Making Multifamily Money - Nov 27th 2024

Real Estate Updates

I self manage all my single family homes in CA that I used to house hack. Why you may ask?

The tenants have been stable and stayed in the properties for over 5 years. The properties would be cash flow negative if I had to pay 8-10% of my gross rents. I have handymen in the local area that I can text to make any repairs.

I created a system that allows me to self-manage. It’s only annoying if a tenant moves out and I’d need to leverage family to show the unit to prospective tenants which is why I tend to keep my rents about 5-10% below market.

Turnover is costly. It cost money to repair the unit, repaint the unit, and do basic make readies for the next tenant. It may take 2-3 months before the tenant fully moves in and before you can start collecting rents again.

I assessed all of my rents this week for all my single family homes and this is what I found

• Rent control - max allowed is about 8-9% depending on which county in CA

• Section 8 - you can submit a request for rent increase and they either deny, approve, or negotiate

1st Property - Current rents $3,900/month ; market rent $4,300/month ; raising rents to $4,100

2nd Property - Current rents $4,500/month including utilities ; market rent for section 8 3 bed room voucher $5,100/month; requesting for $5,100/month but with rent control will likely be limited to around $4,900

3rd property - Current rents $3,700/month ; market rent $4,300 ; raising rents to $4,000/month

4th property - Current rents $1,200/month ; market rents for section 8 is $1,700/month; requesting for $1,700/month but with rent control will likely be limited

Assuming I get all my rent increase requests, that would be $1,500/month in additional rental income; however, everything gets more expensive (i.e - insurance, HOA, property tax)

Moral of the story. You always want to be slightly below market is self-managing properties since turnover is costly assuming you have a good tenant. If you have section 8 tenants, be sure to check the fair market rents on an annual basis and request increases assuming fair market rents have gone up.

My section 8 tenants pay 5% of the total rents so an increase of $600/month is only going to bump up rents by $30/month for their portion.

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