patrick.net

This property was listed on the MLS a couple of days before for exactly 100K more, to the dollar. I'm guessing the craigslist posting might be a typo.

onthefence,

home insurance is way too high, most likely about 1K to insure that house annually.

This would work out really well from a yields perpective, but numbers and real world don’t jive.

From my perspective, the problem is that house will be competing with public housing which are essentially free and no respectable tenants in their right minds would rent that house with their own working cash. On the other hand, even section 8 beneficieries would likely not rent that house as there are far better choices available in the city. (section 8 cannot rent in Marina, Pacheight, but they can find rentals in Sunset, Oceanview, silver terrace, Geneva, etc. easily)

In the end, the landlord will eventually have to deal with the bottom 2% of San Franciscan’s and for almost anyone will be too undesirable to deal with no matter the potential return. (imagine trying to answer phone calls and email and home showing from prospective tenants) That is why places like Stockton, Vallejo, Richmond always outyields the better area. I rather sacrifice a little yield for big upgrade in people.

Thanks for all the feedback.

SF Ace, you make an excellent point about having to compete with Public Housing. I hadn't thought of that. Your scenario seems like the path this house would lead an investor on, dealing with the bottom 2%.

Question on the Section 8:

How does section 8 work exactly, what are angles for a landlord? Why would they want a section 8 tenant? Do they get more rent from them? Is it guaranteed?

Thanks,

SF

For me to be a landlord, I would want at least 50% return on my investment. Just for the hassle and having to deal with tenants. Sure, you have some great renters, but you also have a lot of bad ones as well.

I'm a renter, work in a professional field, do not have wild parties, am single and do not smoke or drink. My landlady one time told me that she hopes I never leave as I am a perfect renter.

She has me over to the house for family events and from time to time has me over for dinner. I almost feel like part of the family.

In return I always pay on time (many times early) and if they have any computer problems, I am always willing to help out. They are a retired couple and not very computer literate.

"How does section 8 work exactly, what are angles for a landlord? Why would they want a section 8 tenant? Do they get more rent from them? Is it guaranteed?"

Section 8 is basically a housing subsidy where the tenant is free to choose from the private sector as opposes to public housing assistance. the subsidy is 70%, so if the home rents for 2,000, HUD pays 1,400 while the section 8 beneficiery picks up the rest. Because this is an extremely lucrative program, the beneficies have motivation to pay the rent than risk losing it (extremely high demand and long waiting list). So from that perspective they can be thought of as quality tenents. From a rental price perspective, the landlord will price it to the maximum allowed by HUD and will not have trouble finding a section 8 renter. (when you see rent prices that seem high, chances are it is marketing to the HUD crowd and will rent for exactly that with no haggle)

Section 8 is pervasive in places like Concord (a meeting of the mind between both the landlord and the tenant). That is why you see 2K plus rents in 200K+ houses (and leaving non-section 8 hosed). Likewise, a section 8 beneficiery will have no luck trying to rent in Lafayette even though the rents are 2500, but the houses are 900K or more. landlords in Lafayette do not want section 8 tenents to ruin their schools, etc even though there is a strong desire for section 8 beneficiery to move there. So from a mechanics perspective, section 8 usually ends up renting in the 250K -400K type homes and never the upscale homes nor the worst homes that are more associated with project homes.

I don't think this would be a good landlord's property. The cashflow would be positive, provided that the tenants even will pay up :) Just not worth the time. You might also risk your safety going to the property to work on it. This is by the far the worst part of town.

I say we just merge both threads. That's why I posted it anyways - for discussion.

Is there some way to promote a commenter Patrick? If so, I'd like to give SF ace a gold star.