The market rents appear to be at about $1000 - 1100. HOWEVER Section 8 prices for 4bedrooms are at $1400. That would boost the gross rents up to $2800 (which would definitely allow the deal to work).
My question is with rents at $1000/month, my max offer price would probably be about 110k. HOWEVER does anyone make an offer based on Section 8 rents?? If that were the case, $2800 (gross rent) would definitely cash flow.
Are you talking about a “payment standard” of $1,400 for Section 8 (which includes the utility allowance) or are you talking about the actual rent the landlord will receive? There is a BIG difference between the two!
If you know for a fact that you can rapidly fill the duplex with Section 8 tenants, then I would consider the Section 8 rent. Otherwise, I would consider the normal rents.
Hmm, not sure! How can I find that out, just call section 8 office? When you say utility allowance, is that supposed to cover all the utilities for the month and then whatever is leftover is rent to landlord??
I WOULD RECOMEND THAT U DO WHAT U FEEL IS RIGHT…I THINK SOME THINGS THAT YOU MAY WANT TO CONSIDER WHEN USING SECTION 8 TENENANTS BEFORE U SET THIS DEAL UP BASED SOLEY ON RENTING TO SECTION 8 TENANTS…
BEING THAT U HAVE FOUR BED ROOM 2 BA UNIT U WILL HAVE A LARGE FAMILY, MABY A SINGLE MOTHER WITH WITH 3 UP TO “6” KIDS COULD ACTUALLY LIVE THERE COMFORTABLE. THINK OF THE DEPRECIATION ON THAT PROPERTY WITH 2 LARGE FAMILIES THERE. IM NOT SAYING DONT DO THIS DEAL. IF THE NUMBERS WORK THEN U SHOULD DO IT, JUST CONSIDER THAT. YOUR PROPERTY IS ONLY AS VALUABLE AS THE TENANT U HAVE PAYING THE MORTGAGE FOR YOU, AND YOUR ALSO GOING TO NEED A GOOD PM COMPANY TO KEEP IT UP TO SECTION 8 STANDARDS SO MAKE SURE UR NOT LEAVING ANY $ ON THE TABLE WHILE NEGOTIATING, AND SEE IF U COULD USE THAT 10k FOR REPAIR TO COME OUT OF THE PURCHASE PRICE… BE SMART
-VINCENT
Vincent,
Glad to meet you.
Just as a courtesy when you post do it without “All Caps” as it sounds like you are “Yelling” at your fellow posters.
I understand it is your first post and welcome to REI Club.
Also, any way I can find this out? I asked the section 8 office if they have many people that qualify or are looking for 4br places and she just said they have a bunch of people. How would you go about finding out if you could find section 8 tenants?
Section 8 tenants are just a subset of normal tenants. If there are a bunch of Section 8 vouchers out there, you can get Section 8 tenants. As for determining what Section 8 will pay, go ask them. I’m not saying call them, I’m saying go to the local Section 8 office and talk to them in person. Don’t leave until all your questions are answered. EASY!
Also remember that Section 8 needs to perform an inspection to qualify initially and continually. I think they inspect annually, but like Propertmanager said, go to the local office and talk to them. They’ll tell you what they’ll pay and what you’ll need to do to get it. Good luck.
Well I found out they pay $1400/month. Whether or not it includes utilities I’m not sure yet. Also, I’m stillnot sure how to tell how many “vouchers are out there”. I will ask section 8 today if they have the number or can tell me.
It is absolutely critical that you determine whether that number includes the utilities. I’m betting it does. Once you determine that, you should understand that every tenant gets a different amount due to the individual circumstances. If this is the first year on Section 8 for the tenant, that can lower the amount of rent. The types of utilities in the house can make a big difference. The tenant’s income makes a difference. It isn’t as simple as saying that Section 8 pays $1,400 for a 3 bedroom. While you’re at the Section 8 office, have them give you the worksheet that they use to calculate the rent and have them give you a copy of the utility allowance sheet for your area.
I talked with them and they said that it includes utilities. They also said that they don’t have many people that need 4 bedroom places AND they aren’t accepting any new applicants at this time. This seems a little discouraging. I guess I need to make my offer based on market rent without section 8…?
