property manager Tag

Charlotte Property Management Weekly: Is the Section 8 Program Good for Landlords?

I was signing a lease with a Charlotte Section 8 tenant (the government subsidized rental program) a year or two ago and asked her if she liked the Section 8 program. She smiled and said, “Yeah, it’s a pretty good deal.” I laughed; when the government is willing to pay some (or all) of your rent, I guess it would be tough to answer any other way!

So, it’s a good deal for tenants. But is it a good deal for landlords?

I only have limited space, but here are the most pertinent and succinct pieces of advice I can offer to landlords to determine whether allowing Section 8 tenants to rent your properties is a good deal:

1. If your house is higher-end, Section 8 has limits on how much they are willing to pay based on the amount of bedrooms and whether utilities are included. This leads into point #2.
2. The rental rates aren’t that high. To see if allowing Section 8 tenants to rent your home makes sense, the cash-flow needs to be computed on a property-by-property basis. On some properties, the cash flow is good and should be recommended as a viable rental source. On others, it just doesn’t make sense.
3. The house will need to meet many government requirements and will be inspected to make sure it is up to snuff. If the house is newer and kept up, it will usually pass. If it is older, there are usually costs incurred to meeting these requirements; the question is if incurring these costs is worth it.

4. It’s a government program which always means two things: it isn’t fast and features many, many documents to sign.

5. Payment is guaranteed, but when mistakes are made (aka missing or incorrect payments), getting them corrected is usually arduous. See point #4.

And as a bonus, here is an answer to our most FAQ by far:

Q: If I allow Section 8 tenants to rent my house, am I just asking for my property to be torn up?

A: I haven’t seen this be the case. There is actually additional protection against a Section 8 tenant tearing up the home, when compared to a regular tenant. Let me explain. The Section 8 program has a huge tenant waiting list (no surprise there!). If a Section 8 tenant tears up the home (or does anything that violates the lease), there is an implied understanding that they can be reported to Section 8 and be removed from the program. The tenant cannot afford for this to happen!

Section 8 can be a great option for the right house. Use it wisely and selectively!

Brett Furniss is the President & Owner of BDF Realty (“Charlotte’s Most Innovative Property Management & Investment Company”), and Rent-To-Sell Realty (“When You Need a New Solution to Sell Your Home”) which specialize in rent-to-own (lease options) and rent-to-sell homes. His newest book, A Real Estate Agent’s Complete Guide to Representing Rent-To-Own (Lease Option) Tenants (Delight Clients, Fill Vacant Homes, and Earn $2,250* Upfront! (*Minimum!)

Charlotte Property Management Weekly: David vs. Goliath: Punish Those with No Credit or Landlord History?

Everyone knows the biblical story of David versus Goliath. David, a young shepherd, takes his slingshot and takes out the menacing giant, Goliath, with one shot. Then he picks up Goliath’s sword and cuts off Goliath’s head with it, saving Israel from the Philistines as a result. Pretty good work for an amateur!

In the world of property management, “David”, the prospective tenant, is often put on the sideline per se. See, David will probably be a good renter, but it can’t be proven. He has no credit score (works at a restaurant and pays with cash) and no landlord history (besides Mommy, Daddy, and his undeserving ex-girlfriend). With no provable payment or rental history, he is the great unknown. To take Shakespeare into the rental world, “To rent or not to rent to him, that is the question.”

Our property management firm uses four criteria to screen tenants:

1. Credit report
2. Criminal background check
3. Landlord history
4. Income and employment verification

So, let’s play this out. We’ll go off the assumption that David is employed, makes enough money to afford the rental home, and isn’t a (known) criminal. We know that he has the money to pay the rent each month. But we still have no idea if he actually will.

Property managers are tasked with proving to their owner clients that they did their due diligence in the screening of prospective tenants that may rent their home. That’s obviously fair. But in a world of limited information, how can David get approved? The easy thing to do would be to reject the application due to having insufficient information to make a decision. This is a common practice in everyday life. For example, this issue was a big reason why President Obama was elected, right? President George W. Bush went to war against Iraq with insufficient information about WMD’s and look where that got him. Most Americans (see polling numbers) wish he had waited for more proof!

So application rejection is a warranted (and defendable) action; if the information isn’t there to make a well-informed call, it needs to be denied. This will cover the property manager if something bad happens, right?

Or, let’s wait a minute. Hasn’t everyone been in this situation once in their life? Does a generation of new renters deserve to be shut out because property managers can’t figure out how to adequately assess their suitability to rent?

I don’t think so. I’ll approve David’s application if he:

1. Passes the aforementioned four screening methods that he can actually qualify for
2. Shows attentiveness and responsibility during the application process
3. Has the wherewithal and willingness to put down additional security deposit monies (this will mitigate the additional risk of insufficient application information)

Israel didn’t shut out David from saving them, even though he wasn’t an experienced soldier. Don’t automatically reject renters of unknown quality; most will turn out to be pretty good tenants!

Brett Furniss is the President & Owner of BDF Realty (“Charlotte’s Most Innovative Property Management & Investment Company”), and Rent-To-Sell Realty (“When You Need a New Solution to Sell Your Home”) which specialize in rent-to-own (lease options) and rent-to-sell homes. His newest book, A Real Estate Agent’s Complete Guide to Representing Rent-To-Own (Lease Option) Tenants (Delight Clients, Fill Vacant Homes, and Earn $2,250* Upfront! (*Minimum!)

Charlotte Property Management Weekly: Drive + Drink = Lease + Option?

“Lease options might be the worst idea ever. Who would ever be a party to one? I tried one once and it was a complete disaster! I mean, I’m not a lawyer- there’s just so much that can go wrong; I don’t have firsthand knowledge of this mind you, but I’ve heard lots and lots of stories.” (Traditional Realtor)

“Combine two innocuous substances and “Walla!” A homemade bomb.” (Al Qaeda training manual quoting a MacGyver episode)

Charlotte Property Management Weekly: “Terms” of Endearment- The Key to Selling Real Estate Buyers

If you were offered both of these jobs, which one would you take?

Job #1: $80K annually
Job #2: $30K annually

Duh, the $80K one.

Now let’s look at the job descriptions:

Charlotte Property Management Weekly: “Cash for Clunkers” Predicts a Cloudy 2010 Housing Market

“Can’t Believe You Still Have a Job” Award of 2009: Obama’s “Cash for Clunkers” sales forecasting team. As they projected a total 7-week program amount of $1B, they ran out of money before the first week was out and had to go begging Congress for $2B more.

If “prognosticatin’” is your game, and you’re off by that much, you probably need to find a new job- you just ain’t that good at it.