Just Bought a Rental - Should I keep it as a Section 8

21 Replies

I just bought this 3 bed 1.5 bath 1400 sq. foot house in Decatur - nicer end of Decatur.   There are properties that are being built across the street that are planned for resale around $200K.  So the neighborhood has a lot of potential.   Currently there is section 8 and it is  under rented meaning it could get $800 a month and is now only getting $565.   I am trying to decide first of all if I need to get a property manager.   I have mixed feelings about section 8 but also have a mixed feeling about paying for property management...  I like the predictability of Section 8 but only if it will come up to the market rent of $800.  

Open to people's thoughts.   Jeannie 

I paid $46K.   Market rent in this area would be $850 realistically.   The Housing Authority somehow has it as a 1 or 2 bed room  and brings in $565.   

@Account Closed

In regards to paying for property management, most people tend to think you pay one way or another. It's either your money or your time. If you plan to scale, you will have to budget that in, even if you are the manager, because it will become your salary :)

As for Section 8: Is it a good tenant? I imagine doing the switchover would be that much harder and morally hazardous if the tenant is good. I can't speak for the laws in your area, but that would be my concern to begin with.

I was considering having the housing authority review the place because it should be bringing in more than it does - even being a section 8 house.    The tenant is not following the rules that are in place right now since he has many cats - but that being said, I understand that he has been a good tenant thus far.   I want to know how I can get his gig!   He pays $130 a month for a 3 bed 1.5 bath.   My God - that is such as great deal for him.  

I appreciate other peoples thoughts.     

Originally posted by @Account Closed :

I paid $46K.   Market rent in this area would be $850 realistically.   The Housing Authority somehow has it as a 1 or 2 bed room  and brings in $565.   

 The housing authority is not responsible for this. The last owner accepted the tenant with a voucher for a 1 or 2 bedroom.

@Mark Holencik thanks for that update!   I am in the middle of trying to fill out the forms to get the payments moved over to me and so I will have to ask them to look at the property again.    The current property management company is APPALLINGLY BAD.    Citiside in Atlanta has ZERO response to me.   I have called, emailed, called, emailed.  It is so ridiculous I can really not believe how they are in business.   And the previous owner seemed pretty out of touch with what was going on - but was also somewhat involved.  So, just a badly managed property and she took a loss.   

Jeannie,
I have been managing properties in Decatur for over 7 years now and would recommend getting rid of section 8, you can most probably get a lot more then $800 if you do a decent rehab and you will get better tenants then section 8.

Hi Jeannie,  I would contact their caseworker directly and try to do what you can to bring the rent up to market. it's not likely and it will be an uphill battle but it's worth a try. If you're not able to bring the rent up then The open market is your best bet. The section of dekalb County you are in can be good or bad depending on which block you are on. I always recommend a local property manager who knows the area. The risk reward ratio makes it worth the 10%. 

The good thing about Section 8 is you're guaranteed to be paid every month on time.  If the tenants tear up your place Section 8 will kick them off the program.  That way at least they keep your property up pretty good and they do come out to check from time to time..

Originally posted by @Sal Levin :

Jeannie,
I have been managing properties in Decatur for over 7 years now and would recommend getting rid of section 8, you can most probably get a lot more then $800 if you do a decent rehab and you will get better tenants then section 8.

I have been managing homes in DeKalb county for the past six years, all Section 8!  I will only do Section 8 rentals in that area! 

For a 3/1.5 in Decatur I get anywhere from $900-$950.  The reason you are getting such low rent is because the previous landlord accepted a 1 or 2 bedroom voucher for the home.  You can not change that, your best bet is to get him out of there and re rent it.  Calling section 8 to come look at the property is not going to happen.  They have all the numbers they need in front of them...how many people are in his family and his income.  You can't change his voucher size and that is what effects the amount.   

My two cents:

Personally, I think section 8 is great. The turnaround times are very low and keeps my vacancy rates almost nonexistent. What many people fail to realize is that there is such thing as an "overqualified tenant". What happens after a one year lease with a tenant who has good credit and good income?... They buy their own house!...Many times with non section 8 tenants you will be looking to fill your property every year or every 2 years with a new tenant. 

Section 8 tenants stay for years! I've never had a problem with having a section 8 tenant pay their portion (as you may know if they do not pay they lose their voucher). As long as I can verify that they've received their full security deposit from their last landlord then I know for the most part that they are clean and keep the property to high standards. Yes, I have bi yearly or quarterly inspections done so I do keep a keen eye on my investments as well.

Where I rent I actually get more from section 8 than what market rent currently is so that's another added bonus in my area. 

As for property management. I believe that when you are first starting out property management should be avoided as long as you are using a reputable agent who has knowledge on rental properties. When you buy your first rental it's important to maximize returns. Personally, I have multiple properties and I've never seen the value of property management. I have a full time contractor (who works on my rehabs as well) that I use for service calls. My tenant will text me, I forward it over to my contractor and they determine a time for the repair to take place. For leasing I use a leasing agent who is VERY experienced in qualifying tenants, and rental payments from tenants are direct deposited into my LLCs bank account (section 8 or not).

By using effective people who most people will use anyways in their real estate business I find it very easy to be able to efficiently manage a good number of properties. I do however have a very good, trustworthy, and economical contractor. I know these can be hard to find :)

I hope that helps.

Happy Investing!

Originally posted by @Account Closed :

I paid $46K.   Market rent in this area would be $850 realistically.   The Housing Authority somehow has it as a 1 or 2 bed room  and brings in $565.   

 Your tenant probably has a voucher that only covers up to a 2 bedroom. It's not that the housing authority has your house as a 2 bedroom. 

You also inherited the tenant's rental contract. Once it is expired, you can adjust the rent you are asking. The tenant might not qualify anymore but that is ok from your perspective due to the low rent. The low rent would probably cause a PM to ask a a high percentage of your rent, which is another hit. Personally, I used the first rentals to learn the trade. The more you know, the better you will be able to manage the PM once you make the switch.

Originally posted by @Account Closed :

@Mark Holencik thanks for that update!   I am in the middle of trying to fill out the forms to get the payments moved over to me and so I will have to ask them to look at the property again.    The current property management company is APPALLINGLY BAD.    Citiside in Atlanta has ZERO response to me.   I have called, emailed, called, emailed.  It is so ridiculous I can really not believe how they are in business.   And the previous owner seemed pretty out of touch with what was going on - but was also somewhat involved.  So, just a badly managed property and she took a loss.   

 Jeannie - I am so sorry for your frustration with Citiside Properties. We are under new management effective January 28th and are in the process of cleaning up all of the screw ups that occurred over the past year(s) with particular focus on the last three months. Please contact me if you need any help with your transition or if you would like to discuss the Section 8 process. 

@Allen Bray I do want to thank you for working promptly with me to get things corrected.   I hope you can get it all back on track now. 

jeannie

Personally, I don't do Section 8, but I think it's a personal & business decision. I don't want to have a third party involved in my business, and I want higher-qualified tenants than I would otherwise get with Section 8. I know LLs that do it and like it, so it really depends on your business model. I get higher rent than I would get with Section 8, because the vouchers where I am don't match the market so the resident portion would be too high. 

Originally posted by @Account Closed :

I paid $46K.   Market rent in this area would be $850 realistically.   The Housing Authority somehow has it as a 1 or 2 bed room  and brings in $565.   

 Your tenant probably has a voucher only for a 1 or 2 bedroom. Housing authority will only pay whatever the tenants voucher is for, no matter how many bedrooms your house has