Section 8 Tenant with Interesting Story - Out of State Property

[Dwayne Clarke]

Good Day!

I purchased a section 8 investment property that was rehabbed in December 2020 and had a tenant in the property at time of purchase paying $550/mth -- December 2021.   The property was originally listed at $65K, I made an offer of $50K but it was turned down because the offer was too low.  A few days later the seller said his business partner fell through on a deal and he needed quick cash so he countered with $53K cash if I could close before the year was out.  I skipped the inspection process because a trusted friend in that state looked at the property and said it was in great condition and also mentioned that section 8 does yearly inspections and the tenants wouldn't be in the property if it didn't pass the yearly inspection which made sense.   Before my friend left the property, and while on the phone with me, he told the tenant 's brother that I would be driving up from another state the next day to see the property.  I live 8 to 9 hours away and drove to see the property but when I got there the tenant's brother said he wasn't expecting me so I resorted to an outside walk-through and drove back home because I didn't want to violate the tenant's privacy...the tenant's brother lied to my face.

Fast forward to 1 month after the purchase, the newly hired property manager asks the tenant to make a list of any items that are of concern and the list is unbelievable: ceiling falling, no heat, mildew and mold in closet, bathroom with a major leak, mold all furniture in living room, no proper ventilation in house and no air in summer.  

The concern is I think the tenant is fabricating the majority of these items and now I have to dedicate resources to follow up which is going to cut into the profits...I only have 1 property. I can't help but wonder if she is trying to have HUD remove her from the property. I was aware that there may be minor roof repair when I bought the place but it's expected to be a few hundred dollars so I wasn't concerned..I have the property manager handling. There was also a plumbing leak on the property and that I had fixed, not an issue. However, the allegation of mold on her furniture, no heat, no A/C, no ventilation seems like a rantings of someone grasping at straws, especially when the original MLS listing has pics of the interior of the house. I find it highly improbable that 1 year after moving into a rehabbed home that the heat, a/c, and ventilation (I assume the windows), all needs repair.

With that said, I have all intentions of strategically remedying any legitimate concerns in order of priority. If the property manager deems even one complaint as unfounded, should I report this tenant to HUD to have them removed? Is it worth the hassle? I chose a tenanted property with a section 8 as my first property because I was trying to play it safe. I'm unable to invest in South Florida because it's the wild wild west down here...a $725K house went pending 40 mins after being published on the MLS this week and that's becoming the norm. This new interesting situation with the Section 8 tenant is slowing down the possibility of me getting another property because I wanted to finalize these concerns before I spend the remainder of my $20K.

What are your thoughts please?  Thank you in advance!

[Jay Hinrichs]

Quote from @Theresa Harris:

The property manager needs to go in and do an inspection.  Also if your friend viewed the inside of the property, they would have seen this and reported it to you.  Not like you can miss that much damage especially if they have properties themselves.

24 hour notice go inside and verify.. also 550 rent is not enough gross income to sustain a SFR you will lose money on this deal over time it will be a slow bleed. I personally would sell ASAP.. and set your sights on rentals that have at least 1k a month in income so you have enough gross revenue to put aside a decent amount for cap ex.. or just save your cash your not going to get ahead financially owning a few low end very intense to mange section 8 homes keep in mind Section 8 tenants by and large are professional tenants they know the laws better than you do and your PM ..

Also the annual inspection is not a home insprection they just look for safety issues and such .. the house could have major issue and still pass hud insrpection