Low Income Housing Investments

Document Sample
Low Income Housing Investments Powered By Docstoc
					by: Steve Gillman

Low income housing providers get a bad rap. Be ready to be called a slumlord if you invest in it.
Much of what people call slumlording though, is simply providing reasonable housing for those
with low incomes. It is of benefit to the renter AND the landlord.

Why Do People Rent Ugly Homes?

Not-so-nice places are rented because they are affordable. When a house needs paint, has old
rusty hinges on the doors, and a dirt driveway, it costs less to buy, and therefore can be profitably
rented for less. In fact, anything major that the landlord does to improve it will result in higher
rents, and possibly drive the renter away.

This often happens due to local regulation. When my own town enacted its first rental
regulations, the fifteen pages of new rules required many landlords to spend money to upgrade
their apartments and other rental properties. They included many non-safety-related
requirements, like a minimum of windows, to allow natural lighting, bedroom square- footage
requirements, and no peeling paint or cracked plaster.

Regulations like these are done in the name of low income renters, but the result is always the
same: higher rent. Combined with the regulations against mobiles homes, these laws force low
income families to move further away from town and jobs. I mention all this to let you know that
if you offer an ugly, but safe and affordable rental, you are providing a real service.

Why Low Income Housing Investments?

When an average two bedroom house in a small town costs $130,000 and rents for $800, an old
mobile home on a lot will probably cost $45,000 or less and rent for $500. The house costs
almost three times as much, but the rent you get isn't even doubled. In other words, the mobile
gives you MORE CASH FLOW. That is why old houses, run-down apartments, and mobile
homes (on land) are such good investments.

Maybe you think you'll have more risk and management problems with low income housing.
Well, you're right. Small repairs come up more often, and rent will be late more often, on
average. But this is why you deserve a higher rate of return. I wouldn't recommend investing in
low income housing if you didn't get a higher rate of return.

Let them call you a slumlord. Just treat your renters well, and make your places safe. Do these
things, and you can enjoy a good return on your investment in low income housing.

This article was posted on December 11, 2005