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BP Podcast 079: Low Income Landlording and Investing to Make a Difference with Michele and Bruce Fischer

by Brandon Turner on July 17, 2014 · 26 comments

  
Low Income Landlording

Today on the BiggerPockets Podcast we are excited to sit down with a couple who together, intentionally invest where most landlords fear to tread . . . low income housing.

Michele and Bruce Fischer who hail from Longview, Washington, decided to make a difference by landlording in areas that are so low-income, that even Section-8 doesn’t work in their neighborhood. In our conversation we dive into some really important topics regarding how to screen low-income tenants, how to handle (pets like pitt-bulls), what to do when your tenant is late on the rent, working with your spouse, what to do when the reality is your tenant will become homeless if you evict them, how to “tenant-proof” in low-income areas and a lot more! You don’t want to miss this one!

Listen to The Show on iTunes

Click here to listen on iTunes.

Listen to the Podcast Here

In This Show We Cover…

  • Why would you invest in low-income areas in the first place?
  • What to look for when purchasing a low-income propertyBiggerPockets-Podcast-Cover
  • How playing “Monopoly” with no money makes you a better real estate investor
  • Handling late payments
  • The “prostitute tenant” story (Yes, really…)
  • How to practically invest with your spouse
  • Renting to low income tenants with low income pets (including those with dangerous animals.)
  • Michele and Bruce’s #1 source of leads
  • How to “tenant-proof” low-income rentals
  • How to utilize a line of credit for investing in real estate
  • Cash flow vs. appreciation
  • Using Facebook to vet potential tenants
  • And a TON more!

Books Mentioned in the Show:

Tweetable Topics:

“Prostitution does pay the rent well!” (Tweet This!)

“Arguing with your spouse is part of the #landlording process!” (Tweet This!)

“We invest in real estate in order to make a difference.” (Tweet This!)

Connect with Michele and Bruce:

HARK! (1)

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{ 26 comments… read them below or add one }

Jon Klaus July 17, 2014 at 8:51 am

Thanks for sharing your story with us, Michele and Bruce. Landlording at the low end is not so passive. Have you considered other types of real estate investing? What kinds? You might look at apartments, given your experience and comfort level with lower end units. Y’all are a great team!

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Michele Fischer July 17, 2014 at 9:52 am

Thanks for posting Jon! We are content with where we are, realizing that we have chosen a more difficult road than we need to. We are exploring “what’s next”. Bruce has been intrigued by apartment complexes. I could also see us transitioning to more traditional and passive properties, partnering or hard money lending, and I am really interested in vacation rentals, especially as a retirement strategy.

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lamac66 July 17, 2014 at 6:59 pm

Much respect to you.

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Michele Fischer July 18, 2014 at 9:00 am

Thanks!

Jeff Sielicky July 17, 2014 at 7:48 pm

Michelle and Bruce, that was very interesting. I am from Portland and think about that kind of investing but like you feel it needs to be hands on.

You have a lot of tenacity to deal with the turnover but you are getting paid so guess it all works.

Wanted to get to chat with you at the Portland meet-up but didn’t get the chance, hopefully next time.

You mentioned to Jon above about partnering. How does that look? I am looking at different avenues so just curious.

Thanks for a great show.

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Michele Fischer July 18, 2014 at 9:04 am

Hi Jeff! There were a lot of people at that meet-up! We should have another one!

Partnering for us is quite a ways out, so I have not done any investigating or detailed planning. But in our dreaming, it would be fun to buy an apartment complex in Seattle, live in a unit to mange it, keep one or two units designated for vacation rentals, and have traditional tenants in the remaining units. The partnering would be sharing profits and funding to be able to get there faster than we could on our own.

Thanks for the post and compliment, take care!

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Gwen B. July 17, 2014 at 9:20 pm

Great Podcast! Thank you!

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Michele Fischer July 18, 2014 at 9:05 am

Thanks Gwen, appreciate you taking the time to post!

