SEC-8 - INNER CITY LANDLords/Investors - VIEW this
Rental Property Investor · Phila, PA · Member since 2018 · 553 posts · 118 votes
SEC-8 - INNER CITY LANDLords/Investors - VIEW this
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Investor · Akron, OH · Member since 2016 · 2k+ posts · 4k+ votes
7yLow income rentals require different expectations. In higher end rentals your "stick" is the ability to trash a credit score if the tenant fails to play by the rules; this stick doesn't work with low income rentals. Almost all applicants will already have crappy credit-- even the kids just starting out (because all to often their parents opened utility accounts in the kids name because they had a heat emergency and they needed to get around their own bad credit). In low income, your stick is the security deposit... never ever let someone in without a cash security deposit. It's very difficult for most low income tenants to get up both rent and the security deposit at the same time. So when you want someone out, an offer of an on the spot security refund for a nice clean place is a carrot they will almost always take. (I require clean ovens too). In low income housing the carrot is more important than the stick: rent clean, nice looking units. Keep advion and contrac blox available at all times. Have a handyman, an hvac guy, and a plumbing company and actually fix problems (and you'll be providing vastly better service than most landlords renting low income housing.) Most importantly, have a flexible late policy that punishes failure to communicate and rewards tenants that are trying to pay even if they are late. (never let anyone get behind a whole month).
I'm currently trying honestrenter.com instead of a credit report. The first tenant I picked with that tool, so far seems to be a winner. I wait for a strong work history and adequate income.
46 Replies
- Real Estate Broker · Northeast PA · Member since 2017 · 2k+ posts · 2k+ votes7y
These are some interesting questions.
First, we don't 'find' qualified tenants, we screen applicants--it becomes a numbers game.
We have our list of required documents and criteria of approval IN WRITING and provided along with our application to all interested parties. We set the bar high, with caveats, like for example, a credit score will not be the only determining factor in approving the application.
The question about urban/inner city rentals is touchy.
There are some wonderful urban markets that are becoming trendy and clean; others can be war zones. A common sense rule: don't expect an 'A' tenant to occupy a 'D' unit. If you want a war zone, better off to wholesale or flip, UNLESS you have some special insider knowledge that 'the train is coming here soon'.
Our best and most trusted rule for locating good rentals: school district. You want stable, long term tenants in your rentals that will show the best long term property appreciation? Look at the schools.
We have found over the last 10+ years of managing hundreds of doors, in A to D areas, the majority of problems, including maintenance/repair and rent collection/problem tenants are to be found in the C/D properties. No judgements here, just the plain facts.
Hope this helps you.
- 7yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
@Marc Winter I think the hardest lesson's learned in the ( I want to be a landlord for financial freedom mindset)
is really understanding the realities of a tenant base and that these assets price for risk.
there is a reason reits or institutional money chases 3 caps. A properties..
and what we find on the lower end 10 % returns or better.. is that beginners think they need that return not 3% 3% is for dummies.. only to find out 10% puts you in C and D and the inevitable heavy management interaction to keep these things from imploding. Inner city urban core is a niche that if you can do it will work fine.. but you cant think for a minute that the effort to keep them churning along is the same as investing in A class or strong B. and that is where
beginning investors just don't know what they don't know until they are living it.
- Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes7y
Originally posted by @Cameron Riley:
Just finishing my open house with another list of prospective tenants I had received from Zillow... I have a few questions for my fellow city investors...
- What has helped you find the most quality/qualified tenants?
- How High have you set the criteria for applying If ANY criteria was set?
- Do you enjoy the urban markets/inner city?
The hood is wild man. It's freakin savage. I do love it though. You've got to manage with an iron fist but at the same time let things slide. You can't take any excuses when it comes to rent collections it's pay or get out even if you're sick. However you've gotta let stuff slide when the tenants are paying the rent.
Like these steps below. I've seen new investors want to evict people over things like this. Can't do it man. Some of these people live like animals, it is what it is. Gotta keep collecting the rent.
- Member since 2016 · 13k+ posts · 12k+ votes7y
You must choose your business market wisely based on you own personality a skill set. No property is easy depending on variables. Set your standards based on your chosen market and stick to them without exception. Without fail making exceptions will come back to bite you.
