Rental properties upside down - Posted by av

Posted by Jimmy on June 13, 2006 at 07:50:03:

AV: these comments are not intended to make you feel bad. I don’t have much help to offer you. But there are some lessons here for others who might want to get into landlording with section 8 tenants. I learned these lessons the hard way. Fortunately, my mistakes were not fatal.

Lesson 1: Never put yourself in a posiion where you are dependent on Section 8 for tenants or for rents.

Lesson 2: We cannot control what HUD does, how much money they opump into vouchers, etc. In 2000, when I started, there were tons of vouchers floating around, and tons of new ones issued every couple of months. I had 55% of my rent coming in from Section 8. Today, I rarely see them. I am down to 18% Section 8 rent. and I am a lot healthier now.

Lesson 3: Do not assume that the Section 8 rent is the same as Market rent. Huge mistake. In my market, Section 8 rents can be 20-25% higher than FMR. and with a decline in vouchers, the elevated Section 8 rent is not sustainable. I saw rents for 3/2 units in Tyler, TX go from $780 on Section 8 to $575-600 for regular tenants. Ouch.

Lesson 4: Do not buy properties in places where the only tenants are likely to be on housing. It makes you a welfare case youself. You want to be in a place where you can attract all kinds of tenants. working stiffs, elderly, Section 8, etc.

Lesson 5. When buying a property with Section 8 tenants in place, be very careful. Take some time and figure out what real market rents are. Do not make a buying decision based on the prevailing Section 8 scale. These rents can be fleeting and unsustainable. Figure out what the regular market will deliver you in rents, and work from there to determine your price. To do otherwise is playing Russian Roulette with 5 bullets in chambers.

Good Luck.

Rental properties upside down - Posted by av

Posted by av on June 12, 2006 at 11:05:39:

I have 6 rental properties (3 SF/ 3 TF) in Cincinnati - all low income section 8. Rents have been cut by sec 8 up to 40% in some houses. To further complicate matters, I have had to take a new job out of town, so now I have a property management company as well. The properties have been running negative cash flow now for over a year. I have tried unsuccessfully to sell the properties, both FSBO and by listing with an agent. Appraisals have been coming in less than what I paid. I have spent all my retirement trying to keep afloat. I have an llc, but only some of the mortgages are actually in the name of the LLC. I have not been late on a mortgage payment yet, but it is inevitable. I have spoken with a bankruptcy attorney, but I’m reading that there are other options. My number one priority is not to lose the house I’m living in. Any advice would be greatly appreciated.