New Sec. 8 Investor/Landlord

[Yusuf Salloum]

Hi all,

I'm a new real estate investor looking for perspective from folks with more experience in renting to Sec 8 tenants. I did a lot of reading in 2016 and decided to take the plunge in late 2017. I started in affordable housing because from what I've gathered a lot of successful investors start in this space. 

I bought a 3 unit property in the far West Chicago area (North Lawndale). The neighborhood is pretty rough, but not as bad as other parts of Chicago with regular murders. The property grosses about 3600 fully rented. My mortgage/taxes/insurances comes out to about 1250 a month. After the water bill ($150/month) and general maintenance (est. $500-600/month) the place should net about about 40% of gross rents. I didn't factor in property management fees since the contractor I work with doesn't charge me a monthly fee. He just charges for the work he comes out and does.

While that all sounds nice and dandy on paper, reality has been a bit harder. One tenant moved out 2 months after I bought the place. Her unit needs about $1,000 in work to get it ready for the next tenant so I'll miss out on at least two months of rent. There's also been a mice issue that will not go away. I'm not trying to treat the property like a Ritz Carlton but I can't have tenants threatening to call the city if I don't get rid of the mice problem. 

I'm looking for some advice from folks with experience in Sec. 8 properties and West Chicago more generally. I underestimated a couple things going into the deal:

- The nature of the tenants:  they are rough on the property, will do anything to dodge their portion of the rent but will always complain when there's an issue. 

-The wear and tear on capital assets: The furnace, water heater, washer and dryer, and oven are all abused. Given the cost of these items my goal is avoid replacing them for as long as I can.

Would love to hear more from folks on how they deal with unruly tenants, and their strategy on maintaining profitability in Sec. 8 investing. I don't think the property will appreciate more than 1-2% a year so for me cash flow has to be solid to make this worthwhile. 

Lastly would appreciate any perspective on the far west side of Chicago. From what I can tell there is some gentrification happening. It's definitely not as nice as Humboldt Park, but I hope North Lawndale can get there in time. The demographics of the Chicago land area aren't great given the stagnant population, so I don't know if there will be any real impetus for gentrification in this part.

Thanks all