New Investor Seeking Advice On Section 8

[Lolo Druff]

I'm interested in writing an offer on a duplex in Columbus OH that is currently occupied with Section 8 tenants on both sides. Is there anything I need to do, or be aware of when buying an occupied property with section 8 tenants? Do I need to re-apply with the city? This is my first investment property, I plugged everything into my deal analysis calculator and it seems to be like a good deal but I want to ensure I don't have any surprises. 

[Nathan Gesner]

Quote from @Lolo Druff:

Lots of things look good on paper. However, you need to really investigate to confirm that the property and tenants are performing as expected.

Your offer to purchase should include a requirement that the Seller provide all documentation and agree to sign an estoppel certificate (also called an estoppel form or agreement). The estoppel is a form filled out by the tenant, then confirmed by the Landlord, and then accepted by the Buyer. It's supposed to ensure there are no surprises after closing. For example, I often see Buyers purchase property thinking there is a $1,000 deposit but then the tenant claims it was $2,000 because they paid the last month's rent. How will you know? An estoppel certificate fixes this problem.

Some things it may include:
1. Tenant name, contact information, and address
2. Occupancy date
3. Is there a written lease? If so, review it to ensure it matches the estoppel certificate
4. Are there any modifications to the written lease?
5. Are there any verbal agreements or arrangements between the current Landlord and Tenant?
6. Current lease term (expiration date, month-to-month)
7. Current rent rate
8. Rent due date
9. Security deposit amount
You can find plenty of examples by searching for "tenant estoppel certificate doc" or exchanging "doc" with "pdf" for more options.

Here is an example and explanation: Sample Estoppel

Some have a lot of legal jargon but this document does not need to be so detailed. This is an essential tool for anyone buying a tenant-occupied property.

[Remington Lyman]

Quote from @Lolo Druff:

I'm interested in writing an offer on a duplex in Columbus OH that is currently occupied with Section 8 tenants on both sides. Is there anything I need to do, or be aware of when buying an occupied property with section 8 tenants? Do I need to re-apply with the city? This is my first investment property, I plugged everything into my deal analysis calculator and it seems to be like a good deal but I want to ensure I don't have any surprises. 

 Here is a standard clause from the Columbus Realtors you can use to protect yourself:

111 Investment Property Purchase Clause
This Offer is contingent upon Buyer’s satisfactory review of all leases, rental agreements, deposits, past _______ years’ income and expense reports and within ___________calendar days after acceptance of this offer. Seller shall provide such documents and information, representing them to be true and accurate, within _______calendar days after acceptance. During the pendency and term of this contract, Seller shall not change any existing lease, enter into any new lease or make any substantial alterations or repairs without the consent of the Buyer. Failure by the Buyer to so notify the Seller and/or Seller’s Broker in writing, within the calendar days, shall constitute an election by the Buyer to proceed with the transaction.

As @Nathan Gesner mentioned, an estoppel agreement is a great thing to get but I have rarely been able to convince a seller to get that from their tenants during a purchase and you could put yourself at a disadvantage when bidding on properties by requiring the seller to get this

[Nathan Gesner]

Quote from @Remington Lyman:

Good advice. The problem is that many sellers keep terrible records or lie. 

The estoppel is designed to confirm all information with all parties and prevent the landlord or tenant from lying about something. It may not be easy to get a seller to fill one out, but if it's part of the written agreement upfront, they are obligated.

[Jeremy Melloul]

Quote from @Lolo Druff:

I'm interested in writing an offer on a duplex in Columbus OH that is currently occupied with Section 8 tenants on both sides. Is there anything I need to do, or be aware of when buying an occupied property with section 8 tenants? Do I need to re-apply with the city? This is my first investment property, I plugged everything into my deal analysis calculator and it seems to be like a good deal but I want to ensure I don't have any surprises. 

Hey Lolo-

Welcome to the game. For Section 8, you'll need to fill out a change of ownership packet (hyperlinked), which you can also find on the CMHA website. Then, you'll have to register/attend a "New Landlord Class," which is held on the first Thursday of every month. It's an hour long and can be attended via Zoom. Once you've done that, you'll be good to receive your voucher payments.

As far as getting an estoppel, it's not needed. That's what leases are for, and they always (should) state the amount of the security deposit the tenant pays. Make sure you get the leases from the seller. Also, when you receive the final ALTA, make sure the seller credits you the security deposits he received when those tenants moved in. 

Are you working with an agent on this deal? They should be able to help you out with this. Hit me up if you need help. 

Jeremy