What do you know about Section 8??

[Chris Perosi]

OK, I tried to search, but no matter how I used the quotes, the search still drops off the "8" so I can't really search for what I'm looking for, and that's information on Section 8 housing.

Specifically I'm referring to a home in Newark, NJ that I'm looking to make an offer on. The first floor is rented to Section 8 tenants -- honestly, I don't know if that's New Jersey specific or if Section 8 is something everyone knows about... Bottom line is the government picks up a majority of the rent (so your rental income is guaranteed) and the tenant only pays a small portion.

That being said, I guess my questions are these:

What are the pros and cons of buying a Section 8 property?

Does anyone know what it takes to convert the (currently vacant) 2nd floor to Section 8?

The whole house was recently renovated and all apartments were brought up to code in order to pass Section 8 inspection, so that part of it should go pretty easy. I'm particularly interested in Section 8 because the 1st floor Section 8 rent is $1380, whereas the 3rd floor (regular tenants) is only rented for $725. There's only 2 bedrooms on the 3rd as opposed to 4 on the 1st and 2nd, but still, that's a substantial drop in price...

Anyway, if anyone can shed a little light on this for me I would greatly appreciate it...

Thanks in advance,
Chris

[Dan Auito]

Chris, sounds like you're onto a profitable venture, A few others here know Section 8 better than I so until they catch this thread I will direct your attention here: http://bbs.mrlandlord.com/qanda/index.mgi Look to the lower right hand side of the column on the page and click on Section 8!

[Chris Perosi]

Thanks Dan... Perhaps it will be profitable, but we'll just have to see. It will require the right mortgage, I'm working on that. The seller was listed on the MLS as a "Creative $eller" -- come to find out he owns about 50 properties in the area, so we might be able to work some creative financing through him. The rents sound astronomically high for someone outside of this area, but bear in mind the price on that 3-family is $339k, and I don't know if I'd quite call it the ghetto, but maybe it's a block or two away.

[Dan Auito]

Cross check current rents advertised in the local classifieds to see what the competition is asking, Also a mandatory review of the owners last 2 schedule C's definitely will be in order. Can you possibly get this thing to positively cash flow $600 a month. (Happy Gouge)

[Debbie]

I know a few people who live nearby Newark. Plus a cousin who lives in Newark.

Based on what I've been told, their Section 8 is not recommended. It's not so much as the Section 8 Voucher tenants, it's the government's policies.

Due to the astrocities of the policies, there's less than 24% of the landlords accepting Section 8. That <24% is located in Newark and surrounding cities.

If you decide to take on, just be very careful. Section 8 can ruin your reputation.

Outside of that, I really do not have details.

I concur with Dan that you should visit www.mrlandlord.com They have plenty of information about pros and cons of Section 8.

Good luck.
Debbie

[Chris Perosi]

Cross check current rents advertised in the local classifieds to see what the competition is asking

The rents are at or below market value. In fact, I couldn't find a 4BR in the classifieds for less than $1400, so vacancy shouldn't be much of an issue. I can get the cashflow a little higher than $600 I think, if I setup the financing the right way. Might even be able to get it up to about $1000 if I do things right, we'll have to see...

[Dan Auito]

If you can clear $600 a month AND be creative then it's time to shedule a section 8 inspection and get a real ASHI inspector to write a report.

[Chris Perosi]

Thanks for the info Debbie -- I'll have to look into the Newark Housing Authority a little more and see what the story is. As for protecting my reputation, well, I'm not worried about that too much, I don't have one! ;-) But thanks for lookin' out....

[Dan Auito]

Your credit report is your reputation! Heh Heh Heh or shall we say, your representative in print.

[Chris Perosi]

Well, in that case, my reputation is a little tarnished -- I had a bankruptcy about 4 and a half years ago. ;-)

[Aldo]

Section 8 is the commonly accepted term for HUD subsidized housing. Indirectly, HUD pays the lion's share of a tenant's rent and the tenant is responsible for the difference between the HUD payment and your HUD-approved rental fee.

Debbie is exactly right if I may add one qualifier. She mentioned government's policies which is too broad a description of the administration of the program. The final 'say' rests with the HUD office in your specific city or county. Locally, we have both city and county Section 8 offices and they differ immensely. I'd rent to a city section 8 tenant in a minute and I'd reject a county section 8 tenant before knowing his/her name. The local administration of the program is the issue and no one, except someone local to you, can advise you if the local admin is landlord-friendly.

