Registered Sex Offenders - Avoid The Area?

Question

Many of the properties I've been looking at - in lower income type areas - have a few registered sex offenders on that same street.  Is this an immediate no?  Would you still invest in that area?

I would feel pretty terrible renting to a family knowing there's a registered sex offender on that particular street.  Are registered sex offenders a protected class?  Can you refuse to rent to them specifically as part of their background check coming back as unsatisfactory?

Michele Fischer · Answer

Housing Authorities have some leeway in how much they pay for their Section 8 vouchers so to get an exact amount it's best to talk to your local Housing Authority. Some pay more, some pay less. With HUD making drastic cuts the last few years in how Housing Authorities are paid most now pay less.

The best place to start though is finding out what the FMR (Fair Market Rent) is in your area. That is the number that HUD uses when funding Housing Authorities. You can see Kentucky's here. Or go to the HUD website and search for FMR.

As far as sex offenders, our family recently got the Life360 app.  One of the filters is showing when you are close to the homes of registered sex offenders, and we are finding a ton even in the best neighborhoods.  I know two sex offenders and they are paying dearly for poor decisions.  I would also say that people or families moving into a low income area generally have made their own poor decisions and cannot afford to live in a nicer neighborhood.

As a low income landlord you will need to decide which crimes are and aren't acceptable to you, because you will be seeing plenty of criminal activity form applicants.  When applicants ask us about the neighborhood, we encourage them to research the area and give them some tools on how to do that.  If they point blank ask a specific question we honestly answer.  Sometimes I want to say "you don't belong int his neighborhood", but that would be discriminatory.

As far as the duplex, we get similar rent on one of our low income duplexes, and it cost us $75K all in, so your price and initial upgrade investment looks good.

Steve Babiak · Answer

Although @George C. makes a good point about many sex offenders remaining undiscovered, the situation you are looking at is something I take a different view of. When lots of offenders live in an area, I check whether they are in rentals or whether they own. If rentals, it indicates that the landlord didn't care, and when landlords around you don't care you have an area that at some point will decline.

George C. · Answer

When 1 out of 4 girls & 1 out of 6 boys are sexually assaulted by their 18th birthday, there are a TON more sex offenders out there than what state websites show, because most are never caught & convicted. Yes, you don't have to rent to known offenders (I wouldn't), but we're kidding ourselves when we think that, that's all we have to worry about, the people on those websites. It's disheartening to think, there's a pretty good chance you know, are friends with or even have as family an offender...They are all over.

I've had only a couple of applicants ask about, "any sex offenders in the area?", I tell them to check the websites, I also add in the above paragraph...and a watch your kids around everyone.

Mark S. · Answer

I just looked up some info on Section 8 and it appears that this particular area pays over $600/month for a 2BR.  So, I guess my income estimates should be increased from $500/unit to over $600/unit if I plan to offer to Section 8.  Boom!

Michael B. · Answer

Going back to the original question: a sex offender in the neighborhood isn't a problem to me buying. It falls under the broad category of problems that aren't mine.

If somebody has a problem living in the same neighborhood they need to do their own research. But the reality is there are lots of people in low income areas with criminal histories. Some crimes are violent, some sexual, some financial. It's up to the tenant to find a neighborhood with the mix of amenities, rent levels, and miscreants they want. It's not my place to put my judgement concerning the neighborhood over theirs.

Wayne Brooks · Answer

@Mark S. I have to agree with @Kyle Hipp .  No offense, but personally I would have let to go long ago.  Low ball offers, unrealistic expectations,etc. looking at a Total gross commission of $1300 or so, maybe $800 after direct fees, less annual fees, monthly expenses, time, gas, etc.....doesn't make a lot of sense for the agent.   Many agents will seem enthusiastic/helpful at first, when they don't prequalify You, then lose enthusiasm as they see the slim odds, and small paycheck possible.

Kyle Hipp · Answer

In my opinion you are trying to turn your realtor into a mentor. As an investor, you really shouldn't lean on a realtor to hold your hand through the process. If that is what you want then pay them for this service as opposed to expecting this service from a person who is a realtor. I would much rather have a realtor let me look at the house on my own. I don't careif the realtor talks great politics or poetry, I am there to purchase an investment property not have a great conversation. I would much rather have my wife be looking at the house with me instead of chatting up the realtor as well.

It sounds like your current realtor is a saint to me. He has been working with an "investor" for months showing you properties all over the extended area at late hours and weekends and has not gotten a nickle out of it. Now months into the process you get upset that he didn't drop his personal plans to show you a property that you again probably won't buy anyway.  He went out of his way to provide you with multiple options to get you access to the residence. If I were in your shoes I would step back and reassess my goals going forward. If you decide not to move forward with this realtor, write him a check for $1,000 for all his time an insights otherwise find a property and get it closed with him...

Just my thoughts....

Benjamin Timmins · Answer

Id move on to the new guy. This is business, not about friendship or loyalty. The goal is to find property and invest. If a realtor isn't accomplishing this for you to the the best of his abilities, then he should see it coming anyways.

Mark S. · Answer

Well, I decided to take a look at the property in the area that I alluded to in my original post regarding registered sex offenders.  This will be a lengthy post; I apologize in advance.  I'm hoping to cover three issues in this post and will try to categorize each separately: deal analysis, Section 8, and my realtor (possibly getting a new one).

==================DEAL ANALYSISDuplex - 2 BR/ 2 BA units.  Built 1999.  Each unit about 600 sq ft.  Each unit also has partially finished basement (dry wall is up, needs paint, etc.), offering a huge amount of storage space.  Also thinking might be able to add an additional BR here (one of the rooms in basement has window and area with door that could be a closet (although it has pipes running through it, so hopefully no leaks!).

