Section 8. Show all posts
Slow February
It's been a slow week, mostly because I caught some sort of bug that knocked me flat on my back for a couple of days. I'm still getting over it, but the worst appears to be behind me. My energy level is still pretty low, however.
No new news on the apartment deal. I suspect the principles are working away busily as escrow is set to close at the end of the month.
I also had a couple of leads on two new potential hard money lending deals, but those fell through. The people didn't need hard money after all. Too bad, as these would have both been 12% net to me. I'm on the lookout for others though.
My Rental #1 is still empty. I've got a call in with the management company to see how things are progressing towards getting a Section 8 tenant in there.
I'm getting antsy without any cashflow checks coming in!
No new news on the apartment deal. I suspect the principles are working away busily as escrow is set to close at the end of the month.
I also had a couple of leads on two new potential hard money lending deals, but those fell through. The people didn't need hard money after all. Too bad, as these would have both been 12% net to me. I'm on the lookout for others though.
My Rental #1 is still empty. I've got a call in with the management company to see how things are progressing towards getting a Section 8 tenant in there.
I'm getting antsy without any cashflow checks coming in!
Tulsa Rental Update
I finally got a few minutes to call my management company yesterday to see what the status of Rental #1 is. As I mentioned before, I noticed that they had raised the asking rent from $775 to $800. The $775 figure was itself a raise from the $750 it was rented at previously. So the place was empty during November and December when I was asking $775 and I was wondering why they raised the rent again, if it could rent at $775.
Turns out, they were meaning to contact me about this. They wanted to know if I was okay with renting to a Section 8 tenant. They think they can get $800 a month from Section 8 for this property, so that's why they raised the rent. If I was managing the property myself, I don't think I would do it. There is just too much work involved in getting the property qualified for Section 8, as Trisha found out. But since I've got a management company to handle all the work, I figured I might as well give it a shot. The only downside is I expect to get some more repair bills once the Section 8 inspectors check out the property.
Oh, and the woman I was speaking to at the property management company said she had been by the house a couple of times and it seems the neighbors like to sit outside and drink. Not a problem. Except they also like to throw their empty bottles into my yard! She talked with them about it and told them if they kept doing it, she'd call the police.
I know the previous tenants left the property right before the holiday season, so I expected some vacancy time, but I can't help but wonder if this has something to do with the property still remaining vacant. I know the previous tenants were Hispanic. Trisha has also noted how the new law has affected the companies she deals with in the area.
Turns out, they were meaning to contact me about this. They wanted to know if I was okay with renting to a Section 8 tenant. They think they can get $800 a month from Section 8 for this property, so that's why they raised the rent. If I was managing the property myself, I don't think I would do it. There is just too much work involved in getting the property qualified for Section 8, as Trisha found out. But since I've got a management company to handle all the work, I figured I might as well give it a shot. The only downside is I expect to get some more repair bills once the Section 8 inspectors check out the property.
Oh, and the woman I was speaking to at the property management company said she had been by the house a couple of times and it seems the neighbors like to sit outside and drink. Not a problem. Except they also like to throw their empty bottles into my yard! She talked with them about it and told them if they kept doing it, she'd call the police.
I know the previous tenants left the property right before the holiday season, so I expected some vacancy time, but I can't help but wonder if this has something to do with the property still remaining vacant. I know the previous tenants were Hispanic. Trisha has also noted how the new law has affected the companies she deals with in the area.
Rental #2 Purchase Moving Forward
I had a nice, long discussion with my property manager this afternoon and was impressed with what I heard. I first confirmed that she had spoken with the tenants in Rental #1 and told them they now need to send payments to them. She said she both sent them a letter and spoke with them in person. They were still processing the rents checks for this month, so she couldn't tell me if they had paid yet or not, but I think they probably have.
I mentioned that my lease specifies that the tenant is responsible for pest control and minor plumbing leaks. I told her I already had sent people out to spray for bugs and to fix the leaky toilet, so I would pay for those, but I wanted to make sure she knew that in the future the tenant would be responsible. She said I could send her the bills and she would go after the tenants for reimbursement! Well, assuming it was their fault. She said she wouldn't make a tenant pay for a leaking toilet if the problem was a 30 year old wax ring that needed to be replaced, but if it was leaking because they were abusing the toilet or something, she would. I am torn though as to if I should bother with it this time. The former owner told me she thought the tenants might move out if they were forced to pay. Maybe if it was closer to the expiration of their lease, I wouldn't have second thoughts about this.
