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Dave V., Other/Just Looking in New Jersey

Purchasing 3-family property in Essex County for investment. What are my options with regard to Section 8?

Asked by Dave V., New Jersey Fri Jul 11, 2008

One of the three tenants is on a Section 8 lease, and the other two are month to month. Ideally my goal would be to have all three on Section 8 leases. Working under the assumptions that the current month to month tenants are not eligible for section 8 (otherwise they'd already be on it), I see my choices as follows:

A) Insist that the house be delivered at closing with these two apartments vacant so that I can fill them myself with Section 8 tenants;
B) Leave the tenants be and keep my fingers crossed that they pay their rent on time each month, then replace them with Section 8 tenants whenever they leave
C) Try to sign these two tenants to leases after closing

My questions are: Which of the above choices is my best option? Do I have any other options in this regard that I may not be aware of? We are not yet under contract if that has any bearing. Thanks.

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Answers

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Dave,

Are you more comfortable with Section 8 tenants because you are guaranteed the rent each month? Receiving the rent on time like clockwork is definitely good but its been said in the past that sometimes Section 8 tenants do not always keep the apartment in good condition which is something to think about.

Also, the current month to month tenants - ask the current owner what their payment history is? Are they on-time? In all reality if you choose option a - you may be spiting yourself for a while because until you actually get tenants for both floors - you may have no rent roll coming in. Also in order for a tenant to qualify for Section 8 requires that apartments be inspected and should there be a problem with the inspection - you may incur some additional costs to get the apartment Section 8-ready.

Last but not least, depending on which city in Essex County you are referring to - it may not be that easy to remove a tenant even if on month to month. For instance, in the Township of Caldwell, if the property was not owner occupied and even if there is no lease in place - you cannot give one month's notice to the occupying tenant to have them move. You should call the town where the property is located and ask if such an oridance takes place in the town you are interested in purchasing the multi-family or perhaps your agent may know the answer.

Good luck.

Gina Chirico, Sales Associate
Prudential NJ Properties
973-715-1158 cell
973-239-7700 ext 132 office
GinaChirico@PruNewJersey.com
1 vote Thank Flag Link Fri Jul 11, 2008
Are the current tenants paying?
We do quite a bit of section 8 housing, TRA and other assistance programs and what a hassle that can be at times.

But section 8 tenants or not the important factor is to ensure you have good tenants, if the ones you have now are good and pay even if a day or two late. Stick with them! IF the you can have a talk with the current owner and hope he is being honest.

Section 8 tenants only get part of their rent paid by the government, they still need to come up with a portion of the rent. I dealt with the section 8 departments for several counties and they all say the same thing. You need to look out for your best interest and inspect your property regularly, if they are messing it up or not paying KICK THEM OUT!!!! This is what section 8 told me and I'd have to agree.

If you plan on being a landlord, You need to come up with an iron-clad lease and make it your business to know whats happening with your properties.

Section 8 or not you need to run their credit reports of all occupants to at least get some insight into what kind of people they are. Is it common and recent for them not to pay their bills and see what they are paying and not paying. If someone has bad credit because of a recent foreclosure, ask what happened there, INTERVIEW the tenants!!!

A good place to get lease info and discuss problems other landlords have come across and how to PREVENT them from happening to you is by becoming a regular over at sites like http://www.mrlandlord.com
maybe buy one or two of the creators best selling books on landlording.

PS. If interested I just got two new 3 family listings in East Orange looking for a new Landlord.

Good Luck and keep some Extra Stregth Tylenol handy. ;-D

--
Victor Kaminski
Broker of Record
Marivic GMAC Real Estate
2056A Lincoln Hwy. (Rt.27)
Edison, NJ 08817-3330
Office: 732-650-9911 Ext.302
Cellular: 908-884-5757
Toll Free: 1-866-745-GMAC(4622) Ext.302
http://www.MarivicRealty.com
http://www.realrep.com/
(MIDDLESEX MLS SEARCH) http://search.victor.msx.mlxchange.com/
(GSMLS SEARCH) http://www.gsmls.com/
(Monmouth/Ocean MLS) http://monmouthoceanmls.com/victor
0 votes Thank Flag Link Sat Aug 2, 2008
Buying investment properties can be lucrative but if is is your first it could also be very expensive. I am in process of listing 3 family home in NEw Brunswick where investor bought (with another agent who had ties with seller) because it wasnt such a great investment. Speak with housing dept in areas where you are considering. Have good inspections done. If say a child living in your property shows elevated lead levels the housing dept may make you remediate this. A 3 family comes under state guidelines for inspections but there may be times when the state will pass to local authorities some control. Ask questions of every body, one big question is why is seller selling?
0 votes Thank Flag Link Sat Jul 12, 2008
Hi Gina. Thanks for the response. Yes, the reason I'd prefer section 8 tenants is because I want my money on time. While it's true that many (or most?) section 8 tenants don't keep the units in good shape, it's also true (and fair to mention) that most times the units are not in great shape to begin with. Section 8 inspections are concerned with health and safety issues, not cosmtics. Generally speaking, if you can get a Certificate of Occupancy, you can pass a section 8 inspection. I've been inside quite a few section 8 buildings in my time. It's not for the faint-hearted. The thing that usually keeps a section 8 tenant from totally trashing your place though is the fact that any complaints against a section 8 tenant by a section 8 landlord (or neighbor, or police) go in the tenant's section 8 file. Too many complaints, no more section 8 benefits for said tenant. Ever. Section 8 tenants are very well aware of this.
Anyway, in a neighborhood where section 8 housing is the norm, I myself would prefer all section 8 tenants. Let's assume a 3-family house, each unit with 3 BR, 1 Bth and each renting for $1,000 per month. Two units have section 8 tenants, one is vacant. As is typical, let's say that each tenant is paying $100 of the rent themselves, while section 8 pays the other $900. Given that the apartment, the building, and the neighborhood are by definition less than desirable, as I see it, there are only the following limited possibilities for filling that third unit - 1) get another section 8 tenant. Well, that's really about it because if a person can legitimately afford to pay $1000 per month on their own, they'll choose another area in which to live. Period. So, other than a section 8 tenant, what you're left with are people who somehow scrape together a security deposit, and from then on it's a monthly fight, whether they're leased up or not, to collect your rent, if you ever do.
So, the rent missed during the month or so it might take me to fill the vacancies left by insisting that all non-section 8 tenants are gone prior to closing, is nothing compared to the months and months of rent I'll miss while trying to evict the non-section 8 tenant who is now living in my property virtually rent free.
I don't have much actual experience as a section 8 landlord, but I've been considering it and researching it for a very long time. No matter what, all things being equal, I prefer section 8 tenants in a "section 8 area". But I'm still undecided about my current situation. Do I get rid of existing tenants (a bird in the hand) to fill the units with more reliable tenants (the US govt) or keep them (and end up with a handful of bird poop)?
0 votes Thank Flag Link Fri Jul 11, 2008
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