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Al Williamson July 17, 2014 at 9:53 pm

I solute you Bruce and Michele!

The impact you’re making goes way beyond money. Ssolving social problems (low low income housing) AT A PROFIT is a sustainable model that should be expanded.

The profit is important – the work is important. More power to you both!

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Michele Fischer July 18, 2014 at 9:09 am

Always love your input and encouragement, Al!

You were mentioned in our podcast, but I wish I had taken time to discuss the networking I’ve experienced through BIggerPockets. You’d be on top of the list, our e-mails, phone calls, and watching each other. The BiggerPockets meet-ups are fantastic, people are very easy to talk to. I met a newbie investor there and we are still in frequent contact as he analyzes deals nearby. And out of the blue another member set up to buy me coffee and we chatted about real estate. Great things happen on BiggerPockets, and you’re one of them!

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kevin July 18, 2014 at 9:39 am

Great podcast. Bruce and Michele a wholesaler that I know just asked me about a duplex in longview. I think an investor fell through so she came to me but I’ve currently got too many properties for sale or in the process of refinancing to put any cash out to buy it and my hard money sources won’t do it because it’s too small.
55k duplex 1100 rents. If you are interested I can forward you her info. Pretty sure there isn’t much time though as its final stages of foreclosure.

I’d even purchase from you with a three to six month balloon. Timing is just bad. Thought I’d throw it out there since your from longview and the deal came to me yesterday.

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Michele Fischer July 18, 2014 at 9:01 pm

Thanks for thinking of me and for jumping in Kevin, but we’re not currently purchasing. Looks like a good deal if it only requires minimum rehab, although it will be very hands on if it is on Cypress or Colorado streets as I suspect it might be.

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kevin July 18, 2014 at 9:42 am

As to people concerned with the risk. There are insurance policies you can get to mitigate this kind of stuff. Typically the cash flow is high enough to justify these deals.

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Nick July 18, 2014 at 10:09 am

This type of investing is definitely not for me! Not to hate on what you are doing and I’m not in A neighborhoods or anything but I just can’t believe it is the highest and best use of your time to clean up after and chase these people. I get the “charity” but these people aren’t poor because they had a little bad luck, they are poor because they have continued to make bad decisions for their entire life. We live in the most productive society in the history of the world it is not difficult to get a job that allows you to pay rent. This is why I don’t rent to section 8. If you aren’t responsible enough to produce something that society values you are probably not responsible enough to take care of one of my houses. Sorry if this sounds cynical I just had my first eviction this week!

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Kevin July 18, 2014 at 11:09 am

A little harsh. Not everyone is capable of getting a good job that pays enough to live off without assistance. Whether they had a rough time a business collapse or are just not smart enough. It’s not always just bad decisions. Plenty of people who have had assistance in some way are now millionaires. The last guy running for president had parents on assistance and he’s a billionaire now.

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Michele Fischer July 18, 2014 at 9:10 pm

Nick, I expected to take some criticism for making things harder on ourselves than we need to. It doesn’t bother me; I know this is what we’re meant to be doing right now and I also know that eventually we’ll move on to something else and this will all be valuable experience.
I’ve also spent enough time in the trenches to realize that the statement “people are poor because they aren’t willing to work” is a gross over-simplification of the poverty issue in America. There are a lot of reasons why, but there is a growing section of our population who are unemployable. Pretending like they are won’t improve the situation.
Sorry about your eviction. I’m sure it will happen to us one day. Maybe with low income, maybe with higher end rentals.

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Dee Boozer July 21, 2014 at 11:48 am

Nick,

I’m sorry that you see low income renters this way. I was raised in Gary, IN, and that is where I am looking to invest for the same reason as The Fischers.

I can tell you first hand that poverty is the result of a mentality, not a work ethic. These people have nothing realistic to pull from to tell them that they can do better. Their education is minimal, and their influences are either mediocre or unrealistic. So they do what they’ve been taught to do, what they’ve seen all of their lives… they just get by.

