Be a slumlord? Okay, I got your attention, now the truth. I
really don't recommend that anyone endanger their renters with
unsafe housing. 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 Dumps?
People rent not-so-nice places because they can afford to. A
house that needs paint, has old rusty hinges on the doors, and a
dirt driveway - this is a house that cost less to buy, and
therefore can be rented for less. Anything major that the
landlord does to improve it will result in higher rents, and
possibly drive the renter away.
In fact, this often happens. A few years ago my own town enacted
its first rental regulations. The fifteen pages of new rules
included many non-safety-related requirements, like a minimum of
windows, to allow natural lighting, bedroom square-footage
requirements, and no peeling paint.
These things are done in the name of low income renters, and yet
the result is always the same: higher rent. With that and the
regulations against mobiles homes, low income families are
moving 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 Invest In Low Income Housing?
If a nice 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 and rent for $500. Notice that the house costs almost
three times as much, but the rent you get isn't even doubled.
This means the mobile gives you MORE CASH FLOW. That is why old
houses and mobile homes (on land) are such good investments.
It's important to note that you'll have more risk and management
problems with low income housing. Repairs come up more often,
and rent will be late more often, on average. This is why you
deserve a higher rate of return. Otherwise, who would want to
provide low-cost rentals?
Treat your renters well, and make your places safe. Do these
things, and you can enjoy a good return on your investment -
even if some want to call you a slumlord.
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