In my city, there is a large group of people whose total monthly income (S.S., or Disability) ranges from $700.00 to $1,200/month. The rent they pay for a roof over their head is generally between $300-$400. Every time I post an Ad on zillow or CL, I get calls from this group of people and I have to tell them NO because you can't afford my rent.

Question: Does anyone serve this 'bottom of barrel" rental market? I have considered entering this market since I know several local LL's who seem to do quite well serving this market. In this low-end market, your tenants never move out because there is no other place (w/cheaper rents) they can go to.

I'll keep them as inherited tenants on a new purchase until I can't any longer.

This is a serious post and if you all don't have anything nice to say about people who are dirt poor, and the LL's who choose to serve this market,..just keep those negative comments to yourself.

I would have liked to. They're a big portion of my town as well. We're teeny and rural, but we have over 300 units of government housing.

In my town, there's a particular abandoned motel I've been eyeing for the last twelve years. It's rock-solid and made out of cinderblock. Metal roof. When I first saw it, taxes were about $1400; now, taxes are about $2500. It probably has about 20 units spread over 3 buildings, plus an office building. The usual set-up of a U-shape around a parking court. It's across the street from the grocery store and the laundromat.

So, my brilliant plan-in-theory had been to put in hard flooring, so that the whole place was as indestructible as I could get. I'd go to one of the hotel liquidations in Dallas and get a cheap mattress, box spring, bedframe, desk, table, tv. Get a mattress protector, of course, and sheets and pillows from the liquidator's. I couldn't tell from the street as to what sort of CHA was in place; some units had window units, but other units seemed to have smaller windows and a rear-access of sorts.

For $x/month, I'd include the water, electric, and probably cable. I'd rent it monthly, not weekly, due to the synch with income theory, and also because I want to avoid the hotel/motel tax that comes from shorter-term residents. Because it was all abstract and theoretical, I hadn't figured out my break-even point, although I know that level of transient housing goes for about $150-$200/week. I figured I would target the divorced-Dads and SS-check crowd, and screening would probably be limited to "are there any outstanding warrants"? I'm sure there would have been enough drama to write a book... but I figured it would have been the closest thing to a boarding house/SRO I could get to in my area, with my zoning.

But--- it will never happen, because the guy who owns the local roach motel is the same guy who's owned the abandoned motel since 1997. He has no intention of ever getting it online; he just wants to keep it off the market, so that all the in-betweeners will go stay at his roach motel for $150-$200/week. And so I watch the vulnerable bits slowly fall apart... and it's sad, because it definitely could be a useful, working building, even if the inhabitants wouldn't necessarily be anyone's cup of tea, and I work hard to keep them out of my houses because I know they can't afford me.

But I'd be willing to give them a room, where they had a minimum of obligations beyond "don't be a jerk" and "pay me". And it's easier to put a concentration of 20 of those sorts of people in a cinderblock building zoned B-2 Hwy Business than it is to take a nice, ordinary three-bedroom in the middle of an R-1 neighborhood and run an experiment with just three people and end up with a trashed house and neighbors who hate me, if the three don't work out.

The trouble with the lowest of low-income folks, Roy, is that they often don't have the ability / gumption / brainpower to run their lives. No matter how cheap you make the rent, some of them will be unable to pay it because other things will take priority because they can't think ahead.

Not all, of course. But some. So it will be like panning for gold: you find a few nuggets amongst all the sand, but it will be hard work.

And that's just finding the right ones. Next you've got to manage them. It's hard enough managing "normal" tenants...

We have a local landlord who rents to that population. And word is he is constantly in court, evicting people. He does no upkeep on his properties: once they are full, the TENANT does any necessary maintenance.

As a result, you can pick his properties out of a line-up LOL!

The trouble with the lowest of low-income folks, Roy, is that they often don't have the ability / gumption / brainpower to run their lives.

