All Forum Posts by: Nathaniel K.

Quote from @Nathaniel K.:

Quote from @John Morgan:

I’ve got a couple with sec 8. These people milk the system for years with practically free rent. I don’t blame them. Once they have a voucher, they’re set for like 15 years. 30 years if they’re elderly. I raise rent each year aggressively on them because our tax dollars covers most of the rent, not the tenant. So I don’t care how much I jack up the rent. Lol. One tenant has a college degree and gets food stamps. Yet she drives a new 50k car. Lol.

The pros are the rent is around $150-$200/month more than market rent. You get paid on time. Lol. Cons: the people are lazy and have zero work ethic causing them to take less pride in the houses.

 Thanks for sharing John! 

What's your experience like for inspections? Is the Housing Authority tough for the counties you have Section 8 rentals?

Do you mostly have in state rentals or out of state? If out of state how do you manage them? 

Thanks for your input, I am gathering as much information as possible to make a move on acquiring my first property for Section 8. 

Mine are in state. They’re only 30 min away. It depends on the inspector. Most of mine have been tough. They will find knit picky things to fail them. I expect mine to fail every time. Lol. But I get them taken care of right away if/when they fail. I think there will be more sec 8 vouchers to more and more people as market rent goes way up due to a massive rental shortage. It’s hard to find rentals under 2k/month in my area (dfw area in Texas) and many people can’t afford that plus utilities. And if we’re not charging at least $1800-$2000/month on these class C rentals, we’re losing money. So tenants are screwed and will need more assistance. Especially the ones who milk the government for freebies. Lol

Aloha,

Nobody seemed to mention that with many subsidized units, the Tenant is required to pay a small portion of the total rent our of pocket. Seems like no big deal, BUT...are you ready to file an eviction over $100? or wait 2 or 3 months until they are $300 in arrears? How much will you let them keep from you before it is worth the considerable expense and additional time of an an Eviction? And, once the Housing office is notified of the eviction, they will often stop making your "guaranteed" rent payments because the Tenant is in violation of the terms of the HAP contract. Unfortunately, the Housing office will NOT evict for you, or, at least in my experience, reimburse you for one dime of unpaid rent.

There is also the reality of the HAP annual inspections. This varies from office to office, but more often than not, anything that is damaged, broken, not functioning, missing, or has paint coming off, will need to be repaired or replaced by the Owner, and usually the Tenant is never required to pay, even if it is obvious the item was misused.

You are required to accept all of the terms of the HAP contract without negotiation, and, as with most legal documents, it favors the person/entity that drafted it. You can review the HAP contract and other documents you will be working with, including the inspection checklist and form here:
https://www.hud.gov/program_of...

Section 8 I great but you have to be in a landlord-friendly county/city. You want to be able to evict fast and have a new section 8 tenant lines up

Thats my number 1 rule with section 8 , but overall I think its great, improves during recession ( recession proof), won't ever go away (govt) , and direct deposits...I find if you treat them good they will treat you well but you need to know when to put the foot down

I’ve got a couple with sec 8. These people milk the system for years with practically free rent. I don’t blame them. Once they have a voucher, they’re set for like 15 years. 30 years if they’re elderly. I raise rent each year aggressively on them because our tax dollars covers most of the rent, not the tenant. So I don’t care how much I jack up the rent. Lol. One tenant has a college degree and gets food stamps. Yet she drives a new 50k car. Lol.

The pros are the rent is around $150-$200/month more than market rent. You get paid on time. Lol. Cons: the people are lazy and have zero work ethic causing them to take less pride in the houses.

Some of my clients target a portion of their portfolios to SFH for rental to Section 8 tenants. Not all Housing Authorities operate the same way so it pays to interview them (county office versus city). What has worked for my clients with Section 8 has been:

1. Rehabbing the houses as any other rental - new flooring, granite, etc. And, expecting the tenant to maintain it in that condition by actually teaching them how to do it (the right cleaners, etc).  Photos are taken a move-in and the tenant signs each acknowledging condition; they are given a copy for their records (and many use the photos as bragging rights with their friends and family).

