biden tax changes impact on real estate investors

With residential rental properties so expensive right now, should you consider alternative niche real estate investments?

Deni and Brian do a quick tour through niche real estate investments, including:

  • Section 8 housing
  • Short-term and corporate rentals
  • Land
  • Manufactured homes
  • Mobile home parks
  • Self-storage facilities

Tune in for an introduction to new types of investments that you haven’t considered before!

Video Broadcast Version

Audio Podcast Version

Also available on iTunes, Stitcher, and wherever else you listen 🙂

Resources Mentioned in This Podcast & Video:

live off rents podcast transcript
Brian Davis: Hey guys, happy Tuesday.

Deni Supplee: Hi, everyone, how are you?

Brian Davis:
We are super excited to be with you this Tuesday afternoon, as always. So last week we talked about five ways to guarantee on-time payments. We talked about things like accepting credit cards, reporting rents to the credit bureaus, rent default insurance, serving eviction notices immediately, all those sorts of good things. This week, we’re switching gears and we’re talking about different real estate investing niches and how they compare. We want to go through things like manufactured homes and Section-8 housing, short-term rentals, raw land, mobile home parks, all that good stuff. So, as you guys join us, please let us know where you’re tuning in from. Don’t hesitate to fire questions at us. This is an interactive broadcast. This is not your typical prerecorded in advance podcast. This is all about you guys. Let us know where you’re tuning in from and fire your questions at us. So, Deni let’s jump right in here and start with something that is a little bit more mainstream compared to some of these other real estate niches that we’re going to talk about. Let’s talk about Section 8 housing, which is not too far from the normal rental investing that you and I talk about. So, can you walk us through some of the pros and cons of Section 8 housing?

Deni Supplee:
I mean, the pro is why I think most people get involved in it, especially in neighborhoods that are harder to rent out. And that is that it’s guaranteed rent or at least like depending on where you are, 80 to 85 percent of the rent. And that’s great, you must take the good with the bad. there are some challenges with Section 8 housing and a lot of red tape. You’re dealing with a government entity here, the government. So, there’s a ton of paperwork, inspections out the wahoo, and then they come back to you and tell you to fix this and fix that Some of the stuff they have you fixing is kind of ridiculous, in my opinion only. And if you have a problematic tenant, it can be hard to evict them. That’s a big one, too, because it’s not just nonpayment of rent, there’s a lot of other reasons that tenant can cause problems and sometimes the nonpayment of the rent is the easier part of the spectrum as these other areas that are hard anyway. But when you have a Section 8 housing, it’s harder.

Brian Davis:
So, I mean, I’ve worked with 60 tenants before, and my experiences have mostly been negative. You do get the guaranteed rent check every month, at least for the course of it. But it comes with all kinds of other problems, like you said Deni. And it’s worth backing up just one moment here and explaining that Section 8 housing are normal housing units that you happen to have voucher-holding tenants move into, but you don’t have to buy properties that are specifically designated for Section 8. I’m not going to say there’s no such thing because there is like a legacy program with the federal government going back to the 80s. But in today’s world, you don’t buy housing that’s specific to Section 8. You buy a regular rental property, and then you rent it to a voucher holder. Now, a lot of investors who invest in lower-end neighborhoods do specifically buy these properties with the intention of renting them to Section 8 voucher holders. But to sum it up quickly, and I want to get too bogged down in Section 8 here, we’ll talk about Section 8 on its own episode sometime in the future. But the problem with these annual inspections is that in my experience, every single year the inspector would find two to three grand worth of stuff to be listed from a punch list. And I couldn’t figure it out because the stuff that they would have me do every year was stuff that was pre-existing the previous year that they inspect it already. This wasn’t working last year, but not working now. And eventually, I discovered that what was happening is the inspector was writing up this punchout list as a way of proving to their supervisor that they had every property on their rounds.

Deni Supplee:
There is going to be that bureaucracy when you’re dealing with a government entity like this. So, I mean, it’s to be expected. But on the positive side of things with the eviction moratorium. It can be a bit of a hedge of protection.

Brian Davis:
Well, that’s true. Any last comments you want to make about Section 8 before we move on.

Deni Supplee:
Just that, we have a link that we’ll put in our comments. If you want to read more about it, the ins, and outs, and all that, just click on that link.

