Landlording & Rental Properties

Investors Can Both Do Well & Do Good in the World—Here’s How

Expertise: Landlording & Rental Properties
10 Articles Written
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Recently, I was a guest on the BiggerPockets Podcast. One point that resonated with many listeners was my desire to make a positive impact on the lives of my tenants while building wealth as a BRRRR investor. This got me thinking about what our responsibility as real estate investors should be toward making the world a better place.

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Last week, I met a gentleman at a local real estate investors’ meeting. He is a successful syndicator. That is, he puts together partnerships to buy apartment buildings.

This investor and I were trading ideas and experiences, and he began to tell me about a mid-level apartment complex an hour’s drive from the Washington D.C. area. He was thinking of buying it.

Of Course Investors Are in It to Make Money, But at What Cost?

He talked about how the property was under-performing. He said he had a plan to complete some improvements, and after all was said and done, he would raise the average rent from something like $850 per month to around $1,550 per month.

That sounds great, right?

investment-thinking

Related: How Giving Back Can Help You Invest in the Future

Great for him and his partners for certain… but what about the current tenants—the people who occupy the 50 or so units? What happens to them once average rents go up by over 80 percent?

When asked this question, my new investor friend simply shrugged and said, “That’s their problem and not mine. I’m in this to make money.”

Now, I don't mean to make him sound totally callous (or even mean). He's simply—like many investors—looking at the bottom line: his return on investment, cash-on-cash return, net operating income, etc.

Yet it got me thinking…

Can Investors Both Do Good and Do Well Financially?

In my opinion, we can. I have met many investors who, like me, believe that real estate investing is a unique vehicle. It’s unique because it’s not only a great way to make short- and long-term gains, but it also provides a way to help people.

Think about it: Not many other asset classes can do that in as direct a way as real estate investing. Buying stocks and bonds, investing in precious metals, or even funding or starting a business doesn’t have much of a socially conscious component the way real estate investing does.

How Investors Can Lift Up Others

Consider a simple fix and flip. As a flipper, your primary considerations are the purchase price, fix-up costs, holding costs, and ARV (after repair value). All of this is at the very center of the BRRRR principle, right? Buy, rehab, rent, refinance, and repeat.

Related: BiggerPockets Podcast 356: 30+ Rentals (in a Pricy Market) Through BRRRR and Section 8 with Joe Asamoah

Yet even a simple flip without the holding component offers you at least three opportunities to help others:

  1. You help the seller out of a distressed property, relieving them of a burden and putting money in their pocket.
  2. You offer work to contractors—often local guys or small operators who appreciate the opportunity and make a living from your efforts.
  3. You offer a buyer a nicely renovated home and a chance to get into something of higher quality in a good neighborhood—often at a discount.

Take it one step further, as I do. After you fix up the property, you offer it for rent.

I’m a big believer in the Section 8 program—for several reasons. First, it’s pretty much a guaranteed stream of premium rent. Every investor loves that. And second, I get the chance to help lift up a family who otherwise couldn’t afford the type of houses I provide.

These folks are looking for a new start in life, a way to get themselves out of whatever situation has dragged them down in the first place. By renting to them, I’m able to offer these families a quality home that’s safe, comfortable, and in the kind of neighborhood where they and their children can be a part of a community.

Tenant move-in day

Creating a Win-Win Situation

So many Section 8 families live in typical “Section 8 houses”—houses owned by landlords who don’t give a damn about the tenants or the property. From their perspective, it’s about the money—pure and simple. They just want that big government check every month.

Well, I’m sorry, but I think that for me, there is an opportunity to do more than the bare minimum. I think we can try and help these folks.

And I’ll be honest, I’ve profited mightily from it!

The Value of Mutual Respect

You treat people with respect, and they’ll treat you and your property with respect. When you treat voucher holders this way, they tend to be very loyal and stick with you a long, long time.

As every buy and hold investor knows very well, by far the biggest expense and profit killers are turnover and vacancy costs. So, treating these tenants, who never miss a rent payment, like people has significant benefits. You'll enjoy a far more stable stream of residual and long-term profits.

Last but certainly not least, you will do some good in this world, as well.

Do you strive to do well financially while doing good philanthropically? How so?

Share below in the comment section.

