The right way to invest in Section 8 Rentals

0:00So I list my properties on affordable housing.com which is for people on Section 8 and then I also I have really good relationships with all the housing authorities and I still list on Zillow like Zillow probably gets me the best leads still right but all the housing authorities like I bring them lunch I they know me like so a lot of times anytime I have an available unit I go I email it to them and I say hey look or if I know I have a vacancy coming up I email it to every housing authority I work with and say hey get a three bed one bath this price excuse me and you know it's available to the state and a lot of times they'll fill it for me so a lot of times I don't actually have to listed at all so which is great and the housing authorities aren't going to send me bad people because they like working with me so you know if they know someone's getting evicted they're not going to be like hey Mike rent to this person

0:48You know so and I have a really good relationship too with the with the inspectors right so a lot of times when I get somebody applying for my unit I see what Housing Authority they're with and I know who the inspector is so I'll shoot the inspector a text message and say hey if you were me would you rent to this person question mark and I don't know if they're supposed to respond to me or not but they do so you know and they let me know like yes or no you know because these inspectors are in their units at least once a year doing inspections right so they're going to know who is a really good tenant who just has a bad landlord or who is a terrible tenant who you shouldn't rent to so and then my screening process so I I do a few things so I've been lied to basically about everything on a rental application before right so when

1:37I when I go into like and I tell people this way so if you got 10 applications right five of them are going to look good but two of them are good so it's your job to find the two that are good if you find one of the ones that's good you'll have an amazing tenant who lives there forever you can go up on the rent every year they'll you can eat off the floors it'll be great if you don't you might have an issue right but it's but you need to dial in your screening process so how do I do this right so I verify well the first when I talk to them I say if you lie to me about anything on your rental application I won't rent you period it's my policy I've been lied to about everything don't put your brother sister cousin friend from Facebook as your landlord I'm going to find out be honest be truthful if you've gotten evicted before if you have bad credit whatever tell me tell me your side of the story people make mistakes I get it it's all good so

2:26I start with that so hopefully they'll just be honest and up front because the number one thing people lie about in their applications are the landlord references right because someone's getting evicted they're not going to put their landlord on their application so what I do is once I get their application in I go into the property records I see who actually owns a property if it's own in a trust a lot of times the name of the person the trustee will be right there on the County website and doesn't match if it's if it's owned in an LLC I go into the state LLC lookup and I see who owns the LC right and to do those names match up so that's going to weed people out pretty quickly and then when I when I call the landlords I ask them questions so I'll have the property card right in front of me to see when they bought it do they own it in LLC that do they own it in a trust they own their personal name and then I'll if depending on what I get there I'll go into Google Maps and I'll see a street view

3:14is there anything quirky about the property so when I call the landlord I basically ask them I like interview them before I ask them about the tenant yeah and I tell them up front I'm going to do it like look I've been lied to about everything I want to verify you're the actual landlord and a lot of times the landlord would like laugh and appreciate it because I've never been asked that before so you know if if you're talking to a brother a sister a cousin and you say Hey how do you own the property they're going to be like in my name like okay what's your name and they say oh they're gonna hang up on you right yeah so it's a pretty easy way you know and I I put a little bit of weight if they've lived at their existing property for a long time if they've lived somewhere for like eight 10 years and and they're you know moving because the property's for sale and then I look it up on the MLS and it's actually listed for sale I'm like okay like you know I'll put weight on the landlord but

4:03If they've moved every two years like I don't care what the landlord's going to tell me I want to like I'm gonna want to talk to the landlord before that right so I'm gonna put no weight like if they if they move in the last two years I put zero weight on their current landlord because they're gonna lie to me to get them out of their unit yeah but the previous landlord will tell me the truth yeah right yeah and then so I I do that and then I also tell I put right on my application that in order to rent one of my units I have to do a in-person inspection at one of your at where you live currently right so I would say 0.001% of investors do this and it's the most important thing you can possibly do when renting to somebody because if you go to their unit right if they lied about anything on their application this has happened to me before you're gonna find out if there's a guy living with them that they said is

4:51Not living with them because there's men's work boots or there's men's clothes in their closet you know what I mean so like you're going to find that out pretty quickly and also the biggest thing is people say oh I have like a mixed breed dog and you're like okay cool and you go to their house and they have like a kennel full of pimples right it's like okay well you're lying to me and don't Li it you know what I mean it's like no I'm not rening and that's happened to me before I went to somebody's house and I was greeted at the door by a guy who who talked to me for like 10 minutes and just told me how we just got out of jail like all this stuff and then I went inside the house and they had a pitbull in a cage that like looked like it wanted to kill me I'm like all right so I left and I texted her after I was like yeah this isn't going to work you lied to me about multiple things in your applications so you know and I would have rented to her if I didn't do that inperson inspection right right and this lady I just evicted if I did an inperson inspection her unit four years ago I would never

