Hello, I hope everyone is navigating this unfortunate coronavirus madness! While unfortunate, I see great opportunity. I have flipped in the past, but would like to transition to buy and hold. Here is my hesitation and I would like your advice.
1. I think I want to rent to section 8 tenants, but do you think that tenants will avoid moving during this time? Will inspections be able proceed? I don’t want to get the property and have it sit. Section 8 already takes longer to rent based on requirements from my understanding. Has anyone received input from the housing authorities they work with particularly in the Dallas/Forth Worth Metroplex.
2. The govt is basically giving a green light for folks not to pay rent. Do you think that the housing authority would pick up the rest of the rent? How are you dealing with your section 8 tenants in light of this?
3. Have you noticed contractors slowing down or not working through this crisis? I don’t want to buy and not be able to get it fixed timely.
4. Do you think that the BRRRR method might be difficult moving forward given home values may drop.
Your insight is greatly appreciated before proceeding. Thank you!
Rental Property Investor · Lakeville, MA · Member since 2015 · 7 posts · 4 votes
6y
Hi Caroline, yes this madness struck me in the heart 2 weeks ago when one of my handy men texted and said "My restaurant has closed for 3 weeks, I will take WHATEVER work you have." It hit me that my tenants (107 units) would likely start falling like dominoes. Instead of going into all the preparations I am taking, I will stick with answering your questions based on my experience.
1) I am finding that all prospective tenants have been cancelling their showings, so to me it appears to be slowing down across the entire tenant base, not just Section 8. As for the Section 8 program itself, up here in MA and I suspect in nearly all Housing Authorities that manage the local Section 8 vouchers, it generally takes 1-2 weeks for the prospective tenant to get their act together in order to present the paperwork to the potential landlord. Then, they generally perform the inspection which tends to be between 1 and 2 additional weeks. Up here, I am hearing from closing attorneys that no cities are performing water readings, smoke inspections, etc... and appraisers and home inspectors are not moving either...I can only imagine the Housing Authority...I would generally plan on at lease 1 months elapsed time with a Section 8 tenant under NORMAL conditions. In this case, I would think this present situation would exponentially impact small government agencies such as housing authorities not to mention the true fall out of this once tenants stop paying rent and emergency rent relief policies take hold etc...I think they will be inundated for several months from when the virus outbreak is actually contained and starts to contract.
2) I am hoping that the Federal Government will emergency fund the Section 8 program in order to pay for the tenant portion of the rent. I have decided to see what April brings before I contact the housing authority in regards to my specific Section 8 tenants as in most cases my Section 8 tenants are also on disability which I am thinking will at least allow them to pay normally. In addition, up here in MA we have existing programs (Homebase and RAFT) that have been in place for many years that act as emergency rent relief programs. While I am still crafting my exact plan as things change, I will likely help any tenant in need navigate these programs...but as you can imagine they will be deluged.
3) I have experienced a bit of the opposite. While certain cities have banned any construction activities, my area has not yet. I actually have more handymen/contractors than work I feel comfortable spending cash on. Since I am trying to conserve cash, I am trying to be careful when and on which projects I should focus.
4) I have always used the BRRR strategy with multi-family and will be looking to do more of them. In fact, I would probably rather have a property that was acquired empty at this point so that I could vet employment information from scratch rather than being stuck with unemployed tenants which I will likely have many. That is assuming you have a strong cash position and can whether both the construction process, potentially lower market rents and any other risk you can come up with. I would not proceed with BRRR without a comfortable cash position.
This is really all off the top of my head so hope it helps. Stay Classy!
Thank you Chris Campeau for this incredibly detailed and insightful post. This is extremely helpful and gives me alot to think about. I appreciate your insight.
Rental Property Investor · Orlando, FL · Member since 2014 · 25 posts · 2 votes
6y
Great questions and answers. On the one hand, I feel that the government will continue to pay Section 8 because they don't want more people on the street. On the other hand, if we move from recession to depression, will the government cut programs like this to stay solvent. They are already printing $1 trillion per day... how long can that continue? When was the last time that the government STOPPED paying Section 8? Does anyone know?