I couldn't buy anything around here cheap enough so I could rent it that low. But over the years, I have had retired people on fixed income try to rent from me. Their SS isn't enough to pay the rent, or pay any rent in this area.

Its a sad situation that people who have worked all of their lives don't have enough SS retirement to get a roof over their heads.

I think they must rent rooms in private houses?

But I also think an old motel or set of studio apartments could be rented out to retired SS recipients and it would work OK. Declare it to be over 55 housing. Keep it very clean and in good repair and specialize in retired people on SS.

Another big problem with the idea is that unless all the utilities are separated out and tenants pay their own, if you are renting a unit for $300 a month, the tenant is using darn near that in utilities: water, sewer, garbage, electric, gas, internet, it all adds up.

Roy,

Good news! We have discussed this very topic before several times. Recall when we have talked about "slum lords" in the past? I used to look down my nose at the slummers, but the past few years have given me perspective. There are some folks who--as you said--have little money and just need a roof. The answer to that is bare bones housing.

How do you provide well-kept, nice looking housing to people who will either not care for it or may possibly trash it and still make a profit? The answer is you don't. Rather, you provide a roof and let the house slowly rot around them. If they stop paying, out they go. Then the next person comes in and repeat.

This is not my business model, but it is a model for some.

I am convinced these slummers are serving a legitimate need in my community AND that the city knows all about it. For years there have been three notorious slummers with 100s of properties, but no one has ever shut them down. I kept scratching my head....WHY, when there are MULTIPLE, OBVIOUS violations were these guys not shut down?

Then the answer dawned on me: our city NEEDS these guys! We need land lords who will rent to someone with a fist full of cash and no photo ID. We need land lords who don't do eviction or background checks, because these folks have been evicted 5+ times and have a record as long as my forearm.

It sure is fun to tar and feather slummers in the local news paper, and well-meaning housing rights activists all screaming, "something must be done about these slummers!"

Okay....I would challenge those activites to invite the people who rent from slummers into THEIR house. They won't. Why not? Because they know what will happen and they are too afraid to do the things they want to order other people to do with their houses. Bunch of cowards is what they are.

Some people are poor and decent. Others are poor and bring a host of problems that no amount of Govt programs and charities can fix. I rent to poor and decent folks, and my humbles houses stay fixed up and nice, if not fancy. Slummers rent to the poor people who have a lot of problems, and their houses "are what they are." You can't put new floors in a house where people stomp out their cigs on the floor. Can't replace counter tops that people leave dirty dishes on to ooze and mold for 3-4 weeks. I know these houses because I've seen the insides of them. You have too, I'm sure.

So it's not my market, but there definitely is a market for it. And I salute those people brave/crazy enough to take a chance on folks who probably don't have two dimes to rub together from the 2nd thru the 30th each month, and yet somehow there are dozens of cigarette butts and empty liquor bottles in piles outside.

My market is the poor but decent folks. I take pride in giving them a home that looks okay, smells nice, and everything works and they can qualify with around $1,600 income. A tad higher than what you're talking about. The folks with $761 Social Security only are going to have to settle for something less, or buddy up with a roomie / spouse.

Hope that helps.

If I were going to get into that market (ultra low income) I would look for houses with concrete floors and cinder block walls. Maybe half inch thick wood paneling for the ceiling. I would use the "Section 8 Bible" list of eliminated items. Surface run conduit wiring. One light switch per room. One light fixture per room. 3 outlets, one in each wall. No doors on any closets. Solid core doors on bedroom and bathroom. College dorm mini-fridge ($50) and maybe a stove cook stop. Let them provide their own microwave if they want that.

The name of the game is at the end of each tenancy, you come in with a shovel and garbage cans, clean it out, then spray down the walls and floors with a pressure washer. Have a drain in the floor of each room connected to the sewer and just rinse the filth away.

