SECTION 8 ANYBODY????

Rehabbing, Fix and Flip, Rental Properties
1

Hey all,

I hope all is well. I haven’t been on here in a while. The other day I received a phone call about a property that had some profit potential. It is a 3 family (3 1 bed apts) in an area that an attempt to revitalize is being made.

The house is section 8 approved (at least 2 apts are).

Ok so here comes the newbie questions:

Only 2 apartments are rented. Should I require the seller to deliver the property fully rented?

Is it possible that only 2 apartments were approved for Section 8 and one wasn’t?

When the tennant moves out, does the government subsidize any repair expenses?

I am sorry for so many questions in one post, but my offer was accepted and the sales contract was signed today. I did not expect such a fast agreement in price. Can anyone provide some insight in this?

-Joe

2

Joe,

I would not require the owner to sell the property with all 3 units rented. If you do so, the owner will probably put just about anyone in there (which is something you definitely do not want).

Buildings are not pre-approved for section 8. They are inspected by HUD once a section 8 tenant is approved for your apartment. Any individual house or apartment could pass a section 8 inspection this year and then not pass one next year. Virtually every house or apartment CAN be section 8 approved - if you want to spend the money to bring it up to section 8 standards (which is not hard).

The government does not subsidize any repairs once a tenant moves out.

You did not mention the most important factors in deciding whether an income property is a good buy - cash flow, equity, quality of tenants, and contents of current leases. Due diligence on a building with tenants is much greater than that for a vacant SFH.

Good Luck,

Mike

3

Propertymanager,

You bring up a good point regarding due diligence with regard to tenants. How would one go about checking out the tenant? Would they need to get permission from the tenant to actually check into the tenant? Can one speak to the tenant before buying the property?

Thanks

4

I would check out the tenant in several ways.

  1. Ask the owner for his records regarding the tenants. If he is a competent landlord, he will already have done a credit check and a criminal background check.

  2. Do a criminal background check yourself. You can do this for free on the internet (via your county’s court web sites) or you can pay a few bucks to have it done. You won’t be able to do a full credit check without the tenant’s written permission on a proper form.

  3. Talk to the tenants in person. Set this up with the owner and go talk to them.

  4. Ask each tenant about the other tenant(s). Ask any neighbors you see about the tenants.

Good Luck,

Mike