I need advice from Affordable Housing Professionals

17 Replies

Hey I'm a college student/real estate wholesaler looking to do some affordable housing for Unc Charlotte students. If you or someone that you know is a professional in the affordable housing field or has knowledge or connects in Section 8, HUD, Low Income Housing and Assisted Living please leave a comment. Because I have plenty of questions on how I could provide college student housing for Unc Charlotte students in Charlotte, North Carolina.

Chad, I'm not your gal, but wanted to shout out an "Atta boy" to you.  We are passionate about providing affordable housing, but college students are our high end tenants.  Thanks for being intentional in your investing!

Just ask your questions here.  There's really nothing unique about "affordable housing" or section 8.  Many landlords have section 8 tenants.  Neither of those are really applicable to student housing, though.

"Assisted Living" is a completely different ball game.

So, fire away with your questions.  Do some reading in the Rental Property and Landlording Questions forum.

Affordable Housing takes in a large swath, most dealing in Section 8 deal with moderate income and low income, working but contributing to housing expenses, there are a few on a full ride when "low income" units aren't available. Designations of moderate, low and very low are determined from the mean income of an area as determined by HUD.

Assisted living may include any income level, but saying affordable puts the same income guidelines in place for those requiring care and are usually under Medicaid at the state level, with subsidies. Programs available may work in concert to pay costs up to a qualifying level.

Very low includes shelters as well, there are HUD grants as well as public, not for profit organizations, religious and private foundations and generally carry corporate sponsors for non-profit housing providers.

You may also be speaking of the more lucrative side of low-mod housing under Section 42 of the Tax Code. Some very nice projects are developed by the sale of tax credits through syndicators. These programs run the full gamut of government, from HUD down to the Mayor of a city for approval, very political due to the amount of money made available to developers and property management. It's a combination of public and private partnerships and the deal to qualify for this funny money is to set aside certain levels of housing for very low, low and moderate incomes. Most of these projects, you could drive by and never identify them as a low-mod project.

SFDs as well as apartment complexes can be used, you might search for a thread here on BP "Profits from Non-Profits" I think, or that should find a more detailed thread speaking of non-profit housing entities and partnership arrangements.

To get involved, I'd suggest you contact HUD and your local Public Housing Administration (PHA) and see if you can become an affiliate member of NAHRO an association of national housing and redevelopment officials.

Ask away! :)    

@chad 

Account Closed - she's a wiz at affordable housing 

Thanks for bringing me into the convo here @Joe Fairless  :)

Account Closed mentioned here is the Low Income Housing Tax Credit program. That does not subsidize the residents in any way, but rather gives the owners of a property tax credits in return for renting to households whose total income does not exceed 60% of the area median income (based on household size and median income determined by HUD). In order to get those tax credits, they have to be awarded to your property by the affiliate state agency (in Ohio, the Ohio Housing Finance Agency doles them out to developers who essentially bid for them as there is a certain allocation amount to be awarded). Additionally, in that program it comes with a commitment of rent and income restrictions for 15 years. Also, it should be noted that under the tax credit rules- a household cannot be made up entirely of full-time college students (looking forward and back 12 months), because the IRS did not want student housing developers to be tax credits. However, there are few exemptions to the student rule, such as if the student has a dependent child or is receiving public assistance.

Section 8, Housing Choice Voucher program, which is my favorite form of subsidy- offers a lot more freedom (not having to commit longer than a lease term), and also helps the resident more as it actually decreases their portion of their rent not to exceed 30% of their adjusted gross income (and the government subsidizes the remainder of the agreed upon contract rent with you. However, again there are many restrictions to receiving this assistance. The tenants have to meet income guidelines and there is also restrictions on students who receive sec 8. For example, the applicant would have to be older than 24, be married, or have a dependent child, etc. 

The tax payers are not generally interested in making housing cheaper for traditional students, so students are excluded from these income based assistance programs. My best advice for you if you wanted to supply good housing at a better (or more competitive) cost than many other housing options- is to find great deals, fix them as efficiently as possible, and hopefully can ask for lower rents than the competition because your mortgage and upkeep is lower. That is generally not in the mind's of investors to see how you can charge a tenant less for rent, but your heart is very much in the right place! I recall my college days and how expensive it was to rent when you do not work full-time. Renting a house with friends definitely beats the costs to live in on-campus dorms though!!

Best of luck to you and your goals, and keep asking all the questions you have on the BP forums! If you ever want to write to me directly, please feel free to!