Brian Davis:
I just shared that link in the comments. And it’s a much more detailed analysis of the pros and cons of Section 8 if you’re thinking about investing in lower-end property use and marketing specifically to Section 8 tenants.

Deni Supplee:
For full disclaimer I’m not and I don’t believe Brian is against Section 8 tenants or landlords who choose to get involved in it. This is just an opinion and the reality of some of the stuff that you must deal with. We’ve gotten a few comments like “you shouldn’t hate Section eight”. And., I don’t hate Section eight.

Brian Davis:
We’re here in business. We’re not we’re not here to have such strong feelings of hate about it, I’ve had some bad experiences with Section 8, and I’ve known other landlords who have had good experiences with it as well. Be careful. There are basically two camps of Section eight tenants. There are truly grateful to have government assistance and people who need help. And then there are another camp, totally entitled people who just think that they deserve to have free rent paid by the government. Anyway, let’s move on to the next niche here. Short-term rentals and corporate rentals as well, like mid-term corporate rentals. What are your thoughts? Tell us some of the basics here.

Deni Supplee:
Whether it’s vacation, short-term or, executive housing, I think that when covid hit, everybody was running from it. But it actually didn’t even affect it that long of a time.

Brian Davis:
Couple of months, Really.

Deni Supplee:
It set the tone for a boom is what it did. Because there was suddenly these traveling health professionals and they needed short term. it just kind of moved into that a little bit and then we couldn’t fly. We couldn’t take the far away vacations. Everybody was taken mountain and shore vacations, so they opened back up.

Brian Davis:
So, we held a webinar, a couple of months ago with Al Williamson, who specializes in teaching Airbnb rentals and midterm corporate rentals. I’m going to share a link to course and program all about it, including how to build a short-term rental business without buying any properties. It’s an awesome system where he uses rental arbitrage to build a portfolio of income properties without having to buy those properties. No down payment.

Deni Supplee:
It’s so cool to me. I mean, it blew my mind. It really did. I mean, it’s possible. All of a sudden, I’m driving around, and I see these executive suites, that’s what he did. He had me open my eyes to how busy they are right now, and their parking lots are full. Oh, my goodness, his information is great.

Brian Davis:
Yeah, absolutely. Check out the course if you’re interested in either short-term or Airbnb experience. All right. Moving on to number three, manufactured homes. What do people need to know about that?

Deni Supplee:
Well, it’s not bad either. It’s cheaper to get involved in it is cheaper. Financing might be a little funny, but not as tough, I believe. And you must talk to your mortgage person, to get into as far as single-family home or small, multi. You do have to know that there’s going to be either a lot rent or you’re going to own your plot of land. There are some different landlord-tenant regulations in some states for mobile homes as opposed to regular single-family homes. You really need to check this out because I’ve seen people get in trouble with it. A lot of them are like condos and some of them don’t allow rentals. Be careful that you don’t just impulsively buy one without finding that out first. Because then you’re stuck with it. But it’s a great way to get involved.

Brian Davis:
With a lower down payment most often and a lower purchase price, Christina Colon says it was bad in city areas like New York City, but there was a boom in short-term rentals in suburban areas away from the big city. And, of course, as you mentioned, some of these vacation areas, particularly in the mountains or on the shoreline, as people could telecommute, they got out of some of those big cities like New York City, like L.A. and San Francisco and Chicago, they hunkered down in these beautiful resort towns and just worked from there for a few months. In many cases moved there permanently. One other last thought about buying short-term rentals. You can switch the use of these rental properties back and forth as the market conditions change. You can buy a property intending to use it as a long-term rental or intending to use it as a short-term vacation rental. Then play around with the different uses for that and just see where the cash flow is better for you. Maybe the cash flows better as a rental property or as a long-term rental property, or maybe a cash was better as a vacation. buy these in which you experiment with different uses, If Al Williamson were sitting here, he would tell us that his best returns always came from corporate rentals. People like travel nurses or businesspeople who are traveling for a few months at a time. you don’t have to lock yourself into the use with these properties. You can experiment with different uses for these.

Deni Supplee:
Absolutely.