You'd have to be ruthlessly efficient to have $300 rent and still make a profit, even if the house is owned free and clear. Taxes and insurance alone are going to eat up $100 - $150 per month. The clean up crew at the end has to be able to get in and out for less than $200 work/trash.

Just running the numbers show why this demographic is almost impossible to serve and that's why the folks who do don't care about the house falling apart. There's no money to fix it.

I see a future where more people have to move in together and pool resources, which is really just a return to our past. 3 generations living under one roof was common until right after WW2 and the returning vets all bought houses with Govt-backed loans. The single person living in a house by themselves is really a recent, odd American phenomenon.

Roy from the posts I'd say this is not a TABOO subject. The big problem is you can't make anything on 400 a month. You have to have Other Sources-- food store (pantry type) pay laundry area, used clothes at discount -- you would be doing your good deed for the community but profit to continue is needed.

IS it worth it?

Sid (my good friend and drinking buddy) - I wish you would quit using the SL word here in referring to decent business minded LL's who choose serve the lowest tier rental market. In this context, using the SL word here is on the same level as using the 'N-word'. It is derogatory. There needs to be better name for these type of business minded LL's instead of the usual stereotypical SL word. BTW, some of the wealthiest LL's in my town serve the low-end market and I am on a 1st name basis with one of them.

Keep in mind, Master Roy...I am not saying YOU or I are SLs. We are a few cuts above that.

Sure, we can choose a different word. Any suggestions? Preferable not a term we have to define and/or explain each time we use it. It should be both descriptive and have a neutral connotation. I don't have any good ideas at the moment, but here are a few examples...

"Ultra low income housing provider" doesn't roll off the tongue or convey an accurate image to me.

"Projects lords" - as in Govt housing. Everyone knows "The Projects" and I'm not sure that's any nicer than SL.

"Humble Housing Host" I like alliteration!

Your thoughts?

In our rural area, cost of developing utilities makes new low-cost housing impossible when added to the high tax/ins here. Think bare-bones forest-service campgrounds where all you get is a patch of ground, water from a pipe and and outhouse, you have to provide your own roof. STILL costs $15-20/night. Nice RV parks are charging over $600/mo. LLs who have tried to create new low-cost housing using a mobile home park model have been been shot down at the septic system phase. Yet here, there is a vast community of folks living on ss/disability being priced out of even the trashiest of mhps. Their only choice is to create their own 'camps', which of course creates problems all around. Folks who own their own RVs can't afford to park them anywhere, and cl is packed with them begging to rent your driveway and plug in.

mtnbunny,

Too true with the cost of regulation hindering new low cost development. Used to be builders could make adequate profit building 1 or 2 bed room single family houses. Not any more, and that's in my cheap MidWestern town.

Also zoning regs/NIMBY.

The cinder bock/hose it down model actually exists already and does work in US Govt military housing. During my 22 years in the Army, I stayed on several posts that had houses / hotel "suites" designed just like I laid out. All concrete except the ceiling. No drains in the floors, but how hard would that be to add? Very basic and bare bones, but dry, comfy beds, and warm or cool as desired by the season using hotel style thru the wall heat pumps. Very efficient, very cheap to install. Some were built in the 1950s and still churning along just fine today.

Sid, lets not get carried away. These are not federal regulations, or even state, that affect zoning. It is city and municipal level zoning that determines where multifamilies can be built.

I've checked the zoning maps for the cities where I have rentals. the duplexes and 4plexes are relegated to where neighborhood streets meet major roads. The desirable inside of the neighborhoods are exclusively SFH

Roy, I'm not sure if your first response was directed at me or not, but I don't regret what I said at all.

I don't want to do business with the eternally poor.

That is exactly the income range I rent to in my rooming house. $795/ month net and up. The cheapest room is $110/wk. If you take home $900/mo, you can afford the most expensive room at $130/wk.

Furnished with twin bed & chest of drawers. Basic kitchen stuff is furnished. All utilities included Except satellite/cable or phone. There is Wifi.