@Michele Fischer  thanks for the words of encouragement

@Joe Fairless   thanks for giving me the Ms.Kurtz contact

@Jen Kurtz  @Bill Gulley  said to find a fixer upper near the campus an rent out the home at a cheaper rate than my competitors an my other option is to try an get a property near the campus with owner financing. However I did have another question outside of student housing. Since Im looking to give back in anyway I was wondering is it a hard process to provide section 8 housing to the general public? An what would be the first step to start providing section 8 for the general public?

Chad, 

As a huge advocate of sec 8, I commend you with your decision. But let me also make sure you understand that tenant screening should still be the same for sec 8 tenants as you'd have for non- sec 8 tenants. Sec 8 just assists the residents with rent, but still make sure you have clearly defined criteria that you will uphold for all of your residents- such as criminal background checks, stable job history, verify employment, must have good landlord references, no prior evictions. When talking to a prior landlord, confirm the timeframe they lived there and what their rent was. Ask questions like how many times they paid late, if there were unauthorized pets in the home, if they ever caused disturbances or complaints, and the best question-would they rent to them again? Another big red flag for me is when you ask someone when they need to move and they tell you asap- enough probing questions and you will find out that this person that needs a place immediately has been given notice to move and has or will have an eviction filed on them. So that could be in the works but you wouldn't yey see it in a background check. 

Just be sure going in that you are not blind to the headaches that any tenant can give you. I have had many wonderful sec 8 tenants that do best with what they have and take care of their home. That's not to say that I haven't had people flip a switch and become a nightmare. People receive sec 8 because they are lower income. You are going to have more issues with that in general just because small bumps in the road that someone who has more savings ability could handle, will rock the boat much more of someone with little to no savings for emergencies. Flat tire could mean 100 short on rent and will be late, then also a late fee. So, once a little in the hole, much longer to get out. 

I love that you want to sincerely help others, just be prepared by having set criteria and defined rules in a lease. Some people will take big advantage where they see an opportunity. I always say - anyone can be a bad tenant, regardless if their mom is helping them with the rent or the government. Just be prepared and consistent for all of your renters, sec 8 or not.

Ok, so to your question on how you get started. Get in contact with your local housing authority and let them know you are a property owner and would like to participate in the Housing Choice Voucher program. Your property will have to pass a HQS Housing Qualities Standards inspection, and you can start having sec 8 voucher holders referred to you to inquire about your home and you can advertise to sec 8 too. Visit HUD.gov for more information about the program from a tenant side and landlord side.

Happy to help! 

Account Closed 

I didn't catch the student housing so much, but getting into "student housing" is another niche and has special financing opportunities or alternatives available for larger projects.

There is a bit of a contradiction so to speak with HUD on its mission of providing affordable housing and the needs of student housing. Students are in a unique situation between government agency missions, they are not "productive" and available for work, nor are they unable to work fitting HUD's main mission and state government and departments of education bear student housing responsibilities. State education departments are rather strapped but may partner in some respects for housing with operators.

Your plan to locate "a" house for rehab might work, but you won't have many financing opportunities, general conventional avenues and seller financing.

Simply renting "to the public" means following HUD guidelines as to discrimination and students aren't a protected class nor are they a special class to be granted priority over the general public. If you simply lower rents, you may not end up with who you may want so much, anyone can apply and attempting to weed out non-students presents discrimination issues.

I've done student rentals here, we had great experiences but I also have non-student applicants and tenants. 

In order to rent only to students, you'll need some "assistance" or support from the university and their office of student housing. This is pure politics! As a landlord, bottom line, you're in competition with the school who also has to fill their housing units (schools are in the business even if they are public institutions). But, if a need exists as they may identify it from their point of view, then they may recognize and support your efforts.

These student housing offices usually have a list of "approved" housing/landlords or the flip side, they may exclude some properties to be rented by students they have "control" over, students at the graduate level are pretty much excluded from college influences or perceived responsibilities by a school. I'm sure you understand the obligations of schools pertaining to the welfare of students. Property owners are generally not restricted as to who they may rent to, but the students may be, so having support from these housing offices opens the pool of applicants of those who aren't willing to be in violation of school policy, much like living out like an illegal alien.     

I'd suggest you begin by forming a non-profit corporation, under the 501 C category, there is an educational election that can support housing.

