How Uncle Sam Can Help Build Your Portfolio
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If it seems like the big bail-outs are reserved for folks in D.C. you aren’t alone. Experts have recently noticed that Washington is handing out bonus dollars for bankrupt executives while people on Main Street are getting laid off in record numbers. Meanwhile the federal government is hiring even while small business owners are shutting down the shop. If you are like most American’s, chances are the little bit of unemployment alone simply won’t suffice in keeping a roof over your head while saving for college and planning for retirement. After all, a mere $400 per week for six months barely keeps a family above the poverty level.
Instead of hoping for a bail-out that actually applies to you, learn how Uncle same can truly help build an investment portfolio with the help of short sales. Skeptical? Good. It shows you aren’t likely to fall for the cheap tricks and dime-store strategy promoted by most so-called experts; instead, keep reading to see for yourself how this little used strategy can turn short sales into a long term income, private pension fund or other investment portfolio even while others stake their wealth on a wing and prayer.
1. Find a short sale property located in a good rental market. Look for simple starter homes in family oriented areas located close to public transportation, schools and shopping.
2. Place the minimum down payment and finance the rest using an affordable interest rate fixed for 30 years.
3. Perform needed maintenance and repairs to bring the property up to a safe and secure living condition. Do not over-invest in the property. Use the KISS formula (keep it simple stupid). The goal is to provide safe and affordable housing.
4. Market your property to the Section 8 housing program via the local HUD office. Section 8 provides rental assistance to low income households. You will need to fill out a property information sheet and have the home inspected (usually free) by a HUD inspector.
5. Determine the Fair Market Rent. HUD typically pays all or a portion of the rent for low income households based upon the fair market rent for your area. FMR can vary widely depending upon the area the house is located but a typical 3/2 home in a small town in Florida will go for just over $1,000 while another in California may be double that. Once approved, you can now show the home to prospective tenants just like you would any other program. To determine the Fair Market Rents in your area view the current 2010 FMR schedule at http://www.huduser.org/datasets/fmr.html.
6. Sign a lease. Collecting rent directly from the federal government dramatically reduces the likelihood of skipped rental payments but it is still important to carefully screen tenants and sign a lease just like you would for any rental. Many tenants may be responsible for only a very small portion of the monthly rent but other issues like damages, repairs etc still should be clearly indicated.
7. Bottom line…Section 8 rentals are not for the faint hearted but it is often possible to lower the risk of non payment for homes that are both affordable and able to cash flow very nicely due to their location. Rather than going it alone in a tough rental market, partnering with Uncle Sam to provide safe and affordable housing while receiving payments directly from the Federal government builds equity and income while others are cutting back.