I screen out violent and drug convictions for 10 yrs. Felony violent / drug or distribution is DQ no matter how long it's been. As a result (I believe) I always have a vacancy. I also require documented income. If they have a cash job on the side, that's great - but it won't qualify them. I want them to have the job for a month, but I would take someone with new employment who is relocating to the area.

Even 1/2 full (4 out of 8) I pay all regular expenses (utilities, tax, insurance) in 1 week, and keep the other 3.

Rentals are weekly term. first and last week paid before move-in, plus $75 security for damage. $75 has been plenty right up until the recent "Pooper", but he was exceptional.

In VA, the first 90 days I can can do a self-help eviction. After that need to go through the court process. In reality, I just give 1 week notice of non-renewal. Need to know your laws.

They are not garnishable, so must keep on top of things (behavior) & give notices quickly, keep the term short. Do inspections early on to find issues early - first 90 days. If they are good that long, then usually are successful longer.

I've had different types of good roomers. Young (20/21 yr old) just starting out, saving up, earning a good LL reference. Retiree living on Soc Sec. Disabilty/soc sec income combined with part time work. Some just work - sometimes 2 jobs. I have an airman now who just got stationed here & needs a place until his wife and household goods arrive - will be buying a house. I've got a few good referrals from the local VA hospital that has programs for drug/alcohol abuse. They need somewhere to start over - most have worked well, only one had trouble & had to leave quickly.

I screen people EVERY DAY. ALWAYS have an opening. High turnover. Issue lots of notices. Very profitable, but money isn't everything. Over about 2 years, I've had to kick out 3 people under "bad" circumstances. The violent drunk, the pooper, and a PITA I should have never let in. She took me to court (why I count her among the "bad")and lost. A couple others I had to non-renew for non-payment. One left because he couldn't stand the pooper as a neighbor - which is why you really have to come down quickly on the bad behavior - so you don't lose the good ones.

Sorry, this really turned into a book! There is a lot to it, but if you have the stamina to deal with it, it CAN bring in money.

BTW: My rooming house has NO roaches, roof leaks or drippy plumbing. It is a solid, simple, affordable place to sleep, cook, and shower - laundry, too.

Security cameras, Dead bolt entry, and locking bedrooms with operating windows and smoke alarms.

Sid, others,

Why aren't the people who care about housing the poor working together with LLs who want to serve this population?

Because there's no $ in it. Something's got to be sacrificed, be it decent utilities, cost to construct, or cost to maintain and carry. Or your profit.

And DJ, kudos.

David, yes, I agree with that. I mentioned zoning and NIMBY in my previous post. When I say "Govt regs" that includes local govt / municipal codes. Neighbors are the squeaky wheels who grease the paths of local regs passed by city counsel, and they often sit on boards of advisers, etc.

Yep, middle class/upper class America pretty much makes it impossible to build profitable low income housing, then whines about it. I have floated an idea that if we could allow zoning variances to allow "tiny houses" (500 sq ft or less) to be put on vacant SFH lots in at least the north part of our town in older, dilapidated neighborhoods that would accomplish several worthy goals:

1) Put to good use a lot of vacant lots that are doing nothing but acting as dumping ground for the hood.

2) Provide a location for new construction for "all in" less than $40,000. Easily affordable to anyone on a 10 year note. I wouldn't buy them myself using debt, but definitely something for others. $400 / month. Doable for two people living on a fixed income of SSI only.

3) Increased tax revenue for the city to fund infrastructure upgrades / repairs that are long overdue in some of these decaying hoods.

Deanna,

In the just the last 2 hours, I have already done some research (due diligence) on that 20 unit motel that is near my rental houses. My information was obtained from a woman that I know that works as a part-time prostitute and that motel is one her favorite places. By the night, the owner (who lives there) gets $45/night. By the week, his 'day rate' drops to $35. By the month, his day rate is $25.00.

