How Do Landlords Make Money In Absolute War Zones?
Most Popular Reply
Patti RobertsonBusiness Member
Property Manager · Virginia Beach, VA · Member since 2016 · 2k+ posts · 2k+ votesI've never knocked on doors to collect rent and never will. I do use paynearme though. Set up an account with them and your tenants can pay their rent in cash at any 7-11 in the country. We've even figured out a way to put "received with reservation" on the receipts printed there. If we need to include that on a tenant's receipts so we don't lose possession, we just add it to their second address line. Their address prints on the receipt they are given at the 7-11 register. The service is free to the landlord and they charge the tenant $3.99. Since I don't take cash, these tenants were buying money orders anyways. Almost every one of my rentals is walking distance to a 7-11. This is probably the case in most parts of the country.
39 Replies
- 9yPatti RobertsonBusiness MemberProperty Manager · Virginia Beach, VA · Member since 2016 · 2k+ posts · 2k+ votes
You screen and pray your fellow landlords will take tenants to court when they do damage and don't pay their rent to act as a warning to the rest of us.
- Real Estate Broker · Chicago, IL · Member since 2015 · 1k+ posts · 2k+ votes9y
@Jeff G. Flexibility. Electronic payments 3 days beforehand don't work in these areas. You need to be flexible to collect rent any way it is presented, work around their weekly issues, and decide on what level of property you are renting. That goes for non-gov't subsidized tenants.
- Rental Property Investor · Chicago, IL · Member since 2014 · 132 posts · 74 votes9yIt goes back to the good old tenant screening process. Even though your tenant pool may be government subsidized, there are plenty of excellent tenants who are on section 8 for many different reasons who would be great tenants as long as you as the landlord hold up your end of the deal. Keep the property as nice as you would any other property and you may be surprised with the respect that tenants will give in return. Many section 8 tenants can be 10+ year tenants if treated well and if vetted correctly on the front end. Patience is the key here, might be 50 applications and interviews you go through before finding a viable tenant but it'll be worth it.
Originally posted by @Matthew Olszak:
@Jeff G. Flexibility. Electronic payments 3 days beforehand don't work in these areas. You need to be flexible to collect rent any way it is presented, work around their weekly issues, and decide on what level of property you are renting. That goes for non-gov't subsidized tenants.
Hmm... I would have expected that electronic payments would be helpful, especially if you engineer it so that your rent payment comes out on their payday.
In war zones when a tenant punches a hole in the wall they either live with it or you hire a contractor to fix it and charge the tenant. Once tenants realise damage comes out of their pocket they will beat some scenes into their children's underdeveloped brains or move to a landlord that does not charge them for damage.
- 9yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
@Jeff G. majority of tenants in war zones do not have checking accounts or do you have the ability to take money from their pay.. this is why you see so many check cashing stores in those areas.. Money orders and cash are what U can expect for rent.
One of my clients in Alameda CA which is not really a war zone but he was a slumlord no question.. when you drove around town the worst looking buildings were all his and he had a plethora of them.. but anyway he collected rent on the 15th and 1st and the tenants were instructed to have it pinned to the front door.. the front doors looked like Dart boards.. No rent pinned then he pinned the 3 day notice. it was one or the other.
you will find many land lords in these areas need to knock doors to collect rent.. of course section 8 is electronic..
- 9yPatti RobertsonBusiness MemberProperty Manager · Virginia Beach, VA · Member since 2016 · 2k+ posts · 2k+ votes
I've never knocked on doors to collect rent and never will. I do use paynearme though. Set up an account with them and your tenants can pay their rent in cash at any 7-11 in the country. We've even figured out a way to put "received with reservation" on the receipts printed there. If we need to include that on a tenant's receipts so we don't lose possession, we just add it to their second address line. Their address prints on the receipt they are given at the 7-11 register. The service is free to the landlord and they charge the tenant $3.99. Since I don't take cash, these tenants were buying money orders anyways. Almost every one of my rentals is walking distance to a 7-11. This is probably the case in most parts of the country.
@Patti Robertson, I don't know that I would have thought of PayNearMe. That's an interesting idea.
I don't 100% follow your statement:
We've even figured out a way to put "received with reservation" on the receipts printed there.
Can you explain that a little better? The only thing I can think that you might mean is that you're not allowing a partial payment to fully satisfy delinquent rent and you don't want their receipt to be construed that way in housing court. That's just a guess... am I on the right track?
