Best strategy for a hot market for long term rentals?

Question

I'm currently making around 100k annually at my W2 job after tax. I can't currently do short or midterm rentals with my current job but I would be open to it in the future when I have more properties. I have been leaning towards section 8 and adding bedrooms/bathrooms to force appreciation and higher cashflow. I'm wondering if this is a feasible strategy in a hot market like tampa or if anyone has any other suggestions or strategies to better deploy my 100k. Thanks in Advance!

Joseph Stern · Answer

@Bryce Kennebeck hey Bryce, adding bedrooms is always an easy way to force appreciation and cash flow especially if you’re going to rent by the room. With 100k you could buy a couple properties and still have reserves for large capital expenditures. Do you particularly want to do section 8? In tampa there are many layouts that offer the ability to add bedrooms.

Rick Albert · Answer

Using the $100K, can you add an additional unit to your property? One property tax bill, one insurance bill, one gardener, etc. but more cash flow.

Bryce Kennebeck · Answer

I'm not set on section 8 but it seems if you can do a quality remodel and screen your Tennants thourly you can get a long term Tennant with less turnover than a traditional LTR. And if I can remodel it to a 4 or 5 bedroom it will make the house much more desirable due to low supply of 5 bed houses(let alone section 8)and like I said spend a little extra on the bathroom and kitchen and get stainless appliances and you should be able to attract a good LTR tenant. That's my thoughts but I also have yet to purchase any properties in the TB area so I'm still open to whatever will make the numbers work.

Bryce Kennebeck · Answer

Both, I have 100k from this past year saved and I will continue to have 100k each subsequent year.

Matthew Irish-Jones · Answer

@Bryce Kennebeck you are making 100k or

have 100k to spend?

Adding bedrooms is not a great strategy in my opinion.  Any investing strategy can work including adding bedrooms,  but it comes with slicing and dicing up units that increases cash flow but decreases quality living space, and decreases the quality of the tenant pool.

I like B+ class units with tenants that care about their credit score.

The best way to invest in this market is value add opportunities.

Bryce Kennebeck · Answer

Already in the works.😅 Yeah my first place will be with FHA and plan on finding something this winter but after that I'll still have the 100k I'd like to put to work aside from the High Yeild savings account that it's currently in.

Rick Albert · Answer

Any reason not to house hack? Maybe find a duplex where you live in one side and then do your strategy on the other side. This way your money goes farther with less down payment and lower interest rate. It also allows you to experiment with less risk.

Doug Smith · Answer

I hate to say this because I'm a lender, but with the jump in interest rates, it's making it harder to cash-flow a property than it was 18 months ago. In Feb of 2022, I remember locking DSCR loans at 4.875%. Now their up at about 8% (give or take). That massive jump eats into profits and makes it harder for you to positively cash flow. Most investors we work with (including our own investment arm) are tending to put more down to keep cash-flow positive. I'm only going to comment on rates as I've not done Section 8, so I'll let others comment. Best of luck to you.

Best strategy for a hot market for long term rentals?

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