Disputing Affordable/Section 8 Rent

14 Replies

Hi Everyone, 

I just recently put an offer on a duplex in Cleveland area and one of the units is classified as affordable/section 8. I purchased with the intent of honoring the current contract and not renewing next year, renovating once vacant and driving the rent up. 

However looking on the CMHA (Cleveland Metropolitan Housing Authority) website it appears that a 2bed 1 bath unit actually should be paying $250ish more than what the current owner is receiving, and would be right in line with the rent I assume to receive post renovation. 

I purchased the property being content with the current monthly rental income; however of course I would take any additional cashflow-especially if its "free" money and if I can avoid having to do any major or high-end renovations and find new tenants next year. 

Has anyone come across this scenario? Do you have any guidance on what I may be able to do with the current contract or what approach I should take to increase the rents at the next renewal? The current contract is through May 2019 so I assume I'm stuck receiving that monthly amount till then but I'd like to be way ahead of the game at renewal so I know what needs to be done to either increase with CMHA or decline my renewal. 

@Michael Masterson , I just requested rent increases to the tune of an additional $125 per month on both of my section 8 properties and it was approved.

If I were you I would find out the process and timeline for requesting an increase and request some this year and some next year. This will get you were you need to be without a costly rehab.

Section 8 will pay up to 110% of market rent.

I really like the program and would like to convert some of my other properties to section 8 in the future.

Contact the Housing Authority. They can provide you with instructions on when/how to increase rent.

Originally posted by @Michael Masterson :

Hi Everyone, 

I just recently put an offer on a duplex in Cleveland area and one of the units is classified as affordable/section 8. I purchased with the intent of honoring the current contract and not renewing next year, renovating once vacant and driving the rent up. 

However looking on the CMHA (Cleveland Metropolitan Housing Authority) website it appears that a 2bed 1 bath unit actually should be paying $250ish more than what the current owner is receiving, and would be right in line with the rent I assume to receive post renovation. 

I purchased the property being content with the current monthly rental income; however of course I would take any additional cashflow-especially if its "free" money and if I can avoid having to do any major or high-end renovations and find new tenants next year. 

Has anyone come across this scenario? Do you have any guidance on what I may be able to do with the current contract or what approach I should take to increase the rents at the next renewal? The current contract is through May 2019 so I assume I'm stuck receiving that monthly amount till then but I'd like to be way ahead of the game at renewal so I know what needs to be done to either increase with CMHA or decline my renewal. 

Don't assume anything... You know what they say about assume, right ? LOL..  Write to CMHA and explain them the situation. Housing Authorities typically have standardized rents they pay for 1 bedroom, 2 bedroom, 3 bedroom apartments. So showing them what you are getting vs what they pay is a no brainer. 

The tricky part is that usually the tenant pays portion of the payment.  A percentage increase in what the housing authority pays is going to mean a percentage increase for your tenants (in the middle of the lease).  In most cases, tenants are not going to be OK with you raising the rents on them in the smack middle of the lease agreement. So even if the Housing Authority agrees to your request, you are probably going to have to let go of getting any more money from your tenants.  That being said, you will still be better off than what you are right now.

@Michael Masterson

I will openly tell you in front of everyone that if you "decide" not to but that duplex with a Section 8 tenant in it then please PM me ASAP so that I can possibly but it.

If you can get a property in Cleveland with Section 8 tenants already in them that can potentially be as "passive income" as it gets my friend.    

I own 5 units in Cleveland, but none have Section 8. It's not from a lack of trying. I also own 2 units in the SF Bay Area and BOTH are occupied by Section 8 tenants that I placed there. I actually purposely sought out tenants with Housing Vouchers here in the Bay Area because it's essentially guaranteed income and they (most likely) won't trash the rental or give landlords a hard time. 

In Cleveland I contacted the CMHA upon closing my first duplex out there and told them I have a property I want to rent out to  Section 8.    No response. I had 2 different tenants that my PM (slowly) met up with, and they liked the units and they went to the Housing Authority to sign the paperwork and everything. Section 8 never called us back to set up an inspection either time. The tenants with the vouchers got tired of waiting, and then they eventually moved on with their lives. 

In July I anticipate trying again to place a Section 8 tenant in the property, but my PM has made it pretty clear they don't "like" the time it takes to deal with inspections, having "his guy" go over to the CMHA office, etc.  

My thought is that it is time to find another PM for that property. It's a Duplex.....3/1 on each unit in Slavic Village in the 44105 Zip Code. 

Can anyone refer me to a Property Manager that is open to working with CMHA and placing Section 8 tenants?

@Brian Garlington I've been actively working on this deal for months so I don't foresee wanting to back out pending all goes smooth with financing-however I will definitely connect and when I get my feet wet with the voucher program we should talk. Curious-what PM company are you using?  

In my talks with other CMHA landlords its very very difficult to initially get approval but if you're in the right market there will be pretty substantial waitlists to fill your property. Suggested route has been purchasing a property with a pre-existing voucher much like I'm doing as opposed to trying to pass inspection and meet the timeline requests with a new purchase. 