- 9yPatti RobertsonBusiness MemberProperty Manager · Virginia Beach, VA · Member since 2016 · 2k+ posts · 2k+ votes
@Jeff G. - I'm not familiar with the laws in CT, but I would imagine we are talking about a similar thing. In VA if a tenant breaks the lease we go to to court for an Unlawful Detainer hearing. If the Judge sides with the landlord it will result in the landlord receiving a judgment, possession of the property, or both. Possession just means that for the next year we have the right to file another form to instruction the Sherriff to evict without going back to court. It's a pretty powerful position to be in and often times if we are given possession it is enough to scare the tenant back into line and we don't have to evict. In order to keep that right of possession, we have to notify the tenant that we are retraining our right to possession each time they make a payment. We generally do this by writing "received with reservation" on their receipt. I use Appfolio and there is no option with that software to create a permanant note on the tenant's receipts. I was always paranoid that someone in my office would forget to write it and we would lose possession. With a tenant getting receipts from a 3rd party it was an even bigger problem. By putting the words on the second address line we solved the problem. No matter where the tenant makes a payment, if we have possession, they will be given a receipt that confirms that.
Paynearme.com has a lot of options you can program in that address the landlord tenant laws in each state. You can hard code the amount of the paymetns you will allow a tenant to make or allow them to make any payment. In VA we can all them to make any payment they want because it doesn't affect our ability to evict or get future judgments.
- Property Manager · Windsor Locks, CT · Member since 2016 · 1k+ posts · 1k+ votes9y
Originally posted by @Jeff G.:
@Patti Robertson, I don't know that I would have thought of PayNearMe. That's an interesting idea.
I don't 100% follow your statement:
We've even figured out a way to put "received with reservation" on the receipts printed there.
Can you explain that a little better? The only thing I can think that you might mean is that you're not allowing a partial payment to fully satisfy delinquent rent and you don't want their receipt to be construed that way in housing court. That's just a guess... am I on the right track?
Last I checked in Connecticut, any acceptance of rent (even if it is partial) effectively resets the clock on eviction. Therefor if a tenant asks me to take half the rent this week and half the rent next week, I always say no. Simply put "next week" may never come for them. No thank you!
- 9yLevi T.Pro MemberRental Property Investor · Tucson AZ / Nice FR / Washington DC · Member since 2016 · 1k+ posts · 1k+ votes
Originally posted by @Patti Robertson:
@Jeff G. - I'm not familiar with the laws in CT, but I would imagine we are talking about a similar thing. In VA if a tenant breaks the lease we go to to court for an Unlawful Detainer hearing. If the Judge sides with the landlord it will result in the landlord receiving a judgment, possession of the property, or both. Possession just means that for the next year we have the right to file another form to instruction the Sherriff to evict without going back to court. It's a pretty powerful position to be in and often times if we are given possession it is enough to scare the tenant back into line and we don't have to evict. In order to keep that right of possession, we have to notify the tenant that we are retraining our right to possession each time they make a payment. We generally do this by writing "received with reservation" on their receipt. I use Appfolio and there is no option with that software to create a permanant note on the tenant's receipts. I was always paranoid that someone in my office would forget to write it and we would lose possession. With a tenant getting receipts from a 3rd party it was an even bigger problem. By putting the words on the second address line we solved the problem. No matter where the tenant makes a payment, if we have possession, they will be given a receipt that confirms that.
Paynearme.com has a lot of options you can program in that address the landlord tenant laws in each state. You can hard code the amount of the paymetns you will allow a tenant to make or allow them to make any payment. In VA we can all them to make any payment they want because it doesn't affect our ability to evict or get future judgments.
Out attornies stuck in some wording in our late payment notice to cover the payment with reservation notice, which is also our certified notice for court. No need to stick it in a payment receipt, etc. We use Appfolio's services as well, even offer CC payment.
- Real Estate Agent · Southington, CT · Member since 2008 · 5k+ posts · 3k+ votes9y
@Jeff G. Not speaking for other states, but in the state we live in it is very hard to make money with these kinds of properties. No good property managers operate in areas like this and if by chance you get one willing to they are going to make it worth their time with the fees they charge you. Try to manage these on your own? It's pretty much a job.
There are plenty of solid C or B areas in CT to invest where the actual real life returns you will make will be more than the actual real life returns you will get in a real bad area. Paper returns and projections are just that. Paper returns. There is no way to predict or project what type of situations that class of tenant will put you through.
- I have a duplex in a semi-war zone. Tenant retention isn't the best but prices are less. My PM does a really good screening potential tenants. Big cash flow. Purchase price- $63,000 Renovation- $30,000 ($15,000/unit) GOI - $1775/month
Hey @Michael Noto, long time no speak.
Yeah, CT has a lot of good places to invest in if you're careful. The biggest problem is managing the ridiculous tax burden. I've passed on many "deals" because they weren't deals after taxes were factored in.
@Alex Olmo, do you mind sharing what state that semi-war zone property is in?
- Investor · Oakland, CA · Member since 2016 · 89 posts · 50 votes9y
Lets be clear these are areas the police will still go right? If so its not a war zoje but an area with "significant police activity"
As was previously stated retention can be a problem your tenant vacancy percentages might trend toward 15%. You might need to offer hazard pay to vendors who work on the property. Some of the vendors might have had a bad experience with the area and don't go there anymore out of fear for their tools / equipment. People will live in all kinds of things in all kinds of areas.