If you can operate like James the C/D class is ideal. If you want to treat tenants like "partners" in your business better target B+ or better. C+/B I find to be the easiest market and allows you to choose the cream of the crop simply by setting above average screening standards. That class has a great deal of above average applicants that choose to be renters. 750 + credit scores are common. Staying away from SFHs is also a better idea since they generally cost too much to produce positive cash flow.
- Rental Property Investor · Erie, PA · Member since 2018 · 6k+ posts · 9k+ votes7y
You have to be as savage as the people you rent to . The best skill you can have is to bite your tongue and just collect the rent . many times I went to my places and seen stuff that peeved me off but I had to keep my cool and remember they don’t live like I live they don’t think like I think this is a business and I gotta remember that . As long as your getting paid and they aren’t destroying the place then ya gotta chill . I put my old nut hugger Levi’s on with a greasy old shirt and go right up on the porch and sit with them when I collect rent while they sit around and smoke . You need to learn to make money in the mess to survive
- Investor · Akron, OH · Member since 2016 · 2k+ posts · 4k+ votes7y
Low income rentals require different expectations. In higher end rentals your "stick" is the ability to trash a credit score if the tenant fails to play by the rules; this stick doesn't work with low income rentals. Almost all applicants will already have crappy credit-- even the kids just starting out (because all to often their parents opened utility accounts in the kids name because they had a heat emergency and they needed to get around their own bad credit). In low income, your stick is the security deposit... never ever let someone in without a cash security deposit. It's very difficult for most low income tenants to get up both rent and the security deposit at the same time. So when you want someone out, an offer of an on the spot security refund for a nice clean place is a carrot they will almost always take. (I require clean ovens too). In low income housing the carrot is more important than the stick: rent clean, nice looking units. Keep advion and contrac blox available at all times. Have a handyman, an hvac guy, and a plumbing company and actually fix problems (and you'll be providing vastly better service than most landlords renting low income housing.) Most importantly, have a flexible late policy that punishes failure to communicate and rewards tenants that are trying to pay even if they are late. (never let anyone get behind a whole month).
I'm currently trying honestrenter.com instead of a credit report. The first tenant I picked with that tool, so far seems to be a winner. I wait for a strong work history and adequate income.
- Rental Property Investor · Phila, PA · Member since 2018 · 553 posts · 118 votes7y
@Jill F.
I am beyond grateful for your comment. I was ridiculed for my application process on my other thread...
I asked
“ how do I reject people when they apply “
I reject about 15 people per home I acquire... all pay a 20.00 app fee..
How do you do your application process?
I NEVER check credit.. because if I did, it would be over for me. No one would rent my homes out
- Investor · Akron, OH · Member since 2016 · 2k+ posts · 4k+ votes7y
Unless we are about to rehab a unit when the tenant moves out, I try to have a new tenant lined up so that I don't lose anymore than 2 days rent. What I do is when I first get a move out notice, I advertise the unit through our property managment software, Buildium on zillow, apartments.com and also on craigslist and FB marketplace. I put in the add that in order to minimize disruptions to current tenants we will only be showing the unit to qualified applicants and I waive the application fee to encourage applications. I require a DL and paycheck stubs upload as part of my application. For local applicants that meet my income requirements , I do criminal & civil court record searches in nearby cities/counties and in all cities/counties listed on the application. I search for the applicant on social media. I do google searches and see if they come up listed in phone books for the address they gave me. I call the applicants that appear to be qualified, When I talk to the applicant, I ask about their current living situation, why they are moving, what they do for a living, if they have pets, will their be other adult occupants, I tell them about the special features of the unit that will be for rent and let them know that our units are no smoking; for otherwise qualified applicants, I will CONSIDER applications with no more than one eviction filing or non-violent felony with an explanation of the circumstances of the case.
I arrange tours of the property and talk to tenants about their move in requirements and ability to pay upfront costs.
We offer applicants that are interested in moving forward after the showing the option of taking the honestrenter.com quiz or authorizing the transunion smartmove credit/background report. For non local tenants the transunion report is required. I usually only make one offer at a time so that I don't pay for background reports on tenants that won't get an offer.
When a unit is offered to an applicant, our offer letter requires 1/2 month's rent as a NON-REFUNDABLE reservation fee OR a signed lease security deposit, and first month's rent within 72 hours or we offer to the next applicant in line.
- Rental Property Investor · Phila, PA · Member since 2018 · 553 posts · 118 votes7y
@Josh Dane
Exactly!