Brian Davis:
Switching gears away from manufactured homes, One of the most popular investments over the last couple of years has been mobile home parks. Where you buy the entire park, and we’ll share a case study here in a second. But nearly six percent of the US population and close to 18 million people presently live-in mobile homes and mobile home parks. it’s a sizable chunk of the population. And according to our Reonomy, these mobile home parks offer the highest cap rates of any type of real estate income. People kind of thumbed their noses at them. The fact is these mobile home parks perform really well. They perform better than know, according to some sources, as Reonomy performed better than any other type of real estate income. The case study here that I want to share with you is from a blogger that I really like Mr. Fifteen Hundred of Fifteenhundreddays.com. I share both the original post outlining where he bought this mobile home park back in twenty seventeen. Then I share the more recent post where he does a postmortem after selling the mobile home park a few months ago. That was in January twenty twenty-one. But he and his partners bought this trailer park for one-hundred-seventy-thousand dollars and they sold it for about three -hundred-fifty-thousand dollars over the course of like three and a half years.

Brian Davis:
It was more than a one hundred percent return. They did put a lot of work into cleaning it up. They got rid of the deadbeat tenants. They spruced up the grounds a little bit, they professionalize the management of it. they did put in some effort here. But it’s not like buying a shell and then gutting and totally renovating it. This is more like cleanup and professionalization of the management. We’re not talking about the same kind of renovation budget here. It’s more just professionalizing it. it’s super interesting pair of articles, both the initial purchase of it and in the post-mortem of what exactly they did, what went right, what was difficult or challenging, of course, the profits If you’re not familiar with Mr. Fifteen Hundred of Fifteenhundreddays.com; it’s a cool blog, it’s a FIRE blog, financial independence for retirement blog. Good stuff. Check out mobile home parks as a niche. If you’ve never considered them before, There’s good money to be made there and they have skyrocketed in value over the last few years, you could make a case that all the easy money has already been made there. But I don’t think so. I think it will continue to rise rather sharply and particularly much more sharply than your typical single-family, home values in the US. All right. Moving on to number five self-storage units. Deni tell us about these.

Deni Supplee:
I was telling you before we came on Facebook live that my husband is a contractor, and he was working for somebody who owned a self-storage unit nearby. And they have seen such an uptick in occupancy. Generally, they have more of a vacancy than apartment complexes. So, I started to delve into it a little They are booming right now. You know, I guess, people have stuff and, so they put it in storage. I just saw that it was an over eighty-seven point sixty-five billion market in twenty nineteen. And they’re expecting it to go to one hundred and fifty billion by two thousand twenty-five. No need to evict, instead you send a notice or a couple of notices and then sell their stuff and you can make money on that. They have a show, I forget what it’s called, where they auction off a storage unit. And there are not many repairs. It’s like a cement hole that you’re renting out. In In some cases, you’re just letting people park mobile homes or whatnot on a lot. there’s little to no repairs and hardly any management. It’s all electronic now. You just buzz yourself in, go to your unit and leave so you don’t have to hire people to be there all the time. And not a bad idea.

Brian Davis:
Yeah, not at all. And there’s virtually no risk of any tenant damage to the property. You’re not going to have maintenance calls at 3:00 a.m. You’re not going to have noise complaints you skip all those hassles. It’s not regulated the way that residential real estate is regulated. Deni and I have gotten away from residential real estate and some of our own investments. And I can’t speak for you, but for me, part of it is about getting away from the heavy regulations in residential real estate and the anti-landlord climate right now and vibe out there. You don’t worry about any of that stuff with the self-storage units and, just circling back around what we’re talking about a few minutes ago, I think we are seeing higher occupancy rates among these self-storage units because people are moving, and people are so much more mobile today than they were 15 months ago because so many more people can telecommute. you have people making these sudden moves and storing some of their stuff that they can’t take with them initially. you are seeing a big jump in self-storage business.

Deni Supplee:
And if you have like a standalone garage or detached garage or whatnot, I’ve done this and have made money on it was like the easiest money I ever made because again, I gave them a key and they just came in and out and, I didn’t have to worry about anything.