As part of the above discussion, the property manager told me a story about how she went after someone to collect what they owed. I guess one of their renters moved out while still owing them $60. To collect, the PM wrote a fake letter to a collection agency and cc'ed the old tenant. The letter gave the tenant's information and asked what else was needed to move forward with garnishing their paycheck. She said the day after the old tenant received the letter, she came in and paid the bill :-) Now in this case, the PM didn't actually mail the letter to a collection agency, but she did say she has a relationship with one in case it comes to that.
I also mentioned Rental #2, which the current owner is just moving to their management company. I told them I had that property under contract and hope to close on it soon. It is a Section 8 rental and the lease is up on July 1. I told her I'd like to raise the rent from $439 to $460, which is about a 5% increase. I spoke with the Section 8 agency in Oklahoma yesterday and found out the procedure to raise rents. First, you must give 60 days notice to the agency. The 60 days must commence on the first of a month, which means I'll need to get the request in by May 1. Once the request is received, the Section 8 worker assigned to your property will do an evaluation of neighborhood rents and see if your new rent is comparable to what other properties in the area are going for. The management company deals with Section 8 all the time and my PM said there is a fixed percentage increase that is allowable that does not trigger a new comp study and she usually raises rents one percentage point less than that. She didn't know the exact amount off hand, but thought that it was more than 5%. So it looks like I'll get a rent increase shortly after buying the property, which will help my ROI.
The PM also mentioned that she had four properties for sale right now and asked if I was interested. I'm close to tapped out right now with the purchase of these two properties, but I will keep them in mind. I'd like to get to up to 4 properties to get the discount they offer on management services.
I also (see, I told you it was a nice, long chat with her) spoke briefly with her about a mutual acquaintance...
I mentioned that my lease specifies that the tenant is responsible for pest control and minor plumbing leaks. I told her I already had sent people out to spray for bugs and to fix the leaky toilet, so I would pay for those, but I wanted to make sure she knew that in the future the tenant would be responsible. She said I could send her the bills and she would go after the tenants for reimbursement! Well, assuming it was their fault. She said she wouldn't make a tenant pay for a leaking toilet if the problem was a 30 year old wax ring that needed to be replaced, but if it was leaking because they were abusing the toilet or something, she would. I am torn though as to if I should bother with it this time. The former owner told me she thought the tenants might move out if they were forced to pay. Maybe if it was closer to the expiration of their lease, I wouldn't have second thoughts about this.
As part of the above discussion, the property manager told me a story about how she went after someone to collect what they owed. I guess one of their renters moved out while still owing them $60. To collect, the PM wrote a fake letter to a collection agency and cc'ed the old tenant. The letter gave the tenant's information and asked what else was needed to move forward with garnishing their paycheck. She said the day after the old tenant received the letter, she came in and paid the bill :-) Now in this case, the PM didn't actually mail the letter to a collection agency, but she did say she has a relationship with one in case it comes to that.
I also mentioned Rental #2, which the current owner is just moving to their management company. I told them I had that property under contract and hope to close on it soon. It is a Section 8 rental and the lease is up on July 1. I told her I'd like to raise the rent from $439 to $460, which is about a 5% increase. I spoke with the Section 8 agency in Oklahoma yesterday and found out the procedure to raise rents. First, you must give 60 days notice to the agency. The 60 days must commence on the first of a month, which means I'll need to get the request in by May 1. Once the request is received, the Section 8 worker assigned to your property will do an evaluation of neighborhood rents and see if your new rent is comparable to what other properties in the area are going for. The management company deals with Section 8 all the time and my PM said there is a fixed percentage increase that is allowable that does not trigger a new comp study and she usually raises rents one percentage point less than that. She didn't know the exact amount off hand, but thought that it was more than 5%. So it looks like I'll get a rent increase shortly after buying the property, which will help my ROI.
The PM also mentioned that she had four properties for sale right now and asked if I was interested. I'm close to tapped out right now with the purchase of these two properties, but I will keep them in mind. I'd like to get to up to 4 properties to get the discount they offer on management services.
