All Forum Posts by: Michael Smythe

@Troy W. Hudson really an investors challenge is determining if how much cashflow they want vs cash.

The inherited house demonstrates this:

1) You didn't mention the mortgage PITI, but assuming it's low, you should cashflow well and even more if you have tenants pay the mortgage off over time.

2) You could also do a cashout refinance, up to an amount that allows the rent to comfortably cover, and use the cash for further investments or personal use. Theoretically, you could do a cashout refi every x years as value & rent appreciation allow.

If you want to really focus on cashflow, then you may want to sell the inherited property and re-invest the proceeds in properties with higher ROIs and potential. Property Class will have an impact on this, see below:

When investing in areas they don’t really know, investors should research the different property Class submarkets. If you apply Class A assumptions to a Class B or C purchase, your expectations won’t be met and it may be a financial disaster.

Here’s our OPINION for the Metro Detroit market (always verify each area for yourself!) that we’ve learned in our 24 years, managing almost 700 doors across the Metro Detroit area, including almost 100 S8 leases.:

Class A Properties:
Cashflow vs Appreciation: Typically, 3-5 years for positive cashflow, but you get highest relative rent & value appreciation.
Vacancy Est: Historically 10%, 5% the more recent norm.
Tenant Pool: Majority will have FICO scores of 680+, zero evictions in last 7 years.

Class B Properties:
Cashflow vs Appreciation: Typically, decent amount of relative rent & value appreciation.
Vacancy Est: Historically 10%, 5% should be applied only if proper research done to support.
Tenant Pool: Majority will have FICO scores of 620-680, some blemishes, but should have no evictions in last 5 years

Class C Properties:
Cashflow vs Appreciation: Typically, high cashflow and at the lower end of relative rent & value appreciation. Can try to reposition to Class B, but neighborhood may impede these efforts.
Vacancy Est: Historically 10%, but 15-20% should be used to also cover tenant nonpayment, eviction costs & damages.
Tenant Pool: majority will have FICO scores of 560-620, many blemishes, but should have no evictions in last 2 years. Verifying last 2 years of rental history very important! Also, focus on 2 years of job/income stability.

Class D Properties:
Cashflow vs Appreciation: Typically, all cashflow with zero or negative relative rent & value appreciation
Vacancy Est: 20%+ should be used to cover nonpayment, evictions & damages.
Tenant Pool: majority will have FICO scores under 560, little to no good tradelines, lots of collections & chargeoffs, recent evictions. Verifying last 2 years of rental history and income extremely important to find the “best of the worst”.

Make sure you understand the Class of properties you are looking at and the corresponding results to expect.

What else can we assist you with?

@Angela Steinhart not many PMCs want to babysit a boarding house. Lots of problems between the tenants that they want the PMC to solve.

@Yacine Bouabba to prevail in Small Claims, you usually need to personally serve the defendant.

Do you know where they live now?

Really, this is your pitch?

How are you different from your competitors?

@Nick Hulme you should try to approach this from a "worse-case scenario".

What happens if either the sister dies or you & your wife?

If it's not in writing in can get very messy with heirs and such.

@Christian Ike here's a suggestion - do NOT post in all caps!

Very annoying "shouting" at us.

Also, you need to ask more specific questions...

@Akono Hite if you sell, the money is tax free up to $250k single person. No requirements to purchase.

Not understanding your math - generating only $1900 renting out by room, but $2800 for whole house? Usually, rent-by-room generates higher gross rental income than whole-house rental.

You could also look into STR on the house and time-block when you want to use it.

Maybe he's getting tired of posting on Only Fans? :P

@Michael Hayes you should discuss this with the S8 office handling the inspection.

Most HAP contracts require a landlord to supply the fridge & stove, NOT the tenant.

Violations of the HAP contract may lead to rent abatements and even banning of the landlord from S8 program (usually only with that specific Housing Agency).

get there if you can!