They were telling me to set high criteria for applicants
- Investor · Wichita, KS · Member since 2017 · 584 posts · 813 votes7y
@Cameron Riley I don’t set a "high criteria" for my Section 8 tenants because the government is really the tenant, this is a person to keep happy so the government keeps paying me. If they can get utilities in their name, check. If they are on on ssi or ssdi, check (There is a chance this can be a lifelong tenant and not just someone down on their luck). One thing I look for is to see they have been living in the area of my property, that way I know they won’t freak out the first time neighbors are yelling at each other in their lawn or a zombie like person is walking down their street. My goal is to buy the whole area and keep kicking the scum out and moving grandma in (by grandma I really just mean a good person). Property values are largely dependent on rental rates in these areas, I want to see those rental rates high. I’m not too terribly picky on the tenant, I want all the tenants on Section 8 one day. The game for me is Section 8 vs non Section 8 (hopefully the good non section 8 landlords will see the progress in the area).
My criteria for buying is to try and stay on the edge of the hood, near a highway, University, business district, etc. Try to focus in one area. Don’t buy in the worst hood, buy a few above the worst so the scum has to move to a lesser hood. Corner lot maybe, less neighbors if possible. Buying right smack in the middle of the hood is less disarable, though if the price is ridiculously low... I did start out inner city investing with Section 8, it was a good move. Glad I didn’t waste my time chasing little cash flow in areas I couldn’t afford. I don’t think you need to be hood too to interact with your tenant. Be cool and be you. Produce a quality product with a nice feature or two (new counter tops and tiled bathroom for instance) and you may have a long term tenant. Good luck.
- Investor · Wichita, KS · Member since 2017 · 584 posts · 813 votes7y
Put your unit on Gosection8.com. that is honestly the only place I've ever had to put it. You will get several inquiries in the first week if your area is anything like mine. If your phone or email isn't blowing up like you want or think it would, don't worry, my local office approves groups of like 700 at a time several times a year, when that happens you are flooded. Tell everyone you will show the unit on this upcoming Saturday 11am-3pm (or a time that is convenient for you). See how many people show to your scheduled appointment and hand them all applications. Pick who you like. If they have a voucher, they are qualified with Section 8. You can do your internal checking. I don't know that I would charge Section 8 tenants $20 to fill out an application, at least I don't. I don't run their credit. I might swing by to pick up their voucher after I have "selected" them to see how well their current home is kept at a glance. I personally do do this with sfh. I have a duplex in this area too but my true niche focus is on sfh, a deal is a deal though, so I'm open. I like it when my tenants aren't on top of each other. I think the mecca of what a Section 8 tenant would want to rent is a sfh, so I feel I am more desirable than apartment complexes; those folks are potentially tenants for me too when they are looking for something better.
- Developer · Atlanta and Detroit · Member since 2018 · 601 posts · 821 votes7y
Originally posted by @James Wise:
Originally posted by @Cameron Riley:
Just finishing my open house with another list of prospective tenants I had received from Zillow... I have a few questions for my fellow city investors...
- What has helped you find the most quality/qualified tenants?
- How High have you set the criteria for applying If ANY criteria was set?
- Do you enjoy the urban markets/inner city?
The hood is wild man. It's freakin savage. I do love it though. You've got to manage with an iron fist but at the same time let things slide. You can't take any excuses when it comes to rent collections it's pay or get out even if you're sick. However you've gotta let stuff slide when the tenants are paying the rent.
Like these steps below. I've seen new investors want to evict people over things like this. Can't do it man. Some of these people live like animals, it is what it is. Gotta keep collecting the rent.
Wow... would heavy grade carpet work..... just joking;)
- 7yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Originally posted by @Dennis M.:
You have to be as savage as the people you rent to . The best skill you can have is to bite your tongue and just collect the rent . many times I went to my places and seen stuff that peeved me off but I had to keep my cool and remember they don’t live like I live they don’t think like I think this is a business and I gotta remember that . As long as your getting paid and they aren’t destroying the place then ya gotta chill . I put my old nut hugger Levi’s on with a greasy old shirt and go right up on the porch and sit with them when I collect rent while they sit around and smoke . You need to learn to make money in the mess to survive
I sold a trophy Ranch in Northern CA to a big landlord in Alameda CA before the values blew up.. but he had about 175 doors which were mainly older homes that had been converted from SFR to 2 flats to 4 flats.. and at the time large military at the Alameda Navel air station.
he owned them all free and clear.. So even in the early 90s rent was right at 1k a month in that area.. When you drove around town you could always identify a Jawad property.. it was the worse one on the street.. But what I found amazing was his rent collection style..
