Trouble Dealing with a section 8 tenant Before making the deal.

[Vincent Plant]

I'm contemplating buying a property as a rental income property. The property is listed for a great price and was interested right away. I went to schedule a showing (I'm a Realtor) however the listing agent informed me that the property is occupied by a section 8 tenant who is being combative and not allowing anyone in the house because she's worried she will be kicked out if it sells. 

In this market, with a price like that I didn't want to risk losing it. The listing agent told me it rents for $1,250/m and I did a drive by and decided to go ahead and put in an offer for full price with a 15 day inspection contingency, as well as a requirement to provide a lease to give me an opportunity to pull the plug if I saw it was banged up too bad. 

The listing agent verbally accepted my offer but didn't feel right having the seller sign it without giving other agents an opportunity to schedule a showing. She also sent me a one page agreement with section 8 and the seller stating the property rents for $1,019 and claimed there is no traditional lease between the seller and tenant. 

Here we are about 5 days later and this tenant has still not allowed anyone in the house (owner claims to not have a key). I have no lease from the seller, no idea what condition the interior of the property is in, and no idea really about what type of control I will have over this tenant once I take possession (Can I raise her rent, can I have her removed, etc.). 

I know that this place can rent for probably $1,300-$1,400 and will be a cash cow if I am able to get the right tenant, but is it worth it?   

[Patti Robertson]

Unfortunately it sounds to me like you are dealing with a listing agent who does not know what she is doing.  Clearly she is not also managing the property, correct? Here are some thoughts and suggestions...

1) If this is really a SEC 8 tenant then there is a lease. Submitting a sample lease is a condition of approving the initial rent, and then submitting a ratified lease is a condition of the HUD contract. SEC 8 will not turn on payments until the signed lease is received. If they are receiving rent, then they at one time submitting a lease. If you can't get it from the tenant and/or owner, then you can get it from SEC 8 once you close. It really isn't a big deal to get it, in my opinion. Once you see how the tenant is living, you can decide if you want her to stay. If you want her to stay, SEC 8 will require you submit a new lease, or an assignment of lease, anyways.

2) Find out what your state's requirement for giving notice to a tenant for access, have the PM or owner give notice, then show up with a contractor or locksmith who will drill out the lock if necessary so the PM/owner and you can complete the inspection.

3) You can ask for owner for a copy of the most recent SEC 8 fail and eventual pass inspection notices.

4) I am confused by your quoted rents.  In on paragraph you quoted the listing agent said it rents for $1250, and in another you said the listing agent provided you with documentation saying the rent is $1019.  Which is it?

When you submit your paperwork as a new payee, you can request a new rent.  If you really think the market rent is $1300-1400, AND the tenant has enough income to make that rent amount affordable, you have a good chance of getting it approved.

My favorite buys are rentals where the current owner can't control the tenant and are underrenting their units.  That's where you get the best deals and both are easy fixes!