First Property - Section 8?
My wife and I are ready to purchase our first multi-family, first investment property. I was driving by a triplex in a low income neighborhood for 95k and grosses $1400/month. After I scoped out the property, I came across a duplex across the street from an elementary school. I called the realtor, turns out it hasn't been listed yet on the MLS. They want 205k, it's leased on both sides grossing $2150/month. In researching the property after driving for dollars, I found out it is Section 8 housing. I have read several differing opinions on Section 8. Does anyone have an experience with Section 8 housing for their first property? Do you recommend this path or should we continue looking? Since the property is only a year old, fully leased, once it hits the MLS I believe it will go fast. The analysis tool on BP for rental property shows it to cash flow at $327/month after high estimations in expenses since I don't have hard numbers yet.
@Dan Mahoney- Amazing! Thanks for the break down. And to everyone else- this is all good stuff, team. Cheers!
I know that some people have had not so ideal experiences with Sec 8 and I'm not sure about Texas. My experience has been very good with Sec 8 tenants and working with the agencies themselves. I currently, have one Sec 8 tenant, but over the last 10 years, I have heard 3 total. The agencies, tend to impose stricter expectations on tenants, because they want to ensure that landlords are willing to work with the agencies in the future. That means that the tenant can't abuse the property, because if they do, they might be kicked out of the program. Also, I like the fact that my rental check gets to my bank in a very timely manner. Anyway, call up the agency in your area and let them know that you would like to participate in the Sec 8 program as a landlord. They will give you more information and if you have a property ready to go, they will add to their list of properties available for rent through their program.
Good luck!
- Property Manager
- Virginia Beach, VA
- 2,187
- Votes |
- 2,674
- Posts
Originally posted by @Tricia O'Brien:
Hello Alice K! When you ask for a rent roll / expenses list (tax return)on a property you are considering, do you ask for the most recent 2 year? Or do you prefer to go back 3-4 years? Also when they send you a chart that shows expenses like Jan $400; Feb $125; March $57.25 is it acceptable to ask them to reply in writing with what they spent each for (like $400 toilet replacement, $57.25 repair front door, etc?)
A Rent Roll is a snapshot in time. It should show the units, beds, baths, current lease terms, current rent amount, deposit amount, and current ledger balance. You can ask for it to include any other info you'd like to know. For instance if there are difference in the units - such as some have garages, some are waterfront, etc, you could ask for that to be included.
Also ask for a P&L or a property expense report. I think the prior 12 months or the last calendar year is reasonible. The expenses should be itemized. Repairs are likely to be in a single category. Utilities in one. Asking them to itemize every single small repair is unreasonable, I think. You should be doing your own inspection to establish the condition.
-
Real Estate Agent VA (#0225186139)
- 7574722547
- http://www.pmivirginia.com
Renting to section 8 gets a bad rap. Of course there are problems with all demographics. After a thorough back ground check and feeling out the tenant, I chose to go with section 8. The 13 months I had them, they were perfectly fine. The only reason it was a short rental is because I had to sell. Do you research and you will be fine.
Before I delve into the depth of our experiences with the section 8 tenants, I have to say, we are a property management firm and we screen tenants thoroughly, we call landlords, we call references, we still run a five point - credit, criminal background, eviction (yes, that too), check disturbance records in counties and interview the potential tenants. This is what we have found over the last few years, there are three types of section 8 tenants,
1. those who take care of the property and do all the right things (very few of those) (1%)
2. those who you never hear from and they don't do anything that they are supposed to do (95%)
3. those who destroy the property to the point of no return. (4%)
Over the years, we had all three types of tenants. Of course the type 1 group is few and far between. Mostly you will get the type 2 tenant and there are really good ways to manage them, and of course, no matter how much you check, you will get some type 3 tenants (we had 2 in three years) and of course, that was a complete remodel after we got them to move out. Evicting section 8 tenants is harder than evicting a regular tenant, but that's a whole different story.