5:40Have rented to her and I wouldn't have gone through an eviction I wouldn't have been dealing with this right now so that's why I said at the beginning if you rent to a bad tenant it's your fault because you were probably lazy with your rent with your application process and the last thing that I asked for is a copy of their most recent utility bill why do I do this because when they move into your unit if they have an an outstanding balance on their utility bill from the last place they lived they're not going to be able to put utilities into their name at your property right so a month two months from now when you're getting your bills in the mail and you're you know taxing your call hey can you switch it over to eversource I'm like yeah I'll do I'm so sorry I'll do it right now like they can't because they can't open another account till the last one's paid off so so I also asked for that they text me a picture of it and those are really like the big three things that I do to to make sure that I get good people yeah wow that's that's really

6:28Great advice and it's it's funny you brought up the in-person inspection cuz the first section 8 tenant that I had this was a long time ago I was I was like there's no way I'm going to get screwed in this situation like I'm doing the most thorough check and I did that I met him over at at his house and did a walk through and and the place was spotless I mean kept it super nice he was a a younger guy had a had a couple of kids single dad and he ended up being an awesome tenant and yeah I sold the place he called me actually a couple years ago was like hey you still the owner I want to buy this place and I was like no sorry the new owner should have told you like five years ago when I sold it but yeah he still thought I was the owner but yeah so that I I think that's great advice and you're right like doing those little extra things

7:17Makes a big difference how how do you do I mean you live down in Florida now I know you're from Massachusetts so how do you maintain that relationship with inspectors how do you manage all the boots on the ground stuff yeah so I actually I have a a woman who used to work at the Housing Authority who's come on to manage all my new units that I've been buying so she's kind of taking that on I still manage 38 of them myself which is extremely easy it's way easier than you'd think but and my brother I was able to take him on as a full-time maintenance manager so he goes around to properties like I'm renovating 16 units right now I'm like turning and renovating so he's kind of managing all that and then I have the property manager you know dealing with the housing authorities doing the showings doing the iners inspections so prior to moving because I was very like Hands-On like I was at the properties every day I

8:05Was walking around I was meeting people doing everything right so I was nervous handing that off because I'm very tight a I like need to be in charge of everything and it's it's been a learning process right I'm trying to teach my brother and the property manager like what I do and how I do it and you know if if my property manager is like hey I got a great tenant I'm like okay we talked to the landlord no okay don't don't tell me you have a great tenant so he talked until you already Tau you're at landord right like oh I have the paperwork ready to go like okay like where's the inperson inspection I haven't seen the video yet oh I have it schedule tomorrow okay cool don't send the paperwork in until I see the video you know so I'm still trying to keep them in check you know and hopes that from down here I can really just be kind of overview making sure things get done and you know and they're kind of taking care of their job so it's been a lot of work doing that I'm not going to lie but I'm

8:54Working less and less on them because they're getting it my brother had done a lot of work in the property to and so it was really cool to be able to take him on and and everything so yeah I see okay that's great and and do you think you could start that way if somebody wanted to start being more automated or do you feel like this is just more of a Hands-On you know Niche that you've got to you got to be more involved yeah I mean if you're going to buy properties that don't because the most time intensive thing honestly is if you're buying a property and you're doing a massive renovation and you have to deal with contractors that you don't know right so you're probably going to have to be on site a lot more at least have somebody there that you trust that can that can deal with that right and once you learn your systems and you learn everything then yeah doing it remotely like if you're going to buy properties

9:43That need to be like painted or like painted floors like like cosmetic stuff like I don't know I've realized how easy it is doing it remotely like you think when you're in it that you can never do it and it really takes you to like move away to realize like oh this isn't like as hard as I thought it would be you know but you're going to need if you're doing it remotely like you need a maintenance person that you trust that you know when you say jump they say how high and you pay like pay them quickly I have a a plumber and electrician now if anything's ever needed they go there immediately I pay them immediately I don't care what they charge me because I want like I don't you know I I made a lot of mistakes when I started out nickel and diamond and watching every penny but now I just want things done correctly in the right way so that they don't break six months from now my tenants will call me again so you know one of the biggest things too is I have Pest Services on every single property so because

10:31My two the two things I got called about the most there's one smoke alarm is going off in the middle of night which is just like I don't I don't know how these smoke alarm companies put out so many faulty smoke detectors it's insane like it's it's nuts so I do all 10e sealed units now so hopefully I don't have a battery issue for 10 years and the other thing was like ants or like they found a mouse like there's there's mice in every property in the United States I don't care where you live like you probably have mice in your house you just don't know it so so I have Pest Services and I put right in their lease it's like if you have any issues with pest bees ants anything you're on a yearly service it cost me $360 a year call them you can call them 365 days a year if you want don't call me call them it's there for you you know and and that limits that call like I haven't got called about pest stuff like