Joe Asamoah, MBA, Ph.D., is a seasoned real estate investor. He owns an impressive portfolio of superior homes in the Washington D.C. area. With over 30 years' experience acquiring, renovating, and...
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    Barry H. Investor from Scottsdale, AZ
    Replied 10 months ago
    Nice article explaining the positive benefits (to others) of owning investment real estate. I agree with the majority of what you have presented. In fact, when I sold my "low end" rental props in AZ, where I likewise made it my passion to help and mentor what I liked to refer to as "poor but honest" tenants, I tried to replicate that in another market - Kansas City. I had never ventured into the Section 8 world in AZ because I (generally) have a distaste for anything run by government. Nonetheless, at the encouragement of others and the "guaranteed rent" enticement, I embraced the benefits of Section 8 ownership. Like in AZ, I was committed to buying up a pocket in a neighborhood and turning it around a bit. My average rehab is about $30,000. I am willing to admit my Section 8 experience is limited (5 tenants in 2 years for 3 props in KC MO) - but every single Section 8 tenant I took on displayed an overwhelming sense of entitlement, lack of cooperation (for repairs/inspections etc) and in less than a year left my properties in shambles - an average of $12,000 rehab for less than 1 year of tenancy. As we know, if/when I put in another Section 8 tenant AFTER I fix up the destruction, it requires another inspection from Section 8, requiring more (or different) maintenance items or upgrades, and depending on the inspector you get - you could fix AB and C and the follow up inspector decides XY and Z is more important and also needs to be changed. Perhaps this is a local market issue, but in KC, the Section 8 Program is not the least bit Landlord friendly. Tenants know all the angles and find their way into the next place with a clean voucher after they have destroyed your place. I swore off Section 8 in KC and have found I can actually get even better rent in the open market because my rehabs are much better than average. My only real risk is a tenant losing a job and not being able to find suitable replacement employment. As long as that tenant is communicating and keeping my place clean, I am likely to work with them. With Section 8 tenants, the rent is guaranteed, but in my experience, so is an attitude of entitlement and no care for your property since the tenant has no skin in the game. In short, what you have presented is anecdotally true - I am sure, but if a new investor wants to try to get that easy gubment $$, I would try it with one prop/tenant first, and see how it goes for a year, with regular (quarterly) inspections, because if that tenant wants to stay another year and trashes your place, Section 8 will make you clean up all their trash with the rent $$$ you made for the previous year with their annual inspection.
    Gina Cardarella Rental Property Investor from Los Angeles, CA
    Replied 9 months ago
    Hi this is interesting that I happened upon your article cause I was just thinking about investing in a 16 unit f-class building in KC MO Which is was my home town 25 years ago so I am familiar with some of the lower income areas one being my old neighborhood and like the owner who wrote a positive note on sec. 8 I totally believe you in what happens and that what scares me -- I blame the section 8 welfare offices for not taking more responsibility for teaching these bad tenants there are consequences such as a walk thur when leaving with section 8 and the landlord as well move-in inspection that being said I really like these units but Iam so afraid of purchasing this apartment but I would love to give back and yet be sucessful as well any words of wisdom....."run" : )
    Nathan G. Real Estate Broker from Cody, WY
    Replied 10 months ago
    I'm not going to say your process can't work but I am going to argue that it's unlikely to work for most Landlords. I hear it all the time: "If I keep my rent low, it helps people out. They'll appreciate the home, take care of it like it's their own, and want to stay longer." In my experience, that seems to rarely be the case. The more likely scenario is that you rent a $1,000 property for $800 and you'll get an $800 tenant treating your investment like an $800 rental. And they're only likely to stay longer if they can continue taking advantage of your good nature. If you drop the rent 20%, you're not stopping someone from being on the streets; you're just helping them get into something nicer than what they could otherwise afford. Personally, I would rather rent for full price and then spend my profits helping people truly in need. Examples include pregnancy resource centers, abused women and children shelters, villages without clean water in Africa, sick and disabled in Haiti, children without schools in Mexico or India, and even foster children in America.
    David Lohrey from Shreveport, Louisiana
    Replied 10 months ago
    Like the article and the approach. Other ideas to assist your tenants (and be win-win) would be to beef up the insulation, weatherstripping, etc. Or improve the property landscaping to improve the appearance of the entire neighborhood.
    Jo Aioda
    Replied 10 months ago
    Great article, Joseph. This is very inspiring. Why not do good and make money at the same time. For Section 8 landlords out there - do you find that you can charge the HUD based FMR (fair market rents) for your section 8 properties or is there more to it than that?
    Deanna Opgenort Rental Property Investor from San Diego, CA
    Replied 9 months ago
    Section 8 - nope. I'm already renting to low-income tenants. I'm providing good-condition housing at below-market rent. The local voucher-holders I've interviewed always came off as entitled &/or sketchy "I'm moving because the carpet is dirty and the landlord just won't replace it. I'm entitled to new carpet every 5 years aren't I?" "I know my voucher won't cover the full rent amount, but don't worry --- I have a side job and I always just pay extra and don't tell Section 8" "Is this house on lots of land? My girlfriend & I just don't get along well with neighbors. And is there room for a garden? We really like to grow all our own...vegetables ".
    Vincent Staverosky New to Real Estate from Warner Robins, GA
    Replied 9 months ago
    Per his telling of his experience, Dr Joe invests in a niche part of the Section 8 market. What's more, he has a uniquely personable and well-developed system for placing tenants (arguably the most important part of the whole process). The way in which he's made those two aspects work together is quite remarkable and I was definitely inspired, but I expect his approach is very rare to find and is truly the key to his success. The podcast is an excellent listen, so I highly recommend it to really understand where he's coming from and why it works so well for him!