Epic Real Estate Investing - How to Get Guaranteed Rent (Despite the Nation's Economy) | 1065

Episode Date: June 30, 2020

2019 stats show that 43 million Americans rented their homes and many of them pay rents with subsidized programs. Hence, in today’s episode, Mercedes, The Turnkey Girl will show you how to get guaranteed rents through subsidized programs despite the current nation’s economy! Tune in and find out more! Learn more about your ad choices. Visit megaphone.fm/adchoices

This is Terrio Media. So you want to be a real estate investor, but you don't want to do the work. If there were only a way where someone else could do it for you, now there is. Tune in here each and every Tuesday on the Epic Real Estate Investing Show for Turnkey Tuesdays with your host, Mercedes-Torres. Hello and welcome, welcome to Turnkey Tuesdays brought to you by Epic Real Estate Investing. My name is Mercedes Torres, the turnkey girl, and I am lucky enough to be partners in crime with Mr. Matt Terrio, the guy who created the epic real estate empire.

I help busy professionals create passive income through real estate investing so they can retire even sooner. So we created this show to share tips, advice, and real life real estate experiences so that you too can create passive income in your world. That said, if this is the first time that you are listening to us, welcome. And if this is not your first time here, welcome back. So there is no secret that the nation is in the midst of a global pandemic that I personally don't think will be over any time in the immediate future.

And while there are so many theories of what the economy is doing and what the real estate market is going to be doing within the next couple of months, you know, everyone has their own theories. I mean, some people think that the market will be a V-curb, where the longer that we are in this pandemic, the longer it goes on, the less likely this is going to occur. Or the U-curbs. The argument there is if the disease doesn't get under control, you know, you can throw out the short-term thinking of the V-curb, where problems will emerge, and that's where they get the U-curve. And then there's the L-curve. So, you know, this will contribute when there will be an excess of debt and there will be liquidity problems. I mean, I personally think the market is

going to be like a Nike swish, and so many of my colleagues feel the same way. But despite all those theories, there is one constant during this whole situation. And that constant is that regardless of what the market does, people need housing. A roof over your head or housing, it's a necessity. It's an essential. In fact, in 2019, 43 million Americans rents. their homes. They rented the place that they live. That's almost 40% of America. That's not counting the homeowners. I'm just counting the renters. 40% of America rents the home that they live in. So if that's the case, why would you not want to own an asset that 40% of Americans need? Here's the best part of it. That 40% of Americans, they pay rent to live in these homes.

And many Americans pay rents with subsidized program. And I'm going to tell you all about how to get guaranteed rents through subsidized programs right after a word from our sponsor, Ridge Lending Group, our exclusive lender. Have you been searching for a lender that is knowledgeable, experience, and will actually talk with you about your financial situation? Well, we found them for you. Ridge Lending Group is Epic Real Estate's exclusive lender. And not only do we recommend rich lending groups to our listeners and our clients,

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Go to Rich Lending Group.com. Click on the Get Started tab and tell them I sent you, will you? you will get individualized financial and lending education with epic love. So let's get back into it. I want you to consider the big picture. Why are you interested in real estate investing? And why is passive income important to you? Now, many people have their own reasoning, their own logic as to why they wanted to jump into real estate investing. or why they're interested in passive income. Some people are looking to get out of the rat race.

Some people just flat out hate their jobs, and they want to do anything that will get them out of that nine to five. Other people, they love their careers. They love their jobs, but they are doing this to help pay for their children's college tuition. And many of the individuals that are interested in passive income, they're merely looking at it as a tax shelter. They look at the tax deductions that they can reap from owning rental properties.

