Does anyone know if the PHA will pay rent for a lease option lease? A prperty that I am looking at currently has a long term section 8 tenant who is trying to buy a home through HUDs housing assistance program, but the program doesn't allow for the purchase of duplexes (for whatever reason), which is too bad since she loves the duplex and wanted to buy it to live in. So I was thinking of doing a lease option for her and selling her the property that way - the numbers work out that the duplex cashflows (including mortgage pament) with just one of the units rented, so she should in theory be able to pay the mortgage without assistance from HUD.
I called the Philadelphia housing authority and they said that their subsidy does not work with rent to own, period which sounded strange to me - but I wanted to see if anyone had run into this before and might know otherwise, or be able to provide any suggestions on ways to move forward. Thanks!
PS. I don't know what her financial situation is yet (I'm assuming poor, considering she's section 8) - I just wanted to get some preliminary info before I talk with her this weekend about it. The sale isn't contingent upon this, but this would be a win win if we can get the details sorted out before the housing assistance program gets it's act together.
She'd have to qualify without the Section 8, which isn't likely. Section 8 helps people rent, not purchase. They're not going to get into being part owners, which is what they'd be.
I don't see these tenants having the ability to buy your place on their own.
That's an interesting point. I believe rent from the other tenant can pay the mortgage and expenses, but the last thing I want to do is set her up for failure, have her miss some payments and lose her home.
I feel like there's got to be a way to make this work though. If I keep her off title for a prolonged period of time, then the FHA will continue to pay her subsidized rent until she's on title. So in theory I could leave her off title until a significant enough portion of the mortgage is paid down OR until I sell.
John, at one time HUD had a lease to purchase program, no more and there is absolutely no legal way to credit any part of Section 8 toward a purchase, it will be fraud on your part and hers and she can be terminated from Section 8 forever. Don't go there. You're messing with federal funds. BTW, HUD Investigators are gun toting Federal Agents. :)
There are programs to help people who are poor buy houses. They will not be rent to own, and they definitely won't work with the housing authority in your area.
There are (of course) lots of ways to sell her the house legally, but one of them is DEFINITELY NOT to use the housing authority payment as a monthly payment from the buyer to you.
If she really wants to buy the property from you, let her suffer through the leg-work to figure out how to do it. If she really wants it, and it's possible, she'll find a way.
The section 8 house buying program is fairly stringent, as it should be. Duplexes wont happen nor will rent to own. Move on
So that folks aren't trying to find that homebuyer's assistance program with HUD, which is still on the books, I'll give more detail.
First, it is regionally up to the HUD district directors and may be allowed in selected MSAs.
The buy from just anyone (like an investor) won't be easy at all if even possible in reality. Those types of transactions are most likely going to non-profit housing agencies in community development, the non-profits will be talking up the funding allocated.
Next, funding is not being expanded through HUD, they aren't issuing any more vouchers and I've not heard of any new projects being adopted.
Going in as a landlord, to rent and having an applicant that claims to be renting and then working out some side sale agreement is a misallocation of federal funds, you can get nailed.
A good source for these community projects, programs and developments is through the National Association of Housing and Redevelopment Officials, HAHRO, if interested you can go to their web site, might join as an affiliate member, they have a good publication quarterly. You'll find that non-profit entities are given priority in community developments and programs. :)
PHA most definitely has a program to transition their renters into first time homebuyers. IF the tenant qualifies, the housing authority either continues to pay the amount of rent subsidy towards the monthly mortgage or will contribute a one time downpayment equal to 12 months of rent payments towards the purchase. Philadelphia Housing Authority used to hold weekly workshops about this program.
It sounds like you could investigate the financial position of the tenant and guide her to meet with a housing counselor. Once she discovers she can actually own a home you can find another deal that works for both of you.
I'm sure you can find another way to make the duplex transaction work if it makes sense.
Thanks for all of the responses.
At the end of the deal, the duplex works with or without her staying. I actually just closed on it. She's staying till she can find a house through the homebuyers assistance program.
These all just come from me wanting to help her out - she loves this home, wants to stay there, but she wants to own a home more and the program won't allow her to buy a duplex (which this is). In my mind that's kind of silly since that will decrease her dependence on program funds, but perhaps the concern is they want those that are financially stable providing housing to others.
I do feel like there's got to be a way to do it though - so if I don't allocate any funds to her downpayment, but when I go to sell it, I just sell it to her at a discount that still makes sense for her without HUD assistance. The allure for me is keeping a good tenant who will take care of the place as if it were her own.
Create Lasting Wealth Through Real Estate
Join the millions of people achieving financial freedom through the power of real estate investing