Purchase Price (ideally): $46,000INCOME: $1,000/mo ($500/unit)EXPENSES Vacancy Loss (@8% or 1mo/yr): $80/moCap-Ex (@10%): $100/moProp Mgmt (@10%): $100/moOngoing Repairs (@10%): $100/moProp Taxes: $60/moInsurance (guesstimate, will get quote soon): $75/moTOTAL EXPENSES: $515FINANCING: 20% down, 30 year fixed, 4.70% interest rate.  Principal & Interest: $190/moINCOME - EXPENSES - FINANCING = MONTHLY CASHFLOW = $295/mo.  Might be slightly off due to rounding.  REHAB/REPAIR COSTS (to get rent-ready)These numbers can be wildly off.  I have no clue how much stuff costs and am by no means a rehabber or anything close.  Both units need work; here are the larger items:

Appliances (Unit A needs range + fridge; Unit B needs fridge): $1,500Floors (flooring needed in living area, hallway, bedrooms - probably use vinyl): $3,000Windows (need to be re-sealed) + New Doors (front screen door, doors in basement to yard, etc.): $1,500Paint (most rooms need paint): $1,000Roof Shingles: (may or may not need to do; roof missing a few shingles near gutter): $300Dryer Duct (missing a piece that connects from laundry room to outside, quick fix): $100Hot Water Heaters (electric) x 2: $2,000 (which is probably way high, but trying to be conservative).TOTAL ESTIMATED REHAB BUDGET (which is probably sky-high): $9,400ESTIMATED CLOSING COSTS: $5,000 all-inPROJECTED CASH-ON-CASH RETURNS: 14.91%=====================

SECTION 8 PROGRAM

I really need to educate myself on the Section 8 program.  This area appears to be mostly Section 8.  I think I would have difficulty getting a non-Section 8 tenant in place after I fix the place up due to the area.  The general location is great.  It's right off a major highway, there are big stores like Wal-Mart, Lowe's, Kroger, etc., within 1.5 miles of it.  There are a couple of factories nearby - very blue collar.  I'm told just around the corner there is quite a bit of drug activity and police are often on patrol in the area.  Believe it or not I felt pretty safe there (much more so than in other areas I've looked at).  Plenty of kids and families living nearby, too.  Neighbors have lawn chairs, swings, and all kinds of shit all over their front lawns and back yards/porches, which you might expect in a low-income area.

My Section 8 Question: How do I find out how much the vouchers are paying in the area?  Is this public information?  Also, will it differ for different tenants?  I've read the many arguments on BP about accepting Section 8 vs. not, but I feel like if I make an offer and purchase this property, accepting Section 8 may be my only option.

========================My Realtor (possibly firing him)Lately, I've been feeling extremely frustrated with my realtor.  On a previous post in the Deal Analysis section, one BP member suggested I fire him for talking back to me (I think he was giving me some push back regarding my offer on another property).

The last house he "showed" me, he arrived on time and we did walk-through, but then all of a sudden he needed to go and asked if I would just shut the door behind me on the way out and make sure it locks.  I will admit that I'm very thorough and like to make lists of things I'll need to fix, record a video so that I can look back and remember things later (as I've been looking at more and more properties lately), etc.  I was a little shocked he just "left me there."

This duplex that I mentioned in this post is another example.  He had some personal things going on and essentially gave me two options: go myself and he'd give me the code to enter, or he could ask another agent to show it to me.  I wasn't comfortable with the first option, so he had someone else meet me there.  The funny thing is that I really liked this other agent a lot.  Not only did he show up on time, with paperwork prepared with information on the property, pointing out both good AND BAD aspects of the property, he was educated on the area and shared his knowledge, he was extremely personable and was able to carry on a conversation with my significant other while I went in and took my usual videos/made my lists/etc.  At no point did I feel hurried or rushed.  He will receive a referral fee if I buy the place, but I'm not so sure "my" realtor earned his keep on this one.  My realtor was too busy to show the place to me because he was selling some personal belongings, including an automobile.  He had the audacity, while the other agent was showing me the property, to text me and tell me that, "he made the right choice" because he sold his vehicle.  I can understand being excited about selling a vehicle, but to text your client and basically tell them that and basically imply that you, the client, are much less important than the vehicle sale is just rude.  THEN, he calls me to see how it went and ASKED ME what THE OTHER AGENT said about rents in the area!  Isn't that YOUR job to know that information?!  The worst part is that he rushes me off the phone right when I start to get excited and tell him more about the condition of the property, and I'm almost positive he said that he had to go because he was showing a property in town and he just arrived.   I could have heard incorrectly, but I'm about 85% sure this is what he said.

My significant other thinks I should absolutely work with the agent that showed us this property and to get rid of my guy.  In his defense, he has taken a lot of his time to show me other places over the past couple of months, even on weekends and properties that are geographically far apart (45 mins+), but lately I just feel like he doesn't even want to deal with me.  It's very frustrating.  I've called him out on it before and he basically just tells me that he's willing to show me whatever I want to see, but that he thinks my expectations might be a bit unreasonable sometimes in terms of rates of return, repairs/reserves, etc.

The twist: the agent that showed us this property is (mildly) considering going to work for this other guy.  I don't want to jeopardize his job prospects if he chooses to make a change.  The other twist: my current realtor is also with a property management company that I am planning to use (although, if it's this much trouble to show me a property, what happens when my tenant calls them for something urgent?  how quickly will they respond?).

Sorry for the rant, but thoughts are much appreciated.  I'm trying to figure out if I should give my current guy the sale as though I owe him something (and to somehow account for all the times he was good about showing me properties in the beginning), or if I should say it's all about what he's done for me lately (nothing much) and dump him and move on to the new guy.

Registered Sex Offenders - Avoid The Area?

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