Now, all those are great reasons. But there's a reason why you're listening to this podcast. And you may have heard me say this time and time again, but people that save money, well, they end up losing money. Those are the people that have a real. difficult time creating wealth because by saving money, they lose wealth. And then there's the people that invest in stocks. Well, they do maintain their wealth, but they have no control over their asset. I mean, they can choose to put money into the stock market and take it out, but they don't

have any control over what the actual stock does. For example, if they have stock in stock, Starbucks or they have stock in Nike, for example. They can't tell the owner of Starbucks what to do with a particular product. So while they maintain their wealth, it's a gamble. They may lose and they may win just like everything else, I'm sure. However, they have no control over their asset and they do maintain somewhat on a constant their wealth. But real estate investors, real estate investors actually build wealth. There are so many avenues where a real estate investor can benefit financially. There's appreciation. Then there's depreciation. So the tax deductions by itself is a good reason to dive into real estate investing. And then there's that equity thing. Now, I don't bank on equity whatsoever,

but history does repeat itself and more times than not, a property will acquire equity over time. Some properties acquire equity instantly. Other properties will acquire equity over a 10-year period. Needless to say, nobody has a crystal ball to determine when and how much equity a property is going to gain. But if we do look at what history does, equity tends to transpire more times than not. But I want you to consider something really important that people forget to consider. And that's the fact that rentals, there is a huge demand for rentals, and at the moment, there is a shortage of rentals. Now, during the mortgage crash in 2007, 2008, 2009, there was an abundance of rentals. But that's not the case today.

Today, there aren't enough rentals. So if you want to buy an asset, an asset that 40% of Americans are going to need, wouldn't it be great if you can guarantee that that asset is going to pay you every single month? I know, I know you're saying, yeah, yeah, Mercedes, nothing is guaranteed in life. And how can you guarantee that a tenant will pay you rent? Tricky question, I know. And the answer is, well, you can't. There is something called Section 8. I'm sure you've heard of Section 8 housing before.

And for those of you that are a bit newer to real estate investing, Section 8 is subsidized housing and subsidized by the government or HUD, the housing urban development. And it provides rental housing assistance to low-income housing. Now, a very important fact that is seldom shared about Section 8 is that 68% of the total rental assistance in the United States goes to seniors, children, and those individuals with disabilities. So, I'm sure you've heard of Section 8, and quite honestly, Section 8 has a god-awful bad rap. It's got a negative connotation to it for the most part. But like everything, Section 8 and

subsidized housing has its pros and cons. And I will say this, not all renters are created equal. So on this episode, I'm going to dive into the pros and cons so that you can make an assessment to help determine if you would like to consider a Section 8 recipient for your rental. Oh, and here's something that many people don't tell you. So let's just say you have a rental property, for example, and you put the property up for rent. If a Section 8 tenant is interested in renting your property, you get to decide if you prefer a Section A tenant, or if you prefer market rate tenant, or if you prefer to rent with a smoker or a non-smoker,

or a dog, or no dog, it's entirely up to you. But one of the reasons that I share about you having to decide whether you can accept a section A tenant, and I'll tell you what happened to me just recently, I have a three-bedroom, two-bath house in Birmingham, Alabama, cutest little cottage home ever. And I was approached by a Section 8 family that wanted to rent my house. Now, whenever you rent to a Section 8 recipient, Section 8 will send out a inspector to ensure that your property is safe and up to code. Well, I got declined for this Section 8 family because one of the children was in a wheelchair, and the wheelchair would not fit into my hallway.

Now, the house was built originally, I believe, in 1951. So although the house itself was 1,300 square feet, the hallways, although they were up to city code, they were not up to Section 8 code. So it was really interesting that although I wanted to rent to this particular individual, I couldn't and vice versa. Sometimes you will be asked to make adjustments to your house and sometimes it's impossible, especially if it's an older home. So just so you know, a Section 8 recipient can choose your home and your home also gets to

choose the Section 8 tenant if that makes any sense. But having said all that, I'm going to dive into the pros and cons. and I'm going to start with the cons first, simply because, as I've shared, Section 8 has a negative connotation all the way around. And I often hear, well, Section 8 recipients destroy the properties or they don't care about the property because it's free. But as I shared before, not all tenants are created equal. And I will say that there is a process to be able to qualify for a Section 8 voucher, and it doesn't always come for free. Now, from my own personal experience, and I'll share this story because it's a story that

is near and dear to my heart because it still exists. I bought this property in St. Louis, Missouri, and I bought this property about eight and a half years ago, almost nine years ago. And I have a Section 8 tenant living in this property. The Section 8 tenant pays rent every third of the month, like clockwork, subsidized housing covers 90% of it, and my tenant pays 10% of the rents. And in eight years, this tenant has called in for maintenance only three times. In eight years. Now, we do conduct yearly inspections on the property. Section 8 requires us to do that every other year, but we do conduct them. And it's not up to me to determine whether the resident is living up to code because Section 8 does that. But this tenant has been there for almost nine years. She pays rent on time and I've heard from her three times. Now,

