Book SummarySection 8 Bible, by Michael McLean and Nick Cipriano

1-Page Summary1-Page Book Summary of Section 8 Bible

Investing in Rental Homes for Section 8

Acquiring Properties Via Cash Advances, Credit Cards, and Alternative Lenders

Use Cash Advances, Credit Cards, and Alternative Financing to Speed Up and Lower Expenses When Purchasing Investment Properties

McLean and Cipriano acquired a significant amount of their Section 8 rental properties using creative financing methods like cash advances on credit cards and loans from alternative, or "B," lenders. Using these tools, you can quickly purchase properties and get them ready for rent, thereby minimizing the time before your investments start generating income.

The authors successfully leveraged cash advances on credit cards offering promotional rates and no fees to make outright property purchases. While this can be risky, the authors immediately refinanced these properties once they were renovated. With the properties unencumbered, they could borrow as much as 75-80% of the appraised value, often getting money back in their pockets to fuel further investments. For instance, they describe buying a property for $22,000, adding $4,000 in repairs, and paying $2,000 for closing costs for a total of $28,000. After rehab, the property's appraised value was $45,000, allowing them to take out $33,750 (75% LTV). This resulted in a tax-free profit of five thousand, seven hundred fifty dollars ($33,750 - $28,000 = $5,750) before even renting it out! The authors recommend refinancing these credit card financed properties as quickly as possible to avoid high borrowing costs and secure more favorable long-term financing.

Alternative "B" lenders offer another route to quick property acquisition, especially if you don't meet traditional bank requirements. These lenders are more flexible with lending criteria and can even bundle the buying, closing, and renovation expenses into a single loan. This allows you to come to closing with minimal upfront cash, but be cautious! Cipriano emphasizes the importance of carefully reviewing the loan terms and ensuring prepayment penalties don't exist. While these loans often have higher interest rates and fees compared to banks, the ability to settle the loan before the term ends without excessive penalties offers a valuable exit strategy.

Practical Tips

• Consider forming a property investment group with friends or family to pool resources for a down payment. This collective approach can accelerate the property buying process since you won't need to save the entire amount on your own. Each member contributes a portion of the down payment and shares in the income and expenses proportionally. This strategy not only speeds up the purchase but also spreads the risk among the group members.
• Develop a relationship with a mortgage broker who specializes in refinancing investment properties. A knowledgeable broker can help you navigate the refinancing process after renovation to ensure you get the best possible terms. This could involve preparing a detailed case for the increased value of your renovated property, including before and after photos, a list of improvements made, and any new rental income figures.
• Set up alerts with multiple lending institutions to get notified about lower interest rate opportunities. This proactive approach ensures you don't miss out on potential savings. You could use online banking apps that offer notification services for rate changes or subscribe to financial newsletters that provide updates on mortgage rates.
• Develop a financial plan that includes potential "B" lender loans. Use budgeting software or a financial planning app to simulate different scenarios where you take out a loan that covers buying, closing, and renovation expenses. Input the terms offered by "B" lenders you've researched to see how the loan would affect your monthly budget and long-term financial goals.
• Create a loan comparison chart to track different lenders' terms, including prepayment penalties, interest rates, and repayment periods. By having a visual comparison, you can easily spot unfavorable terms and make informed decisions. For example, use a spreadsheet to list potential lenders in one column and their respective loan terms in other columns, allowing for a side-by-side comparison.
• Set up a dedicated savings account for early loan repayment. Start by determining how much extra you can save each month, then automate a transfer of that amount into a savings account specifically for loan repayment. This strategy ensures you have funds available to take advantage of early settlement opportunities without incurring penalties.

Leverage Financial Institution Relationships for Favorable Terms and Portfolio Growth

The authors stress the importance of building strong, long-term relationships with banks and lenders to gain access to favorable loan terms and grow your rental portfolio. As you consistently repay loans promptly and demonstrate responsible financial management, your creditworthiness and borrowing power increase.

The authors recommend seeking out financial institutions that offer "blanket mortgages," which consolidate multiple loans into a single mortgage. This simplifies your financial management and also opens additional opportunities with banks that previously limited your borrowing capacity. The authors explain that by paying off existing loans when securing an overarching mortgage, you regain access to lines of credit and potential future mortgages at those banks. They provide an example of consolidating 10 properties with a mortgage totaling $800,000. By determining a 7.7% rate across these loans and negotiating a consolidated mortgage with a reduced rate (e.g., 6.2%), you can significantly reduce your interest payments and free up cash flow for future investments.

Building strong relationships with specific lenders, like Tom Werynski at Port Richmond Bank (as an example from the book), is crucial. The authors praise Werynski's honesty, fairness, and...

Section 8 Bible Summary Cost-Cutting and Profit Maximization For Section 8 Landlords

Reducing Utility and Water Costs for HUD Housing

Install Fixtures That Save Water and Remove Excess Access Points to Control Usage

McLean and Cipriano highlight the importance of minimizing water expenses, particularly in areas where unpaid water charges are lienable against the property. To achieve this, they advocate for a varied approach that combines water-saving fixtures with strategic elimination of potential sources of water abuse or waste.

The authors strongly recommend replacing older, high-flow toilets (typically using five gallons per flush) with modern, low-flow 1.6-gallon flush models. Although this requires an initial investment, the savings on water use quickly offset the cost, often paying for the new toilet within six months. They extend this philosophy to other fixtures, suggesting the use of aerators on taps as well as water-saving showerheads to further reduce water consumption without compromising functionality.

They also take a proactive approach to eliminating potential sources of expensive water costs. They completely remove hose bibs from both the property's front and back to prevent tenants from using excessive water for car washing or...

Section 8 Bible Summary Managing and Protecting Your Asset as an Owner Accepting Housing Vouchers

Implementing Effective Tenant Screening and Management Practices

Vet Tenants and Vouchers Before Acceptance

While Section 8 generally screens applicants before they receive vouchers, the authors advise landlords to conduct their own due diligence to ensure tenant suitability. They prioritize assessing the housekeeping habits and potential for causing damage of potential renters over factors like credit history.

The authors recommend a simple yet effective screening technique: make an unannounced visit to the potential renter's current home. This allows you to observe their living conditions and gain insights into their housekeeping practices. If the tenant refuses access, that's a red flag and likely an indication that they are hiding something. This approach, while perhaps unconventional, provides valuable information that credit reports or property owner references might not reveal.

When a prospective tenant expresses interest, the authors insist that they have their paperwork for Section 8, or "packet," readily available. This demonstrates the tenant's seriousness about moving and eliminates wasted time on individuals who are not prepared to proceed....