Rental Property Investor · Rockville, MD · Member since 2015 · 2 posts · 0 votes
So I'm looking at buying some rental properties in Baltimore and was doing some research about Section 8 and HUD etc. What exactly is fair market rent? Is that what Section 8 WILL pay me or is that the max they would pay on a property in a Metro area? Some of the houses I'm looking at would normally rent out for about $900-1000 a month but the HUD FMR is something like $1600 (for 3 bedrooms). Do I get that amount or will they only pay what would be fair for the neighborhood and type of house? Most of the threads I've seen on here are about FMR's being too low. This is a case of it being too high. This seems insanely too good to be true if I can actually get that amount. Please someone fill me in as the research I'm doing is turning up very vague answers to my question(s).
If you are talking about buying a rental in Baltimore city, the HUD FMRs are used as a guideline. When the home is inspected, the inspector will grade the property based on location and condition. When the case worker reviews the inspection report they will come up with a number (sometimes without too much rhyme or reason). You can dispute if you feel that the amount is too low, however this delays the lease signing as a supervisor must review.
For reference I have two fully renovated 3 bedroom properties in C- areas in the city with rents of $1351 and $1301. Both of these properties were gut rehabs ( new plumbing, electric, sheetrock , central Ac and finished basments). I know another investor who does a minimum rehab on his rentals and his rents are a bit lower for similar 3 bedrooms (mid $1200s).
I would think that to get that top rent number, you would need to be in a premier neighborhood in the city.
If you are talking about buying a rental in Baltimore city, the HUD FMRs are used as a guideline. When the home is inspected, the inspector will grade the property based on location and condition. When the case worker reviews the inspection report they will come up with a number (sometimes without too much rhyme or reason). You can dispute if you feel that the amount is too low, however this delays the lease signing as a supervisor must review.
For reference I have two fully renovated 3 bedroom properties in C- areas in the city with rents of $1351 and $1301. Both of these properties were gut rehabs ( new plumbing, electric, sheetrock , central Ac and finished basments). I know another investor who does a minimum rehab on his rentals and his rents are a bit lower for similar 3 bedrooms (mid $1200s).
I would think that to get that top rent number, you would need to be in a premier neighborhood in the city.
Investor · Baltimore, MD · Member since 2008 · 17k+ posts · 13k+ votes
10y
You cannot go by the published HUD guidelines for rent. In general Sec 8 pays about $200 over market rent, depending on the area. However to get the best sec8 tenants you have to have a very nice house. Note that @Garrett Fulton said his houses were full gut rehabs. Ours are similar.
The best way to estimate rents is to get to now landlords in your area.
Rental Property Investor · Rockville, MD · Member since 2015 · 2 posts · 0 votes
10y
Thank you for all the responses guys, I'm still very interested in this route as 200 more than what I could normally get per house is still substantial. Right now I'm looking at financing multi-family units in either Baltimore or Hagerstown though. I had originally wanted to deal all in cash but realized how much more I can make financing properties, obviously with the inherent risk in doing that. Don't know if I should be disclosing this, but I have about 150k cash to work with and I want to really maximize my ROI as I more or less plan to live off this investment. Any other suggestions on what to do in terms of investment would be greatly appreciated, but that may be for another thread.
Thank you for all the responses guys, I'm still very interested in this route as 200 more than what I could normally get per house is still substantial. Right now I'm looking at financing multi-family units in either Baltimore or Hagerstown though. I had originally wanted to deal all in cash but realized how much more I can make financing properties, obviously with the inherent risk in doing that. Don't know if I should be disclosing this, but I have about 150k cash to work with and I want to really maximize my ROI as I more or less plan to live off this investment. Any other suggestions on what to do in terms of investment would be greatly appreciated, but that may be for another thread.
The number you want to look at is the "payment standard" for the housing authority for where the property is. The housing authority uses the HUD fair market rent figure, then changes it to reflect the local market rents. Often, they vary by zip code.
I found the Baltimore housing authority website, but couldn't find a list of their payment standards. But, you can contact them and ask them how to get the list.