2. Tenants are screened like any other; any past eviction is a deal breaker as is any criminal behavior.  What's different from non-Section 8 to Section 8 is the credit score; many of these candidates have no credit history at all so the score is low (versus being low due to non-payment). 

3. We look for tenants who are employed - most are single parent households, where the mother is a nurse/caregiver, and there are 2 or 3 children who are in school or even in college.  We don't want those folks who have nothing to do so they do nothing good while hanging out full time in the property.  We look at it as a 'hand up' versus a 'hand out' opportunity.

4. Security deposit and renter's insurance are required. There is no grace period on rent...it is due on the 1st and if not paid on the 1st, their caseworker will be notified on the 2nd that eviction for non-payment of rent should commence.  

5. Inspections are at least semi-annually.  No lease is renewed until the property is inspected.  Section 8 will also inspect the property pre-tenancy and annually). Tenants are required to report maintenance issues, maintain the yard, pay utilities and for pest control.

Inherited Section 8 Tenants (those that came with the purchase of a property) have not been the best and we part with those quickly. But every tenant acquired and screened as stated above have been long-time, multiple year tenants - with several who worked their way out of the program to become financially independent (celebrate that!) and remained on as tenants.

Know the program, know the caseworker, meet all the deadlines - including the short window to request rent increases annually - and it's a 'do good' with a great ROI (since our city office pays market rent - and sometimes higher - for a SFH) while providing the landlord with a more secure cash flow source.

Hope this helps...

Some people love section 8 as investors, for the most part the monthly rent is pretty much guaranteed, others hate it as they say it is a hassle with all the inspections and most of the tenants are less than desirable.

I personally have never dealt with section 8, though did have a friend that warned me to never get involved in it and had others say they only deal with section 8...

Quote from @Patricia Steiner:

Some of my clients target a portion of their portfolios to SFH for rental to Section 8 tenants. ....

Hi Patricia, 

Nice post...

What do you do about:

[1] Large menacing sharp toothed attack dogs that live in the backyard on a chain (or inside the house)?

[2] Off the record shack-ups-- (ie), b/f is in the unit as a home, his clothes in closet, but Section-8 has no clue to him being there?

[3] Allowing the unit to slip into a condition of filth and very heavy wear and tear?

[4] Renting out rooms (with a mattress on the floor) as a flop house--subletting while still living there to gain extra spending money.

[5] Criminal activity by 'friends" (who do not live there) who come to visit 24/7-365, aka dope pedaling to cars out front? (as the renter may be under duress to allow it, afraid of the peddlers, and will not want the police involved due to retribution).

Do you just fail to notice this and collect the rent; or try to counsel them or (???)

@Nathaniel K. Hey Nathaniel, first off, kudos to you for having the desire to learn about Real Estate Investing and seek opportunities at age 20. You are well ahead of your peers!

There will be so many opportunities in the future for you that your head will spin, but I think you first need to identify what your goals are with Real Estate. Are you wanting Real Estate to eventually be your primary source of income or are you planning to work in a career and invest on the side to build for your retirement 40 years down the road? The reason this matters is because it will affect your strategy and the path you take.

Sure you can buy in a super cheap market out-of-state, but how will that property do over the long-term from an appreciation perspective if your goal is long-term appreciation? Conversely, if you are wanting to cash-flow from day one, you can count Los Angeles out. I've found that there is a happy medium between the two and you'll have to do what you can to get started in a market that you feel comfortable exploring and investing in.

I would start with an FHA deal if I were you, particularly if you could house-hack either units in a small multi-family or even rooms be renting to friends, classmates, etc. I would actually advise against trying to use private/hard money at this point simply because LA is so competitive in the flipping game, that I would rather you take your time to learn the fundamentals of real estate, establish contacts with good contractors, learn the local rules/laws, etc. before jumping in trying to flip a house with a crazy high interest rate from a hard money lender.

Especially if you like LA and plan to stay here for a while, an owner occupied deal gives you the ability to have more oversight on your investment and begin managing it correctly. If you don't like living here or have been contemplating moving away from CA, then that could be a whole other conversation.