I hope I do not lose my Seption 8 tenant. I absolutely love her. But when she moves out, and let's just say she moves out in two years, she would have been reciting in my property for 10 years. And it's only natural that when she moves out, I'm probably going to have to do a lot of work to the property because I will need to paint the property. I will likely have to change the carpets.

I may have to do the floors, and I may have to change the fixtures in the property just because she's been there for so long. So naturally, my rent ready is going to be a little bit more expensive than if the tenant only lived there for a year because she's been there for 10 years. So it's only common sense to think that, yes, when the tenant left, I wouldn't say the property is going to be trashed, But I will go as far to say that there's going to be more necessary repairs to make the property rent ready because she's been there for eight years plus. Now, hopefully my tenant doesn't leave, but that would be something to consider when you have a Section 8 tenant. Now, that would be a con, in my opinion, that's a pro, but that would be a con. Also, Section 8 dictates how many people can live in a certain square footage.

And depending on how many children they have, they decide how many children are allowed per bedroom. So each state is a little bit different. But I often have tenants have to leave or break leases to move into another property that's bigger because mom is pregnant, is having another baby, and the baby is a different sex of the children that she already has. So Section 8 gets to decide, you know, how the subsidized housing gets presented to you. But that's something to keep in mind that oftentimes if they do have to break the lease, Section 8 is really good about allowing them to complete the lease or preparing you for what's to come eight months down.

the line if the Section 8 recipient is pregnant. Now, here are the pros, and here's one of my favorite pros about Section 8. Not only do you get your rent check every, I get it every third of the month, generally speaking, but it's anywhere from the first through the fifth of the month. So that automatically gets sent to property management, and I absolutely love that. But for a Section 8 tenant to be a recipient of a voucher, they have to go through an extensive screening process to even qualify for subsidized housing. And then once they obtain that voucher, that recipient has to maintain it.

Now, not all Section 8 is 100% subsidized. So in most of my personal cases, the tenant has to pay a portion, and Section 8 decides what that portion is based on financial needs of the family. So subsidized housing will cover anywhere from 50, 60, 70, 80, sometimes even 90%, and then the tenant is responsible for the other percentage to make it whole. Now, something that personally happened during this whole coronavirus, this pandemic, several of my Section 8 recipients that had part-time jobs, they lost their job. So they couldn't make that difference. They couldn't pay their portion of the rent. But they went back to Section 8 and they said, I lost my job. Here's my layoff notice. And Section 8 made up the difference. Now, it took a little bit of time.

It took about 60 days to be made whole. But guess what? I was made whole. And now that slowly but surely, the nation is opening up, my tenants are starting to get their jobs again and are starting to be made whole. And are starting to go back into that portion of where they have to pay a portion of their rent as well. So needless to say, although there was a lapse in me receiving rent for about two and a half months, I got it. Now, how's that for guaranteed rents? So don't let the stereotype fool you. Don't allow the fact that Section 8 has such a bad rap.

Don't let that make the decision for you. Ask your property managers for input about, you know, your property. And ask your property manager about their personal experiences with Section 8 tenants that they rent to because they're going to be able to share a lot more since they are there every single day tending to all of the tenants that they have. You know, there's good, there's bad, and there's ugly. But more times than not, with Section 8, it's mostly all good. And I speak from personal experience.

Now, how great is it to get your rents every first, third, fifth of the month without you even having to check on it? well, there you have it. You get to decide what's a good play for you and what's best for you if you want to accept a Section 8 voucher or if you don't. That's it for today. Oh, and if you found this podcast helpful, share it with a friend. And please leave us a review. You know, it may help someone out there who's looking to create passive income in their world. And let them know. you heard it from me. I'm Mercedes Torres, the turnkey girl, and you go out and have an epic day. If waiting for your investments to grow feels like waiting for pink to drive, there's a powerful

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