11:20Since I started doing this right so yes it cost me 360 bucks a year but it's a service that tenants love and it's one less phone call I have to get so because honestly managing my 38 units remotely I mean maybe an hour a week so wow that's an awesome it's and it's amazing how much crossover there is from section 8 to Vacation Rentals which you know a lot of people probably wouldn't think is is intuitive but same thing like we initially I I didn't want to pay for Pest Services on every property but now we do it just they come out every quarter and and spray they'll come back as much as we need them because that was a common thing you know if like you said there's going to be bugs there's going to be you know a mouse here and there and then you know the smoke alarm same way like we change

12:08batteries now we do deep cleanings every six months so very similar having a handyman we don't do big gut Renovations remotely so there's yeah there's so much that crosses over whether your whatever strategy you're you're using and I think you can do it remotely but it's it's a total shift in mindset that that you need to come up with and and and be comfortable with and it takes a little getting used to for sure yeah in terms of the extra like administrative and inspections and so you mentioned you know annual inspection what does that look like is it a big lift I mean so you have to it takes a little bit to learn what the inspectors look for right so and once you learn that

12:58And you pass the IAL inspection when tenants move in going on a year-to-year basis it's not it's not that difficult there are some like little things that sometimes I get I'm like oh you gotta be kidding me but at the end of the day like you have somebody in your unit giving you a free inspection every year and if if you want to be a good landlord you should want to fix things when they break right so the paperwork comes in like how it works is once there's some vouchers that actually don't even require an inspection right so it really depends on what type of voucher the your attendant has right so like there in Massachusetts there's mrvp vouchers which is a type of voucher and they don't require inspections right so which is great it's one less thing but I actually kind of like them because I have the inspector in there to to to kind of walk through everything then it gives us an excuse to go in and walk through and kind

13:46Of see how the the unit is but the inspector goes out for most vouchers once a year they walk through everything they look like I was just failed the other day because like I had a light bulb out in a closet I was like okay so you know like so I just texted T I'm like hey can you just put a light bulb in and they like yeah sure no problem I was like all right send me a picture so they send me a picture I for it to the inspector like okay thanks like so it's some dumb stuff but you got to think of the advantages right like I'm able to increase my rents every single year without my tenants leaving by sending a piece of paper right like so if I don't want to go fix a light bulb or you know go you know fix something at the property like you know I shouldn't expect a rent increase you know what I mean so it's you know there's I you go you got to weigh out what's important and the rental increases every year are way more important to me than the

14:35You know the inspections even though they they can be a little bit of a nuisance but you know they get emailed over to me I look at the list I have someone go fix it they come back out and reinspect and you know it's it you know like I said you need a good maintenance person that you can get this list send it to them they go out there they fix it and then you know hopefully they have a good relationship you know if you're doing this remotely hopefully they have a great relationship with the inspector and they can just text them pictures right so they don't have to come back out and reinspect got it okay and you mentioned your property manager and your brother who manages all the maintenance are those your only two team members or do you have other team members as well yeah no that's it wow so you know sometimes I think I'm like am I spending more time managing my manager than

15:23I could just be managing these properties myself but you know I'm kind of looking like all well if want to do this correctly I need a property manager so like just stick with it you know train her and you know keep keep plugging along and it's getting better and better every month but yeah you know there's it's a learning curve for sure yeah so yeah and did she just worked specifically for you or does she have like her own management company that so she started her own management company she has some of my units and then some of another investor I'm friends with she took on some of his so she's trying to actively grow that and you know she gets excited every time I buy new building and so does my brother because you know they're paid based off of a unit count so kind of can all rise up together the more units I buy which is nice so yeah and so how do you determine a new or what are you looking

16:12For for new properties today I know this is a different environment than 10 years ago probably when you started so what what to you is a deal what metrics do you look at that sort of thing I will not buy anything unless a cash FL is a th000 bucks per per unit per month and that's my my it's my floor if it's close to that I'll still probably do it but a thousand bucks a month is what I shoot for so and even in this rate environment I'm getting that so you know and it's because I know Section 8 so well right and I know what housing authorities pay what and I can it's so powerful when you don't have to speculate and you can go into a property and say okay there's a three-bedroom here I know I can get between 3,300 and 3600 depending on what Housing Authority of the tenant comes in in with right so okay I'll run

17:00At 3,300 if it makes sense I'm gonna buy it if I end up getting someone with that auto Housing Authority that's 3600 okay just I'm making $300 more a month great right but I care I care more about finding for 300 bucks a month with you know if you're cash on a, bucks right or you cash with 1,200 or something yeah I care more about having a really good tenant in place that is going to keep my property spotless it isn't going to cause issues that you know I'm buying multi like I just bought an you a townhouse building and I'd rather have a tenant I in there that I know is going to be a good person and get along with the neighbors for a couple hundred less a month knowing I'm not going to have a headache right so yeah