1st and 15th.. he drove to whatever homes rent was due on the first.. and rent was to be pinned to the front door. the front doors looked like they were dart boards.. if the rent was not there he then pinned a 3 day notice.. and then by about lunch time he was done and we went and had lunch.. Alameda island is small and you can get around quickly.. those properties today are worth a boat load .. and i know in 92 he paid just under 1 million in cash for the ranch i brokered to him.. Odd duck.. but tough as nails.
- Rental Property Investor · Upstate, NY · Member since 2012 · 3k+ posts · 3k+ votes7y
@James Wise your steps & I raise you the ones we inherited. These were inside the foyer of a unit in a multi we bought. Evicted rehabbed & upgraded the tenant demographics.
- Rental Property Investor · Clifton, NJ · Member since 2019 · 24 posts · 14 votes7y
@Jill F. That was the same strategy I used with my tenants and it worked flawlessly. I also lowered the rent by $25 if the rent was paid before the 1st of each month. No matter what ALL WAYS screen and verify the paperwork of a prospective tenant.
- Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes7y
Originally posted by @Pat L.:
@James Wise your steps & I raise you the ones we inherited. These were inside the foyer of a unit in a multi we bought. Evicted rehabbed & upgraded the tenant demographics.
I raise you a couple tenants who decided to help us out & paint their own kitchen cabinets so we didn't need to do it at the next turnover & deduct it from their deposit.
- Rental Property Investor · Upstate, NY · Member since 2012 · 3k+ posts · 3k+ votes7y
Painted cabinets that look like a crime scene are nothing my guys wanted to literally hacksaw a 240v double poled breaker in half to get 2 more 110v circuits in the panel. But I don't think they were thinking clearly at the time...
These were the same guys that complained about a roof leak & then put a cardboard Amazon box underneath it to collect the drips.
I often wonder where they are now & do they vote???
- Rental Property Investor · Phila, PA · Member since 2018 · 553 posts · 118 votes7y
@Marc Winter
You maintain high standards in the ghettos?
- Rental Property Investor · Phila, PA · Member since 2018 · 553 posts · 118 votes7y
@James Wise
How many do you have in the city?
Yes, gotta move very smart and collected when dealing w city homes
- Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes7y
Originally posted by @Cameron Riley:
@James Wise
How many do you have in the city?
Yes, gotta move very smart and collected when dealing w city homes
We've got a very large portfolio ($50M+) in the Cleveland market so have dealt with 1,000's in Cleveland itself.
- Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes7y
Originally posted by @Pat L.:
Painted cabinets that look like a crime scene are nothing my guys wanted to literally hacksaw a 240v double poled breaker in half to get 2 more 110v circuits in the panel. But I don't think they were thinking clearly at the time...
These were the same guys that complained about a roof leak & then put a cardboard Amazon box underneath it to collect the drips.
I often wonder where they are now & do they vote???
Sweet bowl dude 🚬🌿 I had some tenants leave their's in one of those hanging plants when they left the house....
Apparently it still had some nugs burning 🔥
Your move.
- Investor · Chicago, IL · Member since 2009 · 1k+ posts · 1k+ votes7y
Good advice from @Jay Hinrichs
I have a sizeable amount in the lower income urban areas. On the positive, I have made them work. But here are my struggles: Getting tenants to pay. Section 8 tenants have provided more financial stability for these type of properties. Second, wear and tear on the properties is way more. But I've designed units that have elements that are more durable.
There are tougher investments out there. Imagine owning hotels where you lose your tenants every night. Constant turnover and intense management and operations. Or student housing where kids party a lot and they leave after one year.
I actually dislike upscale housing because the tenants require a level of annoying service that I can't provide.
Observing real estate success stories over the last 20 years, big gains were usually not made in the lower end areas. Although some of them have transformed with gentrification.
- Rental Property Investor · Phila, PA · Member since 2018 · 553 posts · 118 votes7y
@Jonathan R.
I love this advice !
I try to buy near the highways and state buildings! Also, the edges!
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