I also (see, I told you it was a nice, long chat with her) spoke briefly with her about a mutual acquaintance...
Another Rental Property Purchased
I picked up another rental property over the weekend, again in Tulsa. Here are the details: 3 bed / 1 bath, 908 square feet with a carport. The tenant is a Section 8 renter with the rent 100% paid by the state of Oklahoma. The lease is up in July and I'm investigating if the state will pay a higher rent at that time. An older appraisal valued the place at $48,000. I'm getting it for $40,000. I've got a 60 day escrow on this one and will be putting down about $10,000. Numbers below are monthly.
The mortgage payment amount is estimated and depends on what interest rate I'll be able to get. I used a 6%, 30 year loan for these calculations. I've run the numbers with interest rates from 5.875% to 6.125% and with a $10,000 and $15,000 down payment and all results are acceptable to me. (The ROIs range from 11.47% to 14.13%.) With these down payment amounts, I won't be paying PMI, so I don't have to worry about that cost.
I like this deal because the property is already in the Section 8 program, so I don't need to go through all the headache of getting it approved. The rent is 100% paid by Section 8, so I don't have to worry about late payments from the tenant. The drawback is that I am limited as to how much I can charge for rent because Section 8 will only pay the prevailing rate for a similar property in the neighborhood. But then, that's pretty much how all rents are determined. The difference is that with Section 8, I'll have to wait for neighborhood rents to increase and then follow suit rather then be the one leading the rent increase :-) Another plus is that Section 8 inspects the property every 6 months and makes sure the tenant is keeping it in good condition.
The property management company charges 10% of the monthly rent with a $60 month minimum. I'll be paying the minimum and you can look at this two ways: On the one hand, right now I'm paying more than 10% in management fees each month. On the other hand, 100% of any future rent increases go directly into my pocket and nothing goes to the management company - at least until the rent reaches $600 a month. I also inquired about volume discounts with the PM company. In order to get a discount, you need to have at least 4 properties with them. At that point, their monthly fee drops from 10% to 9% and the new tenant fee drops from 75% to 65% of one month's rent. I told them I only had two properties so far and she mentioned that they have some older owners who may be looking to sell their properties. I told them I'd be interested and to let me know if anything comes up.
Rent: | $439.00 |
| Taxes: | $43.42 ($521 / year) |
| Prop. Mgt: | $60.00 (10% of rent, but a $60 minimum) |
| Insurance: | $20.33 ($244 year) |
| Maintenance: | $20.00 (approx. 5% of rent) |
| Est. Mortage Pmt: | $179.87 |
| Profit: | $115.38 |
| Annualized ROI: | 13.85% |
The mortgage payment amount is estimated and depends on what interest rate I'll be able to get. I used a 6%, 30 year loan for these calculations. I've run the numbers with interest rates from 5.875% to 6.125% and with a $10,000 and $15,000 down payment and all results are acceptable to me. (The ROIs range from 11.47% to 14.13%.) With these down payment amounts, I won't be paying PMI, so I don't have to worry about that cost.
I like this deal because the property is already in the Section 8 program, so I don't need to go through all the headache of getting it approved. The rent is 100% paid by Section 8, so I don't have to worry about late payments from the tenant. The drawback is that I am limited as to how much I can charge for rent because Section 8 will only pay the prevailing rate for a similar property in the neighborhood. But then, that's pretty much how all rents are determined. The difference is that with Section 8, I'll have to wait for neighborhood rents to increase and then follow suit rather then be the one leading the rent increase :-) Another plus is that Section 8 inspects the property every 6 months and makes sure the tenant is keeping it in good condition.
The property management company charges 10% of the monthly rent with a $60 month minimum. I'll be paying the minimum and you can look at this two ways: On the one hand, right now I'm paying more than 10% in management fees each month. On the other hand, 100% of any future rent increases go directly into my pocket and nothing goes to the management company - at least until the rent reaches $600 a month. I also inquired about volume discounts with the PM company. In order to get a discount, you need to have at least 4 properties with them. At that point, their monthly fee drops from 10% to 9% and the new tenant fee drops from 75% to 65% of one month's rent. I told them I only had two properties so far and she mentioned that they have some older owners who may be looking to sell their properties. I told them I'd be interested and to let me know if anything comes up.
