Rental Unit - Great Way to Earn a Living

by Mirania 27, November 2012 16:59

To state the obvious, it is always better to own a rental unit that generates regular income than owning a property that creates heavy expenses. According to an interesting article published on Forbes.com (Click here for the full story from August 8th A 2012) earning an income from your rental units can prove to be a better financial strategy. 

Owning a rental unit has the following advantages:

  • It helps you earn a regular income (rent);
  •  It helps you obtain a positive cash flow ; and
  • You will be in profit even after paying all the expenses mentioned above.

Renting out your property can prove to be a profitable venture. There are countless landlords in Houston and Dallas area who have a flourishing business by renting out their assets. If you are looking forward to entering the business of renting property in Houston or Dallas area, you should master certain essential skills. The following tips and tricks will guide you to enter into the business of rental property. An ideal landlord possesses the following characteristics

  • Do you Deal with People well?: Being a landlord requires you to deal with vendors, tenants, governments, HOA, etc.
  • Do you know the right people? To be a successful real estate investor and landlord, you will need to build trusted relationship with real estate agents, contractors, banks, etc.
  • Do you have time to deal with a potential 24/7 commitment? You cannot expect that all repair emergencies will happen during business hours or when your not on vacation. If you work a job, then you will also feel times where those commitments will pull you in different directions.
  • Are you willing to build for a long term? The work you put in maybe only for $100 to $200 a month profit above your expenses (mortgage payment, management fees, taxes, repairs,etc), so you have to accept that your building a long term profit stream.

When you begin to answer those questions posed by Forbes, you may find yourself with answers like these:

  • Working with rental agents and property managers can reduce your cost of advertising and cost with failure to screen for tenants. For example, many property managers in the Houston and Dallas area have extensive marketing programs, can develop a better idea of market rent, and perform extensive screening that a typical investor may not be able to perform.
  • It might become impossible for you to manage several rental units concurrently. A successful landlord prefers hiring a property management company to take care of the rental units on regular basis. Similarly, if you have a huge rental asset, you should look for a property management company who can handle all the household problems effectively.  Property managers can remove the issues related with rent collection, dealing with emergency repairs, book keeping, keeping up with changes in landlord and tenant law, and more.
  •  You must have sufficient savings to buy properties. The best thing about purchasing a property with cash is that you can do away with the burden of mortgage payments.  Moreover, housing loans have also made it easier for an individual to become a landlord. However, if you have sufficient savings to invest in your rental property business, it will generate more profit.

Being a landlord is a viable way to earn a living for the right kind of person who has the financial resources, long term vision, risk tolerance, and ability to build the right team around them.

The Facts of Life- Houston Section 8 is swamped with applicants

by jay.raman@ashokalion.com 2, May 2011 15:53

Today, I read a article about the Galveston County Housing Authority being swamped with applicants, and it made me realize how difficult the position is for the Houston Housing Authority as well. In the past 6 months, the Houston Housing authority has accepted thousands of applicants off their wait list. This make sense that the Housing Authority would try to help tenants find housing assistance, especially in light of this economy; as it is their mission.  With such a good, noble mission; you can forget how difficult it can be for rental property owners and real estate investors who work with the program.   The Houston Housing Authority now has delays that go beyond its 60 to 90 day "normal" processing period for landlords to be paid their check from Section 8 ("Section 8" is a catch all term for the county and city rental assistance program for low income individuals). Therefore with all the good that the program is doing, there are a lot of bad things that the owners are dealing with.

For example, two of our Houston owners who accepted Housing tenants for their vacant properties in November and December of 2010 have only received contracts in April of 2011 after having passed the inspection in December and January of 2011 for the two properties that I am referring to. This means that after marketing the property for tenants in the Houston area and accepting a tenant that the there was a delay of 3 to 4 months to even be approved for payment with payment coming in May 2011. What makes this delay of payment worse is that in one of the owner's cases that the effective date of the rental contracts was that it was made as of April, 2011. This means that the owner lost two to three months of rent keeping the property vacant while the Housing Authority dealt with their internal processing issues. 

These kinds of delays must be dealt with for Houston area rental owners to want to take on the additional burdens placed on them by accepting housing authority standards.  These burdens include:

  • Lengthy Paperwork: The Houston Housing Authority request copies of deeds, w-9, management agreeements, prefilled out leases signed by tenant, voucher, and housing authority packets.
  • Requirements for Tenant Appliances to be at the property: If you rent the property without a refridgerator, it must still be there for the inspection.
  • Inspectors inspection criteria not being uniform: Different inspectors in the Housing Authority program will pick out minute issues to "fail" a property requring a 2 week delay for reinspecting a property.
  • Delays in intial payment: Traditionally, the Housing authority process can take up to 60 to 90 days to process and get payment out. However with this influx of new applicants (some tenants have told our property management firm that there are as many as 6000 new voucher issued in past 6 months).

Also, real estate agents are not educated on this process, so it makes the process longer for them to deal with leasing these properties that have accepted the Section 8 Rental Housing Assistance Program tenants. For example, our property management firm will not pay any real estate agent's commission till the owner is paid by the Housing Authority.  This policy is in place to insure that the final amount is agreed upon, and the effective date is appropriate. Additionally, the Housing authority warns agents, landlords, and property management firms that tenants could potentially be reviewed for eligibility during this submission of their rental packet to the Housing authority for review.  If the prospective tenant is found to be inelligible then the rental owner will be forced to find another prospective tenant.

These delays and risk towards getting payment is why our firm created this policy of waiting till the payment is made by the Housing Authority prior to releasing any commission payment for real estate agents. However, many real estate agents are not used to these kinds of delays and this can cause confusion and resentment. This is why we hope agents read our "Agent Remarks" that our listing agents put which explains that the receipt of a check by the owner is a prerequisite for a Section 8 tenant to be considered approved and for commission to be paid out. 

We hope that real estate agents and property owners understand the risk of dealing with the Section 8 Housing Assistance program. However, there are some benefits to the program:

  • Consistent rental payments
  • Tenants could potentially stay longer as they have to come out of pocket for deposits
  • Housing Authority does provide periodic review of a applicants background

As the TV show the "Facts of Life" would sing in their intro song,

"You Take the Good, but you Take the bad. You Take Them Both, and There You Have the Facts of Life."