The discrimination restrictions have exemptions by statute and rulings as well as accepted practice in applying such restriction to religious groups, associations and non-profit groups. Form your student housing association. You don't want to go the Frat or Animal House route!

Again, sorry I don't have a link to that "Profit in Non-Profit" thread, but many of the aspects of this are applicable and described there.

If you are really serious, make a commitment to learning RE and the related aspects of what I've suggested, you can PM me and I'll offer my assistance, not as a paid participant to your cause, to get you up and running.

I'd also suggest you aim higher than one house with seller financing! Your mission should be easing the need, not housing 3 students, but more like 30 or 300. 

If there is in deed a need, additional housing would be welcomed by the school officials, then an organizational approach will provide more financing opportunities on a grander scale than buying as an individual.

First, I'm sure there are major players, apartment owners in that area, so I suggest staying under the radar as you investigate the market and situation, as I said, these situations are political, don't make waves until you can make a splash, if that's the direction you want to go.  :)  

@Jen Kurtz  @Bill Gulley  

 thank you both for all this great knowledge I will be sure to use it as I start  in my housing projects. I will get in contact with my local assistance housing officials and leaders. If I have any other questions I will post another question on this thread. Thanks again for the advice

My pleasure Account Closed !

@Jen Kurtz

 @Joe Fairless

@Michele Fischer

@Jon Holdman

Hey I hope everyone has been great in their business and personally. I decided to revisit this topic because I came across something called "master lease option" or lease/option which allows you to sublease out a property from the owner while I keep the profit after expenses. I wanted to use this method in order to achieve my goals but was wondering if anyone was familiar with this process of master lease option? 

HI Chad, I hope all is well! I have heard of the Master Lease option, but only in an informational way. I have not had any experience with that in real life, so unfortunately I do not have any advice to offer you on that. I also am not sure how that would fit into subsidy agreements if you are still considering the sec 8 route. I would love to hear more from you though if you do explore this further, it would be interesting to hear! :)

@Jen Kurtz

after talking on biggerpockets and doing some research section 8/HUD maybe a big obstacle. I came across a article published by the national apartment assocation were they used master lease agreement to rebuild the community named "Rebirth by the Bayou" back in June of 2010. I sent them a email to see if there is a way I could do that on a smaller scale.

Chad, sorry, I am not familiar with master lease options.  Thanks for thinking of me though!

Hi all, I'm a LIHTC Developer. Came across this forum while researching HAP Contract returns. Think of a Master Lease Option as a lease with the option to buy the property after a certain amount of time. A Master Lease Option is the commercial real estate version of a residential lease option. 

In an apartment building transaction, a Master Lease Option functions as such; instead of going under contract and purchasing a MF with a large loan, you may control the property through a Master Lease with an option to purchase the property at a previously agreed upon price in a few years. Once the property is operating at its peak performance, you would take the opportunity of exercising your right to purchase the property (for the agreed upon price) and then re-selling it in a double closing. 

Positives: Reduce operating expenses, increase rent rates, get the building to optimal performance and increase its value. 

- Less money down out of pocket

- Cheaper than hard debt

- Less equity in the deal

Negative: If you exercise your right to purchase the property and flip it quick, you may not hold the legal title long enough to qualify for long-term capital gains tax treatment.

I'm curious how this execution strategy of a MF deal could be used when you actually hold the property after exercising your purchase option. The question is... At what point of holding equitable and legal title do you qualify for after-tax equity reversion benefits of RE deals?

One thing that distinguishes student housing in our area is less then full year leases. Properties have a separate summer tenant group. This doesn't decrease the price so much as it standardizes the price/room and lease dates. Because of this I almost never get  non-student renters applying for student rentals. Also our rentals for students are furnished, most regular rentals are not furnished. This serves to target students.

As far as affordable housing for students unless they are already not a dependent of someone else and this means they can prove they make the minimum to self support according to tax code and don't live with their parents when not in school they are dependents and there isn't much government wise to help with housing. This is true for a lot of programs even if they are young adults and are not in school.

Free eBook from BiggerPockets!

Ultimate Beginner's Guide Book Cover

Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!

  • Actionable advice for getting started,
  • Discover the 10 Most Lucrative Real Estate Niches,
  • Learn how to get started with or without money,
  • Explore Real-Life Strategies for Building Wealth,
  • And a LOT more.

Lock We hate spam just as much as you

Join the Largest Real Estate Investing Community

Basic membership is free, forever.

By signing up, you indicate that you agree to the BiggerPockets Terms & Conditions.