Out of state section 8 investors, how do you manage investments?

Question

Hi all,

I'm in the process of purchasing a single-family home in Oklahoma City, OK. The section 8 voucher pays way above the note of a 3 bedroom 2 bath home. My question is for those who have section 8 single-family home investments, how do you or did you vet your property manager? Do the section 8 rental payments go straight to your account or the property manager? I've been burned being an out-of-state investor in the past. I'm thinking of hiring my own employee past the 20th investment or so or when it makes the most financial sense. But I need help not being screwed by a PM on the first few investments.

Thanks

Janet Chou · Answer

Personally I have 3 doors. However my latest acquisition did exactly the 2 things I mentioned. To me, my time is better used to do other things, enjoy life with my family. I am 35 mins away from my property. I didn't have to be there because I have contacts that I can call. But it's definitely taking extra time away from my schedule to take care of those things. My motto is share the wealth. One person can't make all the money, let others help you. 95% of my oos use PM services. I do have a client manages oos. He uses my PM to rent it out for him then he self-manage. But when things happened, he still called my PM (sewer backup into the house, flooded basement). In my experience, you really have to have someone that you can call upon and trust locally in order to self manage successfully.

Matthew Irish-Jones · Answer

@Ben Scott Rent collection is the easy part.  What about section 8 inspections, annual Inspections, lock outs, lock changes, turnovers, CO detector compliance, smoke alarm installs, doors not closing, water leaks, lead paint issues, collection issues, evictions, vacancy, etc…

If I’m spending 10-100K or more on a property across the country I’m happy to pay a PM service to keep my asset in good standing.  It’s an investment after all and to sell it in ten years it has to be kept up.

Janet Chou · Answer

Most of my out of state clients have a PM. It's just easier when things happen. The 8-10% management fee is well worth it when you need someone on the ground. No matter big or small things will happen. Do you want to spend New Year's eve calling hvac guy thousands of miles away because your tenants' furnace will only blow cold air? Or do you want to wake up first thing in the morning to a text telling you that they see sewer coming out in the yard? REI is an investment, it shouldn't be a 2nd job. Let someone has a share of your wealth to take care problems for you. So you can enjoy doing what you want.

Ben Scott · Answer

Would you need a PM for just one property? Rent collection is done since Sec 8 direct deposit the rent into your account. And sounds like you're inheriting a tenant.

Cara Sides · Answer

Hey Henry! I am in Tulsa myself, but I would love to get you set up with our OKC property managers and get some questions answered for you. Do you have time for a call today?

Rhett Tullis · Answer

I would not recommend trying to do remote management of a section 8 property.  especially with how okc handles it.  we have 3 offices here in the metro for section 8 tenants.  it can be a mess at times depending on the office.  hopefully they are with the 4th st. office (the Norman office has been ok as well) but if not it will be a bit of a hassle.  we manage around 60 units in the section 8 program right now.  not my favorite program by any means.  Don't misunderstand though , overall the tenants are great its the process and paperwork that are the real chore.  While that PM sounds like they may have been an issue on repairs we also select our own vendors for repairs.  (we don't own a repair company we use subs).  There is alot of risk in owners sending out unlicensed, unqualified or unscreened vendors into a tenants home.  It is a certain recipe for disaster.  we are always happy to add your vendor to our approved list if they can pass our screening process and are professional and punctual.

Patti Robertson · Answer

@Henry Geneciran - Just like one “slumlord” does not define all landlords, one unscrupulous PM does not define all PMs. Check reviews, which are the modern day references. Get a referral. A good PM should net you more income than operating without.

Alyssa Dyer · Answer

Lots of good responses here.

Most managers I know collect the funds from Section 8 and then pay out to owners on the same date each month.

One of the most annoying things about working with Section 8 is just the old school communication. They'll mail you to notify you of inspections. When they do that, they just give you a time frame of when they're going and the PM and tenant have to be there. Mentioning this because you definitely want to have someone who can go to those on short notice when you get your letter in the mail. If you go the self-management route you might be able to find a newer agent who is cutting their teeth in the industry and looking to make extra cash. Just pay them like, a flat fee or an hourly rate or something to help with in-person things.

I agree with @Drew Sygit about confirming operations when you're vetting. Each management company operates differently, so they're not all going to be a fit for you. I'd get a really good idea of what you want, and then just interview until you find that. But if you know you want to self manage and have the time to do that, then just develop a good relationship with a new-ish agent. Let them know you're looking for help until you can hire someone. You can do most of the work, and they can just be there for on-call work.

How were you burned by past PMs? Sounds like repairs and/or rent collection might be concerns of yours?

Scott M. · Answer

"Do the section 8 rental payments go straight to your account or the property manager?"  Just like with a market tenant all rent should go to the PM, they record it and send it to you along with your monthly statements.  No different with Sec. 8.  PM fills out the paperwork, PM is the contact etc.

Drew Sygit · Answer

@Henry Geneciran - sounds like you need to do a better job screening Property Managers AND understanding how each one operates. Read below...In our experience, the #1 mistake landlords make when selecting a Property Management Company (PMC) is ASSUMING instead of CONFIRMING.

It's often a case of not doing enough research, as they don't know what they don't know!

Landlords mistakenly ASSUME all PMCs offer the exact SAME SERVICES and PERFORM those services EXACTLY THE SAME WAY, so price is the only differentiator.

So, the first question they usually ask a PMC is about fees - instead of asking about services and HOW those services are executed.

This also leads them to ASSUME simpler is better when it comes to management contracts.

The reality is the opposite - if it's not in writing then the PMC doesn't have to provide the service or can charge extra for it!

We have a 14-page management contract that we've added our real experiences to over the years, with the intent of protecting both us AND the landlord. Beyond the Monthly Management, Placement & Maintenance fees, all other fees in our contract are IF EVENT -> THEN fees.

We don’t know any PMCs to recommend in the area mentioned, but since selecting the wrong PMC is usually more harmful than selecting a bad tenant, you might want to read our series about “How to Screen a PMC Better than a Tenant”:

https://www.biggerpockets.com/member-blogs/3094/91877-how-to-screen-a-pmc-better-than-a-tenant-part-1-services-and-processes

We recommend you get management contracts from several PMCs and compare the services they cover and, more importantly, what they each DO NOT cover.

EDUCATE YOURSELF - yes, it will take time, but will lead to a selection that better meets your expectations & avoids potentially costly surprises!

P.S. If you just hire the cheapest or first PMC you speak with and it turns into a bad experience, please don’t assume ALL PMC’s are bad and start trashing PMC’s in general. Take ownership of your mistake and learn to do the proper due diligence recommended above😊

Out of state section 8 investors, how do you manage investments?

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