You don’t “find” Section 8 tenants, they come to you. Advertise your rental as you would for any mainstream tenant. Include in your ad “Section 8 Welcome” or words to that effect. A Section 8 applicant with a voucher for a 4 BR unit who wants to rent from you will fill out your application.
In my area of the country, Section 8 does not pay any more than the market rent for a comparable vacant property. If my competitors are only asking $1200 per month without utilities, Section 8 won’t give me $1400 per month. In fact, the Section 8 office will not approve any rent higher than what I am advertising for mainstream tenants.
When the Section 8 folks told you that they are not accepting any new applications, they were saying that they are not adding any new participants to the Section 8 program right now. Participants who are already enrolled in the program and have a Section 8 voucher can still rent from you if your property passes the health and safety inspection.
Well the current owner had rents through section 8 at $1150/month, BUT when running rental comps for a non-section 8, I had a hard time coming up with that high of a number.
The rental #'s I came up with are from leased rates on MLS. I think I’ll drive out there and see if I can’t find some for lease places to see how much they’re asking. Then again, if they’re for lease they haven’t rented yet…
You’re doing things the hard way. Just pick up the local paper and call similar rentals in the same neighborhood. That will tell you what the rents are. EASY!
The key word here is HAD. It does not matter what rent the previous owner got. If you are buying a vacant property, the Section 8 rent you will be able to get will be comparable to the market rents for comparable properties in your area.
I have a Section 8 tenant in one of my units now at a monthly rent that is about $100 higher than the current market average for a comparable property. If my tenant vacates, I won’t get the same rent that I HAD gotten. Instead, I will only get the lower rent that Section 8 will allow in today’s market.
By the way, this tenant has been with me for 11 years now so I don’t expect him to move any time soon. The rent is $935 per month. The tenant pays the first $53 plus electric (I pay water/sewer), Section 8 pays the rest. This year is the first year that Section 8 has not approved a nominal rent increase. I did not really expect an increase since my current rent is quite a bit higher than the mid-point of the rent range for a comparable property.
Another option may be to contact some property management companies along with advertisements. Ask what the market rents are for the EXACT area. Price can fluctuate dramatically just a few blocks away. You might have a “war zone” within 5 minutes of a nice area. You can even set up appts. to see what the compettion is offering. Eventually you should be able to come pretty close to the rents you can ACTUALLY recieve for that part of town. I think if you limit yourself to just Section 8, you’re limiting your potential rental pool. In my area, rents vary from $500 to $1000 depending on the area and # of bedrooms, parking etc… I guess you can sum it by saying, KNOW YOUR MARKET. :cool
I just had a property manager tell me that he is trying to get $1050 for a similar duplex 1 block away. He only manages this one property. I’m not sure how he is advertising though… I don’t see this place advertised on CL or in the local newspaper.
I see 3br places for $950-1050, and 4br places from $1000 - 1150. I think I can get $1100. I guess it also depends how nice this place would look when it’s fixed up…
I would also like to validate my repair figure amount. I estimated 10k for repairs. This is basically what I saw:
1 side of duplex is almost perfect. Just needs a few replacement laminate pieces and maybe a replacement plastic tub. Also there is a roof leak above the bathroom and I think from a tree that is in that spot. So I will need to touch up the ceiling.
The other side is very dirty. Every single wall/ceiling is covered in grease. It looks as if something exploded in every room of the house. Some of the kitchen countertop/cabinets need to be fixed/replaced (thinking just replace a couple at home depot). Needs paint for 1600sq ft, flooring for 1600sq ft (laminate? linoleum? cheap carpet? something cheap…) I estimated about 4k for flooring work and paint.
Kitchen countertop/cabinets: $500
dishwasher/stove: $200
2 toilets: $100
1600sq ft generic off white paint: $500
1600 sq ft flooring + installation unless I do myself: 4k?
patch the roof in 1 spot above bathroom where tree is: not sure if I’ll do myself: $500?
plastic tub: $300
The place is built in 2001. I think plumbing/foundation are fine. Anything I could be missing?