As previously mentioned tenant screening or rather the tenant screening of the PM company is the part that matters. Some of these kind of properties can require "strong management". You want to partner with someone that way when of you want to trade the property the PM can be offered to a new buyer and their contribution can be sold as a property feature.
@Jason Monroe I mean areas where the police will arrive, eventually... perhaps several hours after you've called them. Or, perhaps they won't go after dark.
CT is amazing. Rent is due on the 1st, give them until the 15th, then start the legal process. It's extremely fast in CT. Never chase rent. Set the expectation on the day of move in with a through lease. My companies lease is about 35 pages, it's insane but what you need to protect yourself. Take photos or a video tour of the place before they move in. Have them sign a move in condition form stating the property has no damages prior to them moving in. In CT you can ask for 2 month's rent as the security deposit, if they don't have it, that's a red flag. Use your gut feelings when screening, and always use a screening site like BP before they move in. My tenant Vemo's me, I love it.
@Jeff G. totally get it, for example Bridgeport, CT has a ton of cheap stuff but property taxes are insane. Try sampling the tools drop down menu and the calculators there. If you you don't upgrade to pro you can only use each one 5 times. It's worth the upgrade to pro, you can put all the numbers in for each listing you think is a home run, or it may turn out to be a dud. Buying cheap was always my motto, but since being on bigger pockets I've learned so much about all the other factors, 2% rule, cash flow # to see if it's worth it, vacancy loss, etc.
- Investor · Orange County, CA · Member since 2015 · 2k+ posts · 3k+ votes9y
I do not invest in war zones, so not my area of expertise ... however, a couple of business models that I have heard of working better than others are:
1)Flip them as turnkey rentals to other investors
2)Flip them with seller financing to owner occupants and carry the paper
3)Buy the paper in the form of a discounted note
Note that in all cases, the optimal strategy is to NOT hold the actual property under your direct ownership for very long, and get a BIG discount at purchase to compensate you as the investor for putting money into a riskier asset class. This makes sense to me because there is typically no appreciation and big headaches associated with holing properties directly in these types of neighborhoods.
@David Faulkner I love your suggestions, especially turnkey rentals to other investors. So many people I know want to get started in investing but don't know where to start. If you can use the BP calculators and show a good return on paper, do all the work, you make a profit, and you also help someone acquire an income property.
- Investor · Huntsville, AL · Member since 2012 · 50 posts · 50 votes9y
It is definitely a challenge to make money in a C/D neighborhood. My properties are located in such areas. The weird thing about it, is that you can make the rentals look presentable, and safe, and take pics of it before they move in. After most of them move out , you will see holes in the wall, doors snatched off of the hinges, ceiling fan blades broke off, smoke detectors removed, light bulbs and covers removed, window panes broken, then they want to call you a slumlord. Maybe these tenants are just pissed off at their position/station in life? Rent will generally be late, but after the 7th of the month, in my state, definitely start the eviction process. If you wait until the 15th, and they know it, you may not get paid until the 20th or the 25th, they will drag out the rent payment period, and offer every excuse imaginable.
So, with all of that said, can a landlord make money in these neighborhoods? Yes, you have to realize that low income individuals need a place to live also, and not all low income people are bad or destructive. Instead of trying to make our properties "perfect", we have decided to make them "pretty good". They may not have perfect paint, or granite counter tops, but they fit in with the majority of the houses in the community. One last piece of advice for these areas, is to be flexible, but firm. Let them know that when you say that you are going to do something ( repair, eviction, etc. ) that you will follow through on your word.
Originally posted by @Jay Hinrichs:
@Jeff G. majority of tenants in war zones do not have checking accounts or do you have the ability to take money from their pay.. this is why you see so many check cashing stores in those areas.. Money orders and cash are what U can expect for rent.
One of my clients in Alameda CA which is not really a war zone but he was a slumlord no question.. when you drove around town the worst looking buildings were all his and he had a plethora of them.. but anyway he collected rent on the 15th and 1st and the tenants were instructed to have it pinned to the front door.. the front doors looked like Dart boards.. No rent pinned then he pinned the 3 day notice. it was one or the other.
you will find many land lords in these areas need to knock doors to collect rent.. of course section 8 is electronic..
I lived in Alameda for quite some time.... you should see it now, it's crazy how much it's changed.
- Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes9y
@Jeff G. a war zone is different than a bad neighborhood. I think some people are confusing the two. In a war zone landlords do the bare minimum and rent is collected in cash or some other method that takes cash to refill. Screening standards are much lower in these areas and in many cases "cash in hand" is about all a landlord will do. Much of the damage is never repaired or bare minimum. Windows get boarded up if they are broken and not essential to safety. Spray paint on a wall gets covered only in that area, versus nicer properties where you may paint the entire wall. Holes in walls get a fast and crappy repair job. You would never want to do significant rehab in a war zone. It would be a total waste of money because the tenants would destroy it. If the neighborhood is being revitalized, then maybe you would do rehab, but then we are not talking about a war zone anymore.
Join the conversationCreate a free account to reply, vote on answers and follow this thread.