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Hey all.
Im targeting a specific area near where I live and focusing on section 8 homes. All the homes on the market are what you would expect them to be in the condition they are in. However gut rehabbed homes are coming on the market about $15k more than the older homes.
Here are some more details.
Older homes: $115k-$125k
Section 8 tenants already in place paying $1350
Homes are beat kinda beat up, exactly what you would expect from section 8. nothing crazy, just low income tenants.Gut rehabs coming on market: $130k-$140k
No tenants, can rent for $1350 with section 8.What would you prefer and why?
Bryon,
A number of questions for you before your questions can be answered.
First, how much experience do you have as a landlord?
How many landlording courses have you taken, and from whom have you taken these courses?
How much experience do you have with Section 8 housing? Do you understand that with Section 8 housing your partner is the government?
It sounds like the neighbors you’re looking to own investment property is a bit rough; is this a the case?
Bill Cook
First, how much experience do you have as a landlord?
7 yearsHow many landlording courses have you taken, and from whom have you taken these courses?
none. Dont need to. I built two 7 figure businesses by myself. I do my own researchHow much experience do you have with Section 8 housing? Do you understand that with Section 8 housing your partner is the government?
none. However I have extensive time spent understanding this particular HUD program in my area. Every area is different. They are not my partner. They are subsidizing the tenants rent. Other than annual home inspections to make sure its safe for tenant, they arent involved. I need to screen my tenant like any other tenant and abide by all the normal rules and laws.It sounds like the neighbors you’re looking to own investment property is a bit rough; is this a the case?
that is subjective. Its low income and with that comes many things related to that class or level of living. I am familiar with the area and I have no issuesafter talking with some peers. spending more money on a rehab property that could be done really badly over one that is not rehabbed is not the way to go for this business model of renting. As long as there are no MAJOR issues of course. This is strictly a cash flow play, appreciation is slower than a hot area obviously.
Bryon,
Our approach to landlording differs quite a bit. That said, I’m a firm believer that my way is not “the” way, it’s just “a” way.
I put great value in learning from great teachers, landlording and otherwise.
When it comes 8 housing, because government has a significant say-so concerning what you (the landlord/property owner) can and can’t do, it’s more of a partnership than a subsidizer.
Experience has taught me that owning rental property in rough neighborhoods comes with many more challenges than does a rental in a nice, owner-occupied neighborhood. I learn this from David Tilney, one of my landlording teachers.
Your original question is which would I prefer and why? My answer: Neither one. That said, I’m obviously the wrong person to answer your question.
Bill Cook
I appreciate you.
However…
“When it comes 8 housing, because government has a significant say-so concerning what you (the landlord/property owner) can and can’t do, it’s more of a partnership than a subsidizer.”
This is far from the truth. They dont have any more say than any other local or federal law that landlords have to deal with.
Bryon, guess we will agree to disagree.
Many of my investor friends have implemented Section 8 with their rentals due to the “guaranteed” rent payments.
Most have run into a variety of problems during Section 8’s inspection process. If the inspector finds one thing not right with the property, a passing inspection is not given. This means the house cannot be rented to a Section 8 tenant. Instead, a new inspection must be scheduled. Most inspectors won’t let you – the property owner/manager – resolve the problem their on the spot. Often times it takes days/weeks to schedule a new inspection. When it’s time for the new inspection, often is the case a different inspector shows up. If this new inspector again finds something wrong with the property, the investor must again schedule a new inspection, which again can take days/weeks. Meanwhile the investor’s property is sitting vacant…often times for more than 30 days…which means no rent plus the investor must switch from a Landlord insurance policy to a Vacant Dwelling policy on the property, which is much more expensive.
Another common problem is when a landlord is having an issue with his/her Section 8 tenant. Maybe the tenant is not taking good care of the property, maybe the tenant is paying late, maybe the tenant is not being a good neighbor, maybe the tenant is not being easy to work with, no matter the problem, if the landlord decides enough is enough and seeks eviction, the chances the Section 8 tenant will turn to a government agency for assistance is much higher than if the landlord is dealing with a non-Section 8 tenant.
Bryon, I’m not telling you to not do Section 8 housing. You’re a grown man, do whatever you want. That said, I want anyone reading this thread to understand that I disagree with you when you say, “They dont have any more say than any other local or federal law that landlords have to deal with.” This is flat wrong.
Bill Cook
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