So by the month, $25.00 x 31 days = $775.00 and this is just one motel room with a kitchenette. These rates do include all utilities though,...which is a mystery at this writing.

There are efficiencies and sleeping rooms near me that rent for $350/month, utilities included. There is an old dorm down the street that rents for even less. I looked at the dorm years ago, but someone else's offer was accepted.

I figured, provide a room with basic furnishings, hall bathroom, common kitchen, laundry on a coin op in the same place. Yep. Even someone getting just $700 per month can afford to live there.

We had taken the kids to the local Jellystone campground earlier this summer. I hadn't realized that RV'ing was such a thing until I visited one a few years ago, and I was pretty amazed. Anyhow, they have pools and laser tag and hayrides and bounce houses and mini golf and other fun stuff, as well as a variety of cabins/RV hookups/tent campsites. So we rented a cabin for a couple of days for a fun family thing.

And, of course, I had to look to see where they got their tiny houses/cabins from, because ours was actually really nice. The park bought theirs from Athens Park Homes, but of course, there are all sorts of manufacturers everywhere. The cheapest tiny house in their catalog was a smidge under $30k (basically a 250 sf studio); there were a number of good options in the mid-upper $30's range.

Of course, those sorts of things weren't the kind of bulletproof cinderblock houses that I'd look for with that kind of clientele. And if I was looking at $30-$40k/unit, that's where I usually am, purchase price + renovation combined. So I'd probably stick with my usual houses, my usual tenants, and get my usual rents.

One thing no one has touched on yet with this model is the higher than average court costs for evictions, collections, etc.

Also, I would discourage drains. If the P Trap dries up, the house will smell like a sewer. However, I like the idea of a house that you can powerwash inside and out. Just sweep out the water and shop vac the rest.

While rents are low, maintenance is low, I suspect collections and legal expenses would be higher and taxes and insurance may be cheaper if in bad neighborhood.

Thanks Ken - I appreciate your truthfulness in being able to admit that you serve the bottom rung of the tenant pool. How have the eviction laws changed there? Is this the only reason you are getting out of this market?

Ken,

I know the eviction process (here) fairly well myself, probably better than most lawyers here who would prefer to chase ambulances. Also, the Constable and I are on a 1st name basis which helps a lot. I can evict a dead beat in 21 days flat, even in December on Chrismtas eve! However, if it took months instead of days to evict, I would get out of this business too. 2.5 months is an eternity.

Originally that was pretty much our market back in 2010-14. Then rents went up a little and my screening went up a LOT, and I left units sit until someone good came rather than get a questionable tenant.

I will say we seem to be having an epidemic, at least in my area of ELDERLY homeless folks, some local, but most are moving through. Our town has a high transient population for the size, but I've been noticing two persistent types. Young, strung out folks with clear drug involvement, and MOST are older men, with a few women.

It is horrible to see people in their 70's (or at least looking like 70) with long grey beards walking down the highway with a pack or cart, when it's 110 outside. I see people WALKING to Vegas, some with no water. (Several locals actually put emergency water out along our roads for people, they have gallon jugs every 1/4 mile or so.)

Some of the homeless may be vets, though there is a huge Vet assistance program. But MANY older folks can't survive on $800-1,200 social security, especially in areas where base rent is $1,200 a month.

LTD,

Mickie,

You are renting individual bedrooms in a traditional 4-bedroom house? Do your tenants share a common bath? Do they get along with each other?

JR,

My county has no shortage of public housing. However, there is a 6-month waiting list to get in and once someone finally gets in,...they are ready to get out. Most housing projects here are located down in the skid-row section of town.

Roy - You do know how to stir the pot. SC has the same problems with low income housing you mentioned. What to do who knows.

This post has a lot of very good information about LL solving the low in come housing problems. I have read over it 3x just to educate myself on this important national issue. Why don't you send this post to some of the politicians.

PG said "Why don't you send this post to some of the politicians."