Buying a rental house (Houston, Pearland: section 8, renter, insurance)

[Oildog]

Anyone have experience with this?

Was looking into buying a 1350 sqft house in the 4th ward as an investment, it was built about 10 years ago. Hoping to rent it out for 1300-1400$/month.

I may buy this with another person.

[marksmu]

Originally Posted by Oildog

Anyone have experience with this?

Was looking into buying a 1350 sqft house in the 4th ward as an investment, it was built about 10 years ago. Hoping to rent it out for 1300-1400$/month.

I may buy this with another person.

I have several rental properties...one in the Heights, 1 in Friendswood, 1 in Pearland....its just like buying any other house except you get to deduct all your expenses...Insurance is different, and many find it advantageous to put rental property in LLC or LLP. Mine are in a Limited partnership with other family members.

All 3 properties have been great. Finding renters has been no trouble at all...the Heights property is by far the easiest to rent and its about 1300 sqft and about 60 years old.

How you get your tenants is really 9/10 of whether or not you will have any problems...we do credit/background checks and require verification of employment. We check references and limit the occupancy...if you do the obvious things to screen out the bad tenants, there are actually lots of good folks looking to rent houses.

[cheryjohns]

Have it built into the lease that you can show the house to prospective tenants the last 30 days of the notice period. Also look for long-term renters - rather than those that move every year, for no apparent reason. Down time, between renters, means no rent coming in.

Review rents every year. Even if they have gone up in the area - give the good renter a break.

[City Love]

It's all about numbers. If you want to lease it out between $1300-1400, I wouldn't expect to pay more than $100k-$110k for it. Any more and there are likely better options for you somewhere else.

I own several properties. Most are under my LLC to make things easier. I don't have any partners, but would caution against that unless you are 100% comfortable with the other partner. Issues will come up with rental properties like maintenance. One partner might think it's wise to replace the roof early, while the other wants to wait a few years. Or each partner might have a different way in approaching a problematic tenant/situation.

In the $100k range, I like to find properties that can at least rent for between 1.3-1.4% of the total value. Some people look for at least 1%, that generally covers all your costs, but with the options out there, you can usually better the return. It will also depend on repairs needed to make the property ready.

I'm a firm believer that with any investment, you make your money when you buy the investment. You realize that profit once sold or rented, but if you buy right, you are almost assured a profit.

Good tenants will be the key to any rental. They will make or break you. Screening properly and managing the issues appropriately will go a long way. Good tips were posted above.

I could go on and on.

[LoraMao]

If you want to appeal to a lot of renters in this area, keep the house around 1,200 to 1,500 square feet and $100,000 and under. Hopefully, you can keep the repair costs to $5,000 to $10,000. When repairing, don't use the top of the line materials because it's going to get beat up a bit by tenants. Use a darker carpet and a gloss paint that you can clean with a wet rag. You can do a hard money loan where you finance the construction phase, and then when it's finished, you will do a regular conventional mortgage. Definitely screen your tenants. I'm renting one out to a Section 8 tenant, and the government pays the whole rent. But, we screened really well, did background checks with previous landlords. If they are Section 8, you don't have to worry too much about them being criminals because the government won't give them a Section 8 voucher if they have broken Federal laws. I'm an agent here in the Houston area and can assist you with buying investment property such as the one your looking for. Contact me if you like.

[DJboutit]

I have read a few bad stories on this forum in the past how section 8 renters are the worst renters of all renters I would never rent to anybody with section 8

[jd433]

This is my formula. If you expect 1400 a month then the price + EXPENSES needs to be more like 80K. Also the home needs to be worth more like 115k but still cost only 80k. Remember it is all about cap rate + appreciation + equity capture. If you are buying in the 4th ward then you are probably focusing more on appreciation than cap rate. you will probably pay more for the property and sacrifice the cap rate in exchange for future appreciation.

[Texascrude]

Originally Posted by LoraMao

If you want to appeal to a lot of renters in this area, keep the house around 1,200 to 1,500 square feet and $100,000 and under. Hopefully, you can keep the repair costs to $5,000 to $10,000. When repairing, don't use the top of the line materials because it's going to get beat up a bit by tenants. Use a darker carpet and a gloss paint that you can clean with a wet rag. You can do a hard money loan where you finance the construction phase, and then when it's finished, you will do a regular conventional mortgage. Definitely screen your tenants. I'm renting one out to a Section 8 tenant, and the government pays the whole rent. But, we screened really well, did background checks with previous landlords. If they are Section 8, you don't have to worry too much about them being criminals because the government won't give them a Section 8 voucher if they have broken Federal laws. I'm an agent here in the Houston area and can assist you with buying investment property such as the one your looking for. Contact me if you like.

How much does the government pay for their rent? Can you still set the price?

[jd433]

If you rent to section 8 then regardless of the agreed rental price the section 8 office will review the market value of the subject property and will adjust the rental price if it is too high. Also it will take a few weeks to receive the first payment so the renter may wind up living there for a month or so before you receive your first section 8 payment.

You can advertise the property on gosection8.com . You will probably be flooded with calls and a lot of the renters are in a hurry to move in, Unfortunately though the section 8 office is not in a hurry to pay you.

[Texascrude]

Originally Posted by jd433

If you rent to section 8 then regardless of the agreed rental price the section 8 office will review the market value of the subject property and will adjust the rental price if it is too high. Also it will take a few weeks to receive the first payment so the renter may wind up living there for a month or so before you receive your first section 8 payment.

You can advertise the property on gosection8.com . You will probably be flooded with calls and a lot of the renters are in a hurry to move in, Unfortunately though the section 8 office is not in a hurry to pay you.

Hmm... sounds like a lot of effort for no significant advantage. Do the section 8 renters tend to be more long-term? I guess that'd be nice to only have to find a renter once every 5 years if that were the case.