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

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

Vincent Plant
West Chester , PA · Member since 2017 · 104 posts · 19 votes

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?   

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Patti RobertsonBusiness Member
Property Manager · Virginia Beach, VA · Member since 2016 · 2k+ posts · 2k+ votes
7y

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!

757-472-2547
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  • Patti RobertsonBusiness Member
    Property Manager · Virginia Beach, VA · Member since 2016 · 2k+ posts · 2k+ votes
    7y

    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!

    757-472-2547
    4Reply
  • Richard Sherman
    Rental Property Investor · Salem, OR · Member since 2017 · 696 posts · 660 votes
    7y

    I literally agree with everything that @Patti Robertson said!  100%

    1Reply
  • Wesley W.
    Rental Property Investor · The Vampire State · Member since 2013 · 2k+ posts · 2k+ votes
    7y
    Originally posted by @Vincent Plant:

    ...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. 

     LOL - I'd say she's virtually guaranteeing that result if she continues with her conduct.  

    Anyhow,  the advice given by @Patti Robertson above is great!

    And getting her out would be my first order of business after COE.

    2Reply
  • Vincent Plant
    OP
    West Chester , PA · Member since 2017 · 104 posts · 19 votes
    7y
    @Patti Robertson Thank you so much for the detailed response it helps a lot. When the listing agent was telling me about the property initially over the phone she said she “believes” it rents for around $1,250. Then after I submitted the offer and pressed a bit about them sending a lease she sent over the one page section 8 agreement that showed a rent of $1,019. So clearly she lied or your right, she doesn’t have a clue. My biggest concern is taking the deal and then being stuck with the rent at $1,019. It just doesn’t cut it. You mentioned if I can show comps, AND if she can afford it, they will raise the rent up to market value. Well what if she can’t afford it?? On the agreement they sent, it lists that it’s effective until 7/1/19. So do I have to wait until that agreement expires before making any changes? And, if I’m not able to raise the rent and she is compliant am I able to remove her just on the fact that I want to get more for the property?
    1Reply
  • Patti RobertsonBusiness Member
    Property Manager · Virginia Beach, VA · Member since 2016 · 2k+ posts · 2k+ votes
    7y

    @Wesley W. - Great minds think alike.  Only thing I’d suggest is that kicking the tenant out may not be necessary.  The SEC 8 tenant has a very valid reason to fear being kicked out by a new buyer, not that this excuses her choice to violate the owners requirement to inspect.  SO many landlords have bad conceptions and are unwilling to accept SEC 8.  Just last year I picked up the best tenant who lived by himself in an apartment he has lived in for 16 years.  He is developmentally challenged but works two jobs - about 60 hours a week. His mom, who he had lived with, had passed away that year and his apartment building was sold. The new owner wasn’t willing to take SEC 8, so after having just lost his mom, he was kicked out of the home he had lived in for 16 years.  This sweet, hard working adult man, literally cried tears while I helped him complete my application. He will likly live another 16+ years in his current apartment because some short sited, ignorant landlord was unwilling to fill out a few pages of paperwork.

    Just sayin’.  ;)    

    757-472-2547
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  • Thomas S.
    Member since 2016 · 13k+ posts · 12k+ votes
    7y

    Going forward your priority , assuming you purchase the property, will be to get rid of the tenant. She is clearly too controlling to be allowed to stay. Thinking she can prevent the sale is not acceptable tenant behaviour and she must go. The only reason she is still there is because the present owner has ignored his responsibilities and has probably never even been to the property since she moved in.

    Biggest question is how fast can you get her out. You will likely have to use the threat of her losing her welfare to motivate her to leave. Once you own you file for eviction based on something/anything you find and force her to leave rather than lose her free ride.

    Forget the fact she is S8 her behaviour right now is grounds for you to not want to keep her a day longer than necessary. If you do purchase the property begin the process immediately. Time is money.

    1Reply
  • Patti RobertsonBusiness Member
    Property Manager · Virginia Beach, VA · Member since 2016 · 2k+ posts · 2k+ votes
    7y

    @Vincent Plant - Don’t worry about the current tenant.  She is short term at worst.  Housing Authorities seem to handle purchases different ways, and I haven’t figured out if there is a reason for the difference or of the HAs can just set their own policy about this.  I have had scenarios where the HA allowed the existing lease to remain in tact if the buyer submitted an assignment of lease contract, signed by the buyer and seller, to the HA.  The only thing required in this scenario is proof of purchase and paperwork identifying the new payee and their 1099.  I have also had scenarios where the HA required the Buyer to enter and submit a new lease and a new set of paperwork, starting the process all over minus the inspection.  If you are submitting a new lease, you will always have an opportunity to ask for whatever rent you want. If you are being assigned the current lease, and the HA is going to allow that to transfer, your ability to raise the rent will depend on how long the tenant has lived there.  Rent is locked for the first 12 months of the lease.  If she has been there beyond 12 months, you will have the ability to ask for an increase.  HAs have different policies regarding rent increases. Some allow you to request an increase anytime, as long as it is not more than 12 months since the last increase.  Others require it to be done some period before the current expiration.  Other have set times of year they process all increases. Find out of your HA offers a landlord orientation class. If so, you can get most of your questions answered there.  If they don’t they likely at least have a website where you can find some answers in the section called Housing Choice Vouchers.

    Bottom line is, as long as you know the fair market rent, don’t worry one iota about this current tenant.  Think of her as your ace in the hole, because she is creating a barrier of entry for other investors and making the owner and agent think this sale will be impossible.  You privately sit back knowing that the tenant is an easy fix - either to rest her mind at ease and keep her in place for a long time, or move her out.  

    You could try knocking on the tenant’s door and talking to her.  Explain that you find her being with SEC 8 a huge benefit and you really hope she stays.  Tell her you want to be a good landlord and ask her to share with you anything that is wrong with the place. If she won’t answer, write her a hand written note saying this, and ask her to call you.  Chances are,  she will.

    Find out if the tenant pays any portion of the $1012 rent.  If she does, she has income.  If she does not, she doesn’t have income.  She may still have income if she doesn’t pay any rent, but if her income is low it may only be enough to cover the cost of utilities. Personally, I would not move a tenant out of a place I purchased who is living relatively cleanly and doesn’t cause problems, just because the rent is a little below market.  I’d rather keep the cash flow going and delay the vacancy.

    Please keep us posted. Inquiring minds want to know how this one turns out!

    757-472-2547
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  • Patti RobertsonBusiness Member
    Property Manager · Virginia Beach, VA · Member since 2016 · 2k+ posts · 2k+ votes
    7y

    @Vincent Plant - One more thing.  It doesn’t sound like the listing agent “lied”.  It sounds like she was mistaken.  There is a difference.  She probably did “believe” it rented for $1250 when she made that comment to you.  She may have been told the market rent was $1250 and that’s what she was thinking of.  Just want to point out that listing agents are human too!

    757-472-2547
    1Reply
  • Thomas S.
    Member since 2016 · 13k+ posts · 12k+ votes
    7y

    "You could try knocking on the tenant’s door and talking to her. Explain that you find her being with SEC 8 a huge benefit and you really hope she stays. Tell her you want to be a good landlord and ask her to share with you anything that is wrong with the place."

    This is not necessarily a bad idea. If you can't get the info from the owner you might get her to drop her guard and open up you providing information to use in your decision to purchase. This may also afford you the opportunity to gather the info in advance that you need to evict her. My guess would be that she is mentally unstable, not uncommon for S8, so be prepared.

    1Reply
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