HUD affiliation worth it?

Question

I was thinking of getting HUD approval on an 8 unit rental property, but I'd like to know what you guys think. The idea of a guaranteed rent check for 8 units each month sure sounds good, but are there any down sides? Does it take forever to get approval?

Michael Rossi · Answer

YOU are on the hook for any damages in excess of the security deposit.  You can complain to Section 8, but it probably won't do any good.  In my area, Section 8 won't kick them off the program unless you get a court judgment for the damage.

Mike

Jeffrey Gordon · Answer

If you have damages with a Section 8 tenant how do you handle the payment of them?  i.e. if the repairs are greater than the damage deposit etc., is the local housing authority on the hook or like unpaid rent is there a strong incentive for the tenant to pay up so they can get back on the program?

Ryan Webber · Answer

Well you advertize the unit at the HUD office and in the paper or whatever you are doing as HUD acceptable.  If the tenant is interested then you can look over their paperwork and determine what their pay scale is.

I do not use HUD on all of my units.  HUD has its advantages and its disadvantages, and most of time if the rent will qualify I'd be willing to work with HUD.  On some of my units I don't want most HUD tenants there.  95% of the time the tenant wouldn't qualify under my normal guidelines and I only take them becasue of the guaranteed rent from HUD.

HUD can be a real hassle sometimes.  I had a duplex on HUD and I ended up having to repaint the exterior every year for the inspection.  The inspection was always in the early spring time when it was still cold, raining, and moist.  The paint, eventhough it was a high quality, wouldn't bond well unless the exposed wood was thoroughly dried out, which we never had time to let it.  So after about a year it would start to flake off, and we would have to rescrape it and paint it again (about a $1000 every year).

Mark Beekman · Answer

Hi, Mike. Yes I was referring to Section 8, but I was drawing a blank for the term. Is there any specific down side to it? How long does the process take before you can finally have Section 8 tenants move in?

Mark Beekman · Answer

Ryan- Is it the luck-of-the-draw to find those 100% funded tenants, or can you simply specify that those are the only ones you are interested in? I don't care how bad the tenants are as long as I have the safety of a guaranteed check each month. Do you do the whole section 8 thing with all of your units?

Ryan Webber · Answer

The main hurdle in Section 8 is the inspection.  Normally it only takes a couple days to get done, but then you have to fix everything they want fixed and then they reinspect.  If they find the dreaded paint chips or flaking paint, it can push you back a week or two for testing.

I personally prefer the tenants that Section 8 pays all their rent.  They are usually crappy tenants, but the check IS guaranteed.  At least if and until they get a job and then they start paying a portion of it (I hate when they get a job).

Now one perk to the program is that if you do have to evict them for non-pay then they can't get back on the program until you release it, so it gives them some motivation to pay you.

Michael Rossi · Answer

beekrock,

If you are talking about Section 8, there is certainly no guarantee that you will receive 8 rent checks each month.  Section 8 tenants are no different than any other tenants.  In addition, Section 8 normally only pays a portion of the rent and the tenant is responsible for the other portion.

Section 8 tenants do all the same stupid things that other tenants do.  They get involved in drugs, they drink, they don't pay their bills (including their portion of the rent), etc.  They get evicted with the same regularity as Non-section 8 Tenants.

I do accept Section 8 and have many Section 8 tenants.  Accepting Section 8 helps fill my rentals, but it is no panacea.

If you weren't talking about Section 8, what program are you referring to?

Mike