All Forum Posts by: Dave Versch

Jodi,

Thanks for responding. I've decided not to get involved. By the way, this particular property is in Buffalo, NY, not in NJ.

Mike,

Thanks for your input. I've decided to walk away. I'm not necessarily judging anyone, it's just that if I'm going to be involved in anything "risky", I'd prefer being involved from the beginning. At least that way I know the full story and what my risks actually are.

Sorry... made a typo with the one of the numbers in my original post. Section 8 is paying $453, not $430.

Hi. I'm in a situation where I'm about to close on a rental property that has a Section 8 tenant. I just found out that the current owner and the tenant have a side agreement where the tenant pays the owner almost $100 per month more than what Section 8 is aware of. According to the HAP contract with Section 8, the total rent is supposed to be $583 per month, of which the tenant should be paying $130 and Section 8 pays $430. The lease that the tenant signed with the landlord calls for $675 per month. So what's happening in actuality is that although Section 8 is paying their share of $430, the tenant is (knowingly) paying $222, unbeknownst to Section 8. Incidentally, the current property manager employed by the current owner has agreed to stay on, so at least there's continuity...

Opinions anyone? Is this common practice? Should I risk getting involved in this, or should I run as fast and as far away as I can?

Mike,

Are you absolutely 100% sure that's what it means? The wording in the HAP is pretty confusing.
Have you done section 8's?

Can someone please explain these two terms found in the HAP contract:

"Initial Rent to Owner" ($583) and "Initial Housing Assistance Payment" ($453)

My tenant's rent is supposed to be $675 per month, and I was under the impression that Section 8 would be paying $583 of that each month. Given the above, was I wrong?

In theory, I'd say that the good news is it should provide some support for home prices since homes will be more affordable, it will clear some of the huge inventory, and it will allow for some great refi opportunitues. On the negative side (for us landlords) more people will be able to afford to own, so the rental market will probably suffer, with tenants being harder to find and some downward pressure on rents due to the decrease in demand. Of course these days we're in such uncharted waters with the economy, who knows what might happen. If unemployment goes up to 8 or 9% next year which is very possible, low mortgage rates will be irrelevant since you can't buy a house with no job (not any more anyway). Plus, lately there always seem to be a whole bunch of unintended consequences every time they try to fix something. My guess is that dropping the rates might just keep things from getting worse. Personally, I'm looking forward to refinancing my home and my rental property.

They would give an equity line if they won't give a refi?

Not that it's right either way, but how does this moron know the difference between a foreclosure and a house that happens to be vacant for a couple of months? I don't get the feeling he's doing a whole lot of research.
Wait till there's a fire or an accident in the house. Three guesses who gets sued by these slobs? The landlord, who else!! It's your fault that you didn't put in strong enough locks to keep these jerks out.
This is all just an extension of the whole bailout mentality. We've gone from "Let's buy a house that we won't be able to afford once the rate adjusts and worry about that when the time comes", to "Screw it!! Why bother with all that messy paperwork, let's just move in!!"

Thanks to Mike, Jon, and everyone else for your responses.

One other related question -- I've decided that section 8 rentals are probably a better place for me to begin my investing, since I'm guaranteed at least a portion of the rent each month, and the cost of entry into this market is lower. Do you think that having Section 8 tenants would or should have any bearing on the 50% rule? In other words, does the fact that a large portion of the rent is guaranteed (presumably lowering potential collection costs) make it a little more acceptable to do a deal where the expenses come out to 55 or 60%, or do you feel that it's totally irrelevant?