Early on in our managing practice, about 9 years ago (we managed only our owned properties) we got very excited at the opportunity not to worry about the rent payments. It was then when we took on about seven section 8 tenants. Out of those 7, only one was the type 1 tenant, 4 were the type 2 tenants and two were the type 3 tenants. That's kind of our break down.
The type one tenant lived with us for 4 years, wanted to change towns and left. We came in, did minor touch up and re-rented the place within 2 weeks. This tenant we just accepted back into one of our three Section 8 friendly rentals now.
The other type 2 tenants, through trial and error, we managed for about 3 years on average. What we figured out is that we need to do routine inspections (drive-by's and scheduled ones) every single month. Alternate scheduled inspections every two months and do drive by's every other month. They will not call you if the ceiling is leaking, if the toilet is running, they will not change HVAC filters regularly, they will not do anything related to maintenance, so be prepared to take care of these responsibilities yourself. Also, make sure that at their yearly inspection they have NOT damaged screens as you will have to replace them, paint walls if they are super dirty as the section 8 inspections may cite you for that.
Type 3 tenants took us a while to recuperate from. There were over $30,000 worth of damage on 2 of our properties and we were inspecting the properties. Now we were not doing it as often as every 2 months, we were doing inspections every 6 months as we did on our regular rentals. This was when we first started. We didn't have anyone warn us about section 8 and peculiarities of this tenant mind set. This group will live damage what they can and then they'll want to move to a new place. We did not get bad reviews from previous landlords on those two tenants, so there was nothing that could give us a clue. I'll share some photos from one of the homes shortly, but I wanted to say that over the years we have decided that the guarantee from section 8 as far as rent payments was not worth the lower rent amounts, all the extra paper work and the numerous inspections. We still have 3 homes that accept section 8, but as soon as I can talk the owner into selling those properties, we will be section 8 free.
Overall, type 2 tenants cost us about $7K on turnover, type 3 tenants about $30k in turnover and type 1 tenants about $3k in turnover.
As far as we are concerned, section 8 is not worth the trouble. But there might be some thicker skinned people then the ones that work with us. Take a look at the pictures below and decide for yourself.
These cabinets and GRANITE counters were brand new, all appliances were brand new when they moved in.
They pulled the carpet off the stairs.
This was a brand new vanity
This is how we found the kitchen after move out. The stove was brand new. The fridge had to be thrown away as everything inside was broken. It'd be more expensive to replace all the shelves in the fridge then to buy a brand new fridge.
All new tile in the kitchen was broken, walls painted green, look at the carpet that used to be NEW only 2 years ago.
Would someone mind giving me an example of when a tenant would actually "qualify" for your unit while also receiving a voucher? How on earth do they have the income to qualify, like 3x rents for example, but also have their rent paid for by our taxes through the county? Or am I missing something.
Oh my gosh Marina Shlomov that's horrible. Thank you for the details and the photos.
We are researching still. Put in a request to talk to someone with our local authority and waiting for a callback. Also, I'm meeting with a longtime friend who's rented property for the last 20+ years in our area. I'm going to see what his thoughts are in the area and I'll update everyone. Currently, my realtor is waiting for a response to all requested financials. We requested them Saturday the 14th. I'll also update everyone on the details.
Originally posted by @Shea Spinelli:
My wife and I are ready to purchase our first multi-family, first investment property. I was driving by a triplex in a low income neighborhood for 95k and grosses $1400/month. After I scoped out the property, I came across a duplex across the street from an elementary school. I called the realtor, turns out it hasn't been listed yet on the MLS. They want 205k, it's leased on both sides grossing $2150/month. In researching the property after driving for dollars, I found out it is Section 8 housing. I have read several differing opinions on Section 8. Does anyone have an experience with Section 8 housing for their first property? Do you recommend this path or should we continue looking? Since the property is only a year old, fully leased, once it hits the MLS I believe it will go fast. The analysis tool on BP for rental property shows it to cash flow at $327/month after high estimations in expenses since I don't have hard numbers yet.
Pass.