Buying Rental Property For Section 8
Hi..everyone, I am new in this forum.
I am planning to buy rental property that rented for section 8. This is a rowhouse in Baltimore city, Maryland that cost around 40K and it;s been rented around $600-750/month.
What things that I need to know before buying this property?
I deeply appreciate for your comments.
The good thing about section 8 is most of the rent is guaranteed. Be selective in tenant selection as you would be on any other rental property. Some of your potential tenants will tell you that you must rent to them or section 8 will remove you from the program. This is not true.
I have been using Section 8 Tenants since 1990. I have had no problems with any of them. I require three background checks before I will rent to anyone, a credit check, unlawful detainer and bouncing check. When the prospective tenant gives me a Application to Rent, I also get a check for these three background checks (approximately $45).
I require the applicant’s income to be three times the monthly rent (same as open market).
I heard that using property management would be an advantage, for additional expense 10-12%. Is this true?. Thanks for other previous comments.
Also be aware that with Section 8 you will have an initial inspection before the tenant moves in and the property MUST pass or you cannot rent thru the program. Inspectors and interpretations of the code can and do vary WIDELY by county. We basically had to jump thru rings of fire to get our last Section 8 property passed, whereas another person we know in the neighboring county, the inspector did not even enter a couple rooms. There are usually valid reasons behind the items you have to fix, but some are pretty trivial. I'm assuming that the property you are buying was built before 1978, therefore you will have to provide the tenant with a lead paint booklet and sign a form saying you've done so. If there will be children under the age of 6 living in the property and there is a possibility for lead-based paint, they may have you get a certification from an approved inspector. Luckily only adults are living at our property so this was a non-issue for us. Items at the yearly inspection will also have to be fixed within a 45 day time period or they can withhold your rent. Just be aware of these things. I think Section 8 is a good program for both tenants and landlords, but it seems that enforcement issues vary greatly depending on your location. I wouldn't hesitate to go thru them again, just be aware there may be some issues to deal with that may not occur with renting thru the private market.
Thanks for sharing informations. I do appreciate it. The other thing that I would like to ask is the appraisal value.
For the cashflow stand point is good, I have no doubt about it, however the property is under appraisal value. What do you folks think? as an investor.
Thanks again for your comments.
I've found that there are some wholesalers or sellers of properties who like to estimate ARVs (After Rehab Values) on the high end.
I'd do your due dilligence in trying to determine its fair market value by looking at area comps, similar properties in the neighborhood and what they recently sold for, etc. If you're really concerned, I'd sign the contract and have an appraiser come through the property before closing just to try to get a better understanding of its value.
Finally, I've checked neighbors and/or buildings in the area with rental signs and found out what the rents are.
Happy hunting.