Debbie's remark that Section 8 can ruin your reputation baffles me. I'd really like to know how that can happen.

One issue that has not been covered is whether the property is subject to rent controls. That can have a huge effect on the amount of rent you can charge.

[thepower]

Im curious also about tihs statement "Section 8 can ruin your reputation"

Can you embellish on this?

Thanks much

[SPIVALAW]

I love Section 8. They inspect often, so I dont have to.

You cant hurt a lawyers reputation.

[Debbie]

Im curious also about tihs statement "Section 8 can ruin your reputation"

Can you embellish on this?

Thanks much

Sure, I can embellish----it's not so much as ruining a person's reputation but ruins a landlord's reputation.
In other words, non-section 8 tenants gets a word that the landlord accepts section 8. Well, non-section 8 steers clear of that landlord because they lack respect for section 8 and it's landlord.
Soooooo, whenever a landlord tires of the section 8 policies---it'd be awhile before landlord gets non-section 8 tenants because of the "reputation" or stigma.

Does the above information help?

Debbie

[SPIVALAW]

My section 8 tenants look exactly like the non section 8 ones.

They are all green.

[thepower]

Sure, I can embellish----it's not so much as ruining a person's reputation but ruins a landlord's reputation.
In other words, non-section 8 tenants gets a word that the landlord accepts section 8. Well, non-section 8 steers clear of that landlord because they lack respect for section 8 and it's landlord.
Soooooo, whenever a landlord tires of the section 8 policies---it'd be awhile before landlord gets non-section 8 tenants because of the "reputation" or stigma.

Does the above information help?

Debbie

Not really, so basically one should only cater to the "privledged" tennent as to avoid being labled?

It doesnt make sense. For example, the lease is up and my section 8 tennent moves. I advertise the nice clean dwelling and someone from a yr ago is going to look in the paper-remember my phone number from a yr ago & avoid my property? Wow some people must have good memories lol..

If a landlord stands by their principles,provides a clean place to dwell & doesnt allow themselves to be bullied by "too good for you" tennents out there, then they should be ok..

[Chris Perosi]

Debbie -- I hear what you're saying, but I guess I just don't understand how anyone would even know. I mean, how would they even know what building(s) I own, let alone that I accept Section 8? Someone looking in the paper for an apartment wouldn't have the ability to even know my FIRST name, let alone my first and last, what properties I own, who lives in them, etc. Am I looking at this the right way? Is there a bulletin board like this one where all tenants hang out and post information about other landlords? I mean, sure, maybe there is, but wouldn't it be just a small percentage of tenants that might even have the slightest clue?

Please don't take this the wrong way -- I'm not challenging, I'm just trying to get clarification. The Section 8 tenant in the 1st floor of the property I'm trying to buy is something I'll have to deal with either way, but if I can avoid making it worse by going Section 8 on the 2nd and 3rd floor, well, that would be great.

[Debbie]

Debbie -- I hear what you're saying, but I guess I just don't understand how anyone would even know. I mean, how would they even know what building(s) I own, let alone that I accept Section 8? No, they wouldn't know unless you announce your name to your tenants and neighborhood often enoughSomeone looking in the paper for an apartment wouldn't have the ability to even know my FIRST name, let alone my first and last, what properties I own, who lives in them, etc. You are correctAm I looking at this the right way? I'll explain belowIs there a bulletin board like this one where all tenants hang out and post information about other landlords? I mean, sure, maybe there is, but wouldn't it be just a small percentage of tenants that might even have the slightest clue? LOL. Of course not!

Please don't take this the wrong way -- I'm not challenging, I'm just trying to get clarification. Not a challenge at all. I'll explain below.The Section 8 tenant in the 1st floor of the property I'm trying to buy is something I'll have to deal with either way, but if I can avoid making it worse by going Section 8 on the 2nd and 3rd floor, well, that would be great.

There are many ways that section 8 and non-section 8 can find out about you and your property.

