Rental Property Investor · Warrenton, VA · Member since 2016 · 126 posts · 58 votes
Checking out this one 29 unit apartment building now and spoke with the current PM who mentioned that:
Most tenants are on government assistance
Building is old but condition is fair
Great cash flow.
Converted hospital to apartment building years ago
Owner pays utilities and you can't separate
It's in a class B-C area but not sure how I feel about most of the building being on government assistance. Has anyone every dealt with situations like this and how did it turn out for you?
Rental Property Investor · Waycross, GA · Member since 2018 · 39 posts · 40 votes
8y
I haven't personally owned a property where tenants were on public assistance, but I have managed one or two units out of a large inventory that did. Of those, they always paid because the money came directly to the office. The negative is in the maintenance agreement. You'll want to be sure that you know what their damage is before buying because when they come to do the inspection, the owner frequently has to make the repairs. Hopefully, the PM did a walk through and has a signed walk through agreement. The government assistance part is good on the payment, but bad in that they have no skin in the game. Fortunately, the 2 that I encountered still had respect for their home and didn't create a lot of damage. They also stayed longer because the rent was guaranteed for this location, whereas, they may not get approved again if they move. Just something to consider. I wouldn't let it be a drawback. Just do regular inspections and have your contractors report anything that may attention as they go in and change fire alarm batteries. It's the best way to keep your eyes on damage regularly.
Rental Property Investor · Waycross, GA · Member since 2018 · 39 posts · 40 votes
8y
I haven't personally owned a property where tenants were on public assistance, but I have managed one or two units out of a large inventory that did. Of those, they always paid because the money came directly to the office. The negative is in the maintenance agreement. You'll want to be sure that you know what their damage is before buying because when they come to do the inspection, the owner frequently has to make the repairs. Hopefully, the PM did a walk through and has a signed walk through agreement. The government assistance part is good on the payment, but bad in that they have no skin in the game. Fortunately, the 2 that I encountered still had respect for their home and didn't create a lot of damage. They also stayed longer because the rent was guaranteed for this location, whereas, they may not get approved again if they move. Just something to consider. I wouldn't let it be a drawback. Just do regular inspections and have your contractors report anything that may attention as they go in and change fire alarm batteries. It's the best way to keep your eyes on damage regularly.
Rental Property Investor · Erie, PA · Member since 2018 · 6k+ posts · 9k+ votes
8y
Section 8 can be very profitable and advantageous for landlords . Fear comes from “not knowing “ well you can “ know” by doing your research and understanding the ins and outs of having tenants on assistance . Having the right education mitigates loss and conquers fear . There are many investors who make a killing doing this . There’s several books on this subject . Section is great and section 8 bible are just two of them that are good
Section 8 is very high maintenance. Requires skilled management.
Utilities paid by owner is a definite deal breaker. Tenants that do not pay their own utilities are extremely irresponsible and can/will abuse utilities to punish landlords.
Investor · Narragansett, RI · Member since 2013 · 8k+ posts · 4k+ votes
8y
If not section 8 it could be a similiar program or just non working and on disability etc. For urilities this will mean they are home more. You need to figure that in. in addition the tenant you have will influence the tenants you get.
Investor · Narragansett, RI · Member since 2013 · 8k+ posts · 4k+ votes
8y
If not section 8 it could be a similiar program or just non working and on disability etc. For urilities this will mean they are home more. You need to figure that in. in addition the tenant you have will influence the tenants you get.
If not section 8 it could be a similiar program or just non working and on disability etc. For urilities this will mean they are home more. You need to figure that in. in addition the tenant you have will influence the tenants you get.
Rental Property Investor · Maryville, TN · Member since 2009 · 529 posts · 414 votes
8y
Interesting that it is a converted hospital, my first thought is that it's probably built waaaay better than the typical multifamily which is usually cheap as possible. Section 8 is more a desirable thing in a weak rental market. If vacancies go back to 10% like 2010(national average) you will be glad to have those folks. If demand stays high.....not so much.
Broken record here, but look closely at where we are in the r.e. cycle and try to size up the potential for supply saturation.
China, ME · Member since 2014 · 3k+ posts · 4k+ votes
8y
@Chris Ayers I don't know your state's fair housing laws, but here in MA, receiving any form of public assistance is a protected class.
That means it's an area where you have to tread VERY carefully. Again, I don't know VA law, but here in MA, they take housing discrimination very seriously. I've seen fines approaching 6 figures for those who violate.
@Chris Ayers I don't know your state's fair housing laws, but here in MA, receiving any form of public assistance is a protected class.
That means it's an area where you have to tread VERY carefully. Again, I don't know VA law, but here in MA, they take housing discrimination very seriously. I've seen fines approaching 6 figures for those who violate.
This is in NC and I'm in the research process of buying it so no worries.
Rental Property Investor · Santa Maria, CA · Member since 2016 · 36 posts · 17 votes
8y
With Section 8 tenants your rent is guaranteed, with disability and welfare it is not.
It sounds like the tenants have already self-selected that building, so it may not be feasible to change tenant type now. Is there anything about the building that would make it attractive to non gov't assistance tenants? Gov assist tenants go where they are accepted, which is usually the bottom of the barrel, or where the landlord chooses to make a killing on Section 8.
My agent is offering me a triplex, units as small as 650-700 sq ft rented at $1700 to Section 8. No one else in their right mind would pay that much rent for a unit that small in this town.
In California the landlord has the right to choose whether to take Sec 8 or not, which drives the price up on available units. There's years long waiting lists.
A friend told me that in her state they don't have the right to refuse them, so check your state landlord-tenant laws on that.
We recently purchased a multi-unit building in the same situation, 19 of the 24 units had tenants on government assistance. It was USDA funded, but seems to run along the same line as Section 8 as much of the paperwork we had to complete had reference to it. Not sure how it usually works, but we had to complete a few rounds of paperwork with each tenant receiving assistance but I had a contact at the USDA and was able to scan everything and get it to them directly. Overall the transition went pretty smooth. I believe on any type of government payments, the tenants are required to be respectful of the property or they risk losing their benefits... Our tenants all take very good care of their units and the building in general. On a side note, as the tenants leave that are receiving assistance we are able to rent those units at market rent. We are doing this for a long term investment, and with the cash flow numbers, it was absolutely worth any hassle we may have run into up front in the change of ownership.