Investing In HUD Apartments

[Mike Ojo]

I recently just started educating myself on HUD. I hadn't thought about Hud or section 8 programs until a friend who is an active investor was telling me about their recent deals. I've been presented with a deal of 200+ units and I've been thinking hard about it, discussing with a group of investors to go in together.

Assuming a deal and financing is put together, what are other things to look out for? Can anyone who is an active investor in HUD multifamily please advise on the basics and what to expect? thanks.

[Evan Polaski]

I can only add so much value. When I first started buying single families in 2011, I was renting Section 8.  At the time I felt like I was getting more rent than I could market rate tenants, given the economy.  Cincinnati MHA used to do annual, now biannual inspections.  There would be a list of repairs needed EVERY YEAR, and I would have to eat that cost.  So chipping paint, cracked outlet covers, etc.  At first I was getting more rent than market, and the repairs weren't too expensive, so worth it.  As time went on, the list got more and more expensive, and rents were no longer a premium to market.

Since the areas recovered I had no trouble finding market rate renters and so am now down to 1 Section 8 tenant.  

In my experience, it was never the tenants that were an issue.  It was the process and the financial burden that caused me to stop renting section 8.  My screening process was slightly different.  It relied much more on landlord references and criminal background, then income verification and credit scores.