Brian Davis:
There are a few websites where you can list your storage space. Barefoot is one but there are a few of them out there where you can list storage space. You rent out your spare storage space in your home to other people, and it’s much cheaper than renting out an entire storage unit. This can be an easy way to start if you happen to have extra storage space in your own home. look into investing in self-storage businesses because it can be a very lucrative way to invest in real estate. All right.

Deni Supplee:
What can you tell us about land?

Brian Davis:
So, it’s number six, the final niche in our real estate investing alternative is purchasing raw undeveloped land. it shares the advantage that you’re not going to get any maintenance calls. Right. Because there’s nothing to maintain. It’s not regulated the way that residential properties are regulated. You’re not going to have noise complaints from tenants. there’s a land course that we’ve gone through ourselves. They joke about no know no toilets, no termites, all the big headaches of investing in properties. And by the way, we’ve added a link in the comments here. It’s very comprehensive. And what they go through with you is how to buy properties that are in land parcels that are in tax sale at twenty-five cents on the dollar, basically. You turn around and either sell them to other investors or you can sell them retail to neighbors or to people who want some extra land in the countryside. And you can earn between one hundred- and three-hundred percent returns on these properties. So, these returns are much higher than for residential real estate. Now there is a lot of work involved in this like sending out mass mailing campaigns. In some ways, it’s very much a business. To say return on the investment on each lot may be super high, but you also have these ongoing business expenses, such as the mailing campaigns and so forth. There’s some work involved in the due diligence. But, of it’s a great business model.

Deni Supplee:
Once you get it down, it runs a little smoother. It isn’t as time intensive.

Brian Davis:
Yeah, absolutely. And you can automate a lot of it. You can delegate a lot of to virtual assistants. We’re going to share a second land course here that we like. Our friend Seth Williams over at our REtipster has a great course as well, super knowledgeable guy. There are there are not many people in this country that know more about land investing than either Seth Williams or Mark Podolsky. These are the two experts on land investing in the US. Check out those two courses if you’re interested in investing. And by the way, when you buy land parcels, each individual parcel can be quite cheap. I mean, Deni and I, bought some land parcels for between five hundred and a thousand dollars. And that’s the price for like an acre of land a piece.

Deni Supplee:
Those prices blew my mind, to be honest with you, when we first started.

Brian Davis:
Yeah, so, I mean, the last one that we bought, we paid about a thousand dollars for it and our estimates are that the retail value will be between five and seven thousand dollars for this lot. The returns on that lot are going to be quite, nice. We’re going to pop a bottle of champagne and when we sell that parcel. It does not take a lot of money to invest in raw land is my point. If you’re not working with a lot of money and you’re looking for an inexpensive way to get started in real estate investing, it could be a great way to do it. Deni, what did I miss there as far as land investing? Is there anything you want to add to that?

Deni Supplee:
No, I don’t think so. I think you covered it.

Brian Davis:
All right. Well, to give a quick recap here, of the six real estate investing niches. If you’re looking for something a little bit alternative because residential property prices are too high for you right now. The first is Section 8 housing. Again, these are regular homes that you buy that you then can turn around and market specifically to Section 8 tenants if you choose. So, one, Section 8, housing two is short-term rentals through Airbnb or corporate rentals or mid-term leasing. Number three is manufactured homes. Number four is mobile home parks. Number five is self-storage facilities. And number six is raw land. And next week, by the way, we are bringing on a special guest Ali Boone of Hipster Investments. Ali is going to talk to us all about turnkey investing, long distance. She operates a turnkey rental company that they source turnkey properties all over the US. They’ve got some in Chicago, Texas, and Indianapolis. She works all over the place. So, her company, Hipster Investments, all are long distance turnkey rental properties to help you buy properties out of state. it going to be a super fun interview. She’s super fun herself. That is next Tuesday at 2:00 p.m. Eastern, 11:00 a.m. Pacific, join us as we talk to Ali Boone of Hipster Investments. All right. Well, on that note, let us know what you guys want to hear about moving forward. You can either message us on Facebook Messenger or you can email us at [email protected] Let us know you want to hear about. And we do listen to your requests. We typically get our ideas for these podcast episodes your requests and your questions. So don’t be a stranger. Reach out and let us know you want to hear about, and we will catch you guys next Tuesday.

Deni Supplee:
Absolutely. Have a great Tuesday and keep safe.

Brian Davis:
All right. See you then.

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