It is a mentality that they have to have the personal motivation, inspiration and dedication to rise above. And I wonder, if you grew up with a minimal education and no one in your life showed you that “success” was attainable for ‘people like you’, if you would have the fortitude to succeed.

I am living that struggle. And there are signals all around me that say that I have done well already and could rest on my laurels. It is a challenge every day to continue to push forward. So, have a little heart. :-)

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Michele Fischer July 21, 2014 at 8:23 pm

Thanks for weighing in, Dee, and for the colleague request!

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Brent Ludwig July 18, 2014 at 10:18 pm

Kevin and Michele thanks so much for sharing your story. I have been running an outreach to the homeless of St. Louis Mo for about fourteen years and have work with a church in the north city (war zone ) reclaim its neighborhood they chose to do it by low income tax credits and building new construction. I worked the neighborhood has changed in a great way but I have to say that I personally like your method for myself. You guys inspired me to move on my dream and vision to change the world one neighborhood at a time and teach some of the people in each neighborhood to do the same thing in the next neighborhood. Your passion is not misguided or enabling they are giving a big hand up and a motivation to do better. Would love to follow you journey more and hear some of your tenant success stories.

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Michele Fischer July 19, 2014 at 5:43 pm

Brent, thanks for sharing and thanks for the work you are doing to advocate for others. Feel free to send me a colleague request. You may also want to check out Al Williamson’s book on landlord led revitalization. Pondering tenant success stories, we’re still hoping to see some big wins, but there are some with challenging situations who have been able to build some positive rental history and a few have been able to ride out financial storms in their lives without losing their residence due to modified payment plans.

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Tim G July 19, 2014 at 3:48 pm

I loved this podcast. The comments above likely cover 80% of the spectrum of opinions on this subject, so I won’t belabor the love/hate of the strategy. I was intrigued to hear how the higher rent more than makes up for the extra damage caused by the tenants. It goes to show that there is money to be made in these areas. On paper, the numbers in super low income areas look quite lucrative, but I think by the time you add up the higher expense costs and the value of time spent managing the properties, it might be a wash.

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Michele Fischer July 19, 2014 at 9:06 pm

Tim G, glad you enjoyed it. When we were starting out, we weren’t sure what to factor in for vacancy and rehabbing the units between tenants. It’s easy to imagine the worst case scenario, but with a bit of hustle we can usually cap the turnover cost at a few thousand or less. Part of it is keeping tabs on the property – driving by looking of signs of extra people or abandonment, verifying their utilities are getting paid, period inspections, etc. It’s just a shame that the rents in this neighborhood could be so much lower to get the same landlord returns if landlords didn’t have to experience these consistent costs.

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Greg Leffel July 22, 2014 at 5:58 pm

Great podcast. Doing something similar in Columbus Ohio. Everyone needs a place to call home! I agree the cash flow is great. We even have Non profit/public agencies helping families get placed in some of the homes– paying deposits and first months rents etc. Imagine homes in the 5-10k range and rehabbing costs between 5-7k….those were the days up to late 2013!!! In hind site should of bought another 15-20 :) Find a piece of the market that works for you and work it! Wishing you much success Michele and Bruce!

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Michele Fischer July 23, 2014 at 8:20 am

Thanks Greg! Great to hear that we aren’t the only ones working this niche.

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Paul July 23, 2014 at 9:37 am

Hey Bruce and Michele,
Great article which has generated a lot of discussion an divergent viewpoints. This also points to the fact that there are tons of entry points and niches in REI around which one can generate value, you just need to find one that is aligned with your personal goals and passions.

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Michele Fischer July 23, 2014 at 7:33 pm

Thanks for weighing in Paul! I love that we can explore “divergent” options on BiggerPockets without needing to be defensive or a complete expert.

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