How I spent $300K on a shack and keep smiling about it... Part 7

The house originally had 2 bedrooms and 1 bath on the 1^st floor. In order for me to increase the value of the house and get more rent out of it I had to add bedrooms. There is not much standing room in the attic but luckily the basement is large and has enough height that I can finish it and add 2 more bedrooms and a full bath there. My intentions are to rent the house when it's finished to Section 8 tenants (the subsidized housing for low income residents). Section 8 calculates the rent based on number of bedrooms, so in DC in 2006 a 2-bedroom house can rent at $1,250 but the rent for a 4-bedroom house goes up to $2,068.

A lot of people don't want to rent to Section 8 tenants because they are afraid that since the tenants don't have to pay any rent or pay very small part of the rent they will trash the place. However, I believe that every tenant should be screened thoroughly, regardless of the fact that he/she pays the rent or the government does. It's much easier to rent a place to somebody, than to get rid of a bad tenant. Especially in DC - it is totally a pro-tenant state. It can take several months to evict tenants. So screen, screen, screen before you rent even if that means that you have to cover the mortgage for a few months before you find that perfect tenant.

I am rehabbing this house as if it was my own home. I want the new family that moves in to have a nice and clean place to live in. Everybody deserves a nice home. But, on the other hand, I want my tenants to take care of the place as if it was their own.

Now, going back to my original thought - 2-bedroom house vs. 4-bedroom house. When I first started looking at this property my objective was to increase the number of bedrooms and functionality of the house. If I could not add any more bedrooms I would not acquire this property. I also looked at the area - what's happening now, what are the plans for the future, is any new development coming to this area, how's the crime, etc. Well, the crime was pretty high - it is still a very transitional neighborhood, and some would even consider it a borderline war zone. I never would even think of being there after dark. Even during the daylight I always make sure that someone is at the property before I come over. But there are good things going on too. First, there is a lot of construction activity going on all around the area. Then there is the Habitat for Humanity project right across the street from my property - over 100 homes are being built on this once empty field. The high school down the street that looks like a maximum security prison is getting over $8mln from the city to rebuild their facility. A few blocks away "the Projects" ridden with crime are going to be torn down and rebuilt as single family homes or townhouses. The neighborhood is definitely changing.

To Be Continued...