Originally posted by @Brian Garlington :

@Michael Masterson

I will openly tell you in front of everyone that if you "decide" not to but that duplex with a Section 8 tenant in it then please PM me ASAP so that I can possibly but it.

If you can get a property in Cleveland with Section 8 tenants already in them that can potentially be as "passive income" as it gets my friend.    

I own 5 units in Cleveland, but none have Section 8. It's not from a lack of trying. I also own 2 units in the SF Bay Area and BOTH are occupied by Section 8 tenants that I placed there. I actually purposely sought out tenants with Housing Vouchers here in the Bay Area because it's essentially guaranteed income and they (most likely) won't trash the rental or give landlords a hard time. 

In Cleveland I contacted the CMHA upon closing my first duplex out there and told them I have a property I want to rent out to  Section 8.    No response. I had 2 different tenants that my PM (slowly) met up with, and they liked the units and they went to the Housing Authority to sign the paperwork and everything. Section 8 never called us back to set up an inspection either time. The tenants with the vouchers got tired of waiting, and then they eventually moved on with their lives. 

In July I anticipate trying again to place a Section 8 tenant in the property, but my PM has made it pretty clear they don't "like" the time it takes to deal with inspections, having "his guy" go over to the CMHA office, etc.  

My thought is that it is time to find another PM for that property. It's a Duplex.....3/1 on each unit in Slavic Village in the 44105 Zip Code. 

Can anyone refer me to a Property Manager that is open to working with CMHA and placing Section 8 tenants?

 Property Managers don't like to work with Section 8 has been my observation. The reason being the red tape surrounding the whole Sec 8, doesn't allow them to efficiently rent out the property. It takes too long.  Its a govt program, and is riddled with inefficiencies.  It doesn't work well with PM business model. 

That being said, I am a huge proponent of Section 8 myself, and have 2 Duplexes in Richmond, Va right now, one side of each Duplex is rent out to Sec 8 tenants. When the existing tenants leave, I plan to fill the vacancies with Section 8.

What I have found to be helpful is that I like to be involved in the renting process, and while I do have a PM now, I will make sure I pay out of my own pocket to advertise the properties on Sec 8 affiliate websites, and I will have all the calls come to me directly. I will screen the tenants myself, and will send them my PM's way once they seem to be OK.  I will make sure that my PM will take care of everything from that point out.  I have learned that it takes patience, but when you get the property approved and decent people in place, it will work just fine.  If you want Sec 8, don't rely completely on your PM. Do some of the work yourself.

@Chinmay J.     It's interesting you say that................I actually did do everything that you mentioned. I put the ads up on Section 8, Zillow and Craigslist and had the prospective tenants call me. They literally had to get through me before I forwarded them to my PM. I actually don't mind doing this part of things because then i know the PM isn't putting just anyone in the property. 

Once it became apparent that even if I do this work my current PM confessed that he really didn't want to work with them, that's when I came to the conclusion I simply need a new PM  

Originally posted by @Brian Garlington :

@Chinmay J.    It's interesting you say that................I actually did do everything that you mentioned. I put the ads up on Section 8, Zillow and Craigslist and had the prospective tenants call me. They literally had to get through me before I forwarded them to my PM. I actually don't mind doing this part of things because then i know the PM isn't putting just anyone in the property. 

Once it became apparent that even if I do this work my current PM confessed that he really didn't want to work with them, that's when I came to the conclusion I simply need a new PM  

 Yes.. You definitely need a new PM my friend.. My first question is.. "Do you work with Sec 8 tenants"  If the answer is NO or a very, very reluctant YES, then my response is "Click...."

Hi All, 

It's been a few months since closing so I thought I would circle back. Unfortunately CMHA will not adjust the rent to my desired amount even with supporting evidence that my house next door is generating $925 to their $625. I have some time before actually deciding to not renew but thats a fairly large gap so I assume I won't. 

It just so happens to be that this duplex is in Lakewood which demands pretty high rent if fixed up properly, but its just a few blocks from the city of Cleveland so they still base their market rents on that. 

Just food for thought if any of you are working in this market or looking at properties. You can get a distressed duplex in the $100-$125k range and rent out for $600-$700 as is. But with some tweaks (AC, new furnaces, updated kitchen/bath) you can easily get to the $900-$1000 range. Its not unheard of to fetch $1200 per unit but it needs some unique qualities to just the standard duplex. 

@Chinmay J. Tenants portion of the rent is based strictly as a % of the tenants income. The portion the tenant pays is not tied of the total rent cost. I have multiple section 8 tenants and have had their portion of the payment vary. One went from $500 on a $1400 rent to $0 when they lost their job. The housing authority picked up the difference until they found employment again.

@Brian Garlington - One good way to find a PM who does have experience working with SEC 8 is to pull down the SEC 8 list from your HA website and see who is advertising properties.  It is generally pretty easy to identify the PMs vs. the landlords.  It is REALLY important to find someone with SEC 8 experience.  SEC 8 offers many advantages, but if you don’t know the system well, the problems that come with working in the low income community will get away from you.  This is not limited to SEC 8.