Let's discuss the non-section 8 tenants. A large percentage of non-section 8 do not want to be associated with section 8. They will find out and steer clear of any properties that accepts section 8. How? Here are the ways:
1) word of mouth---"hey, there's a house across the street from me. It's $500/mo. Yes, there one section 8 on the block. But luckily, she's very nice & upstanding. Nothing to worry about. Check out the house before it's rented! Wouldn't it be cool for us to be neighbors!?!?!?!"
2) police beat in newspaper that repeatedly mentions a crime on "500 blk on Main St"
3) potential non-section 8 talks to neighborhood (same way you'd do if you were a buyer)
4) neighborhood's laundry facilities, tavern, drugstore---lots of gossip
5) common knowledge of the area

I think you get the idea.....

[Debbie]

Not really, so basically one should only cater to the "privledged" tennent as to avoid being labled? I didn't say that. I'll try to explain better below

It doesnt make sense. For example, the lease is up and my section 8 tennent moves. I advertise the nice clean dwelling and someone from a yr ago is going to look in the paper-remember my phone number from a yr ago & avoid my property? Wow some people must have good memories lol.. Actually, most remember the "500 - 2500 blk of Main St" that has reputable section 8 neighborhood or something to that effect.

If a landlord stands by their principles,provides a clean place to dwell & doesnt allow themselves to be bullied by "too good for you" tennents out there, then they should be ok..

If the landlord screens, screens, screens, screens any potetial section 8 tenants, landlord will do well to weed out troublemakers. There are plenty of good section 8 tenants. But they generally stay long term at one place. So, there's a greater chance that you'll find less good section 8 tenants.

Nevertheless, it's not so much as YOU, it's the BUILDING that neighbors, visitors, friends, family will REMEMBER. If that building has a reputation that the owner accepts bad section 8 tenants then the reputation is ruined for a long period of time.
If that building has a reputation that the owner accepts good section 8 tenants, then the good reputation is intact. HOWEVER, all it takes it just one, only one bad section 8 tenant to jeopardize good reputation.

Did I explained better? If not, I'll try another way....

Debbie

[Chris Perosi]

Much more clear Debbie, thanks!

[Aldo]

Debbie, without thoroughly reading anything beyond your 8:09 AM embellishment, methinks your brain is smarter than the fingers posting that reply. That may be a result of your being in an area with a lower population where everyone knows what their neighbor had for dinner.

In more populous areas, applicants have huge numbers of lanldlords to choose from while knowing nothing about them. But, then, applicants are usually selecting a home, not a landlord. The sad truth is that tenants should screen their potential landlords. There are a lot of landlords out there whose title should be Slumlord (Mike, no offense intended).

[Judd]

iEdited

[Aldo]

Judd made a very good and very important point. Check with other local landlords about the local admin of the S-8 program. My area is a classic example of how the admin can vary from one area to another. Locally there is a municipal S-8 office and a county S-8 office and they are as different as night and day. The county office is clearly tenant-friendly while the city's office is straight-forward but leans toward landlords.

[Chris Perosi]

OK, this may be a silly question to some of you seasoned veterans... But... How does one go about finding and contacting local area landlords? We spoke to the Newark Housing Authority today, they seemed very helpful and friendly (quite an oddity around here) which made me feel a lot better, but still, what did I expect? Did I expect them to be like, "Well, you really don't want to deal with Section 8 around here. The tenants are terrible and as an agency, we really don't even know our a$$ from our elbow..." I guess not, so I guess my basic question is, where might someone find an unbiased opinion on this subject? I guess calling numbers from ads in town that might say, "Section 8 OK" would be a start, any other ideas?

[Judd]

Edited

[Burke]

Many communities have a landlord association. Check your yellow pages or call your REI club and ask them.

Burke

[Aldo]

Asking the housing authority whether you should accept S-8 is like asking Big Goerge if we should be in Iraq.

If you don't know (and trust) any local landlords you need, really need, to find a local landlord group/association where you can get the opinions of several landlords. Calling a random landlord that accepts S-8 is like calling the power company to ask if their rates are fair. If a landlord accepts S-8, do you really think s/he will bad-mouth it? You need opinions on both sides of the fence.

[Chris Perosi]

If a landlord accepts S-8, do you really think s/he will bad-mouth it? You need opinions on both sides of the fence.

Fair enough. I found out an interesting tidbit of information last night after that post. My cousin invests in the same area I'm looking into... And has been doing it for about 5 years now. That oughtta be a good start for finding some information -- that is, if I can get in touch with him... I have a BIG family... ;) I'll report back when I finally do get a hold of him...

-Chris