Section 8 Rentals by TheInvestorBroker

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									Why Consider It? Supply.
Ten to fifteen years ago, HUD homes
were considered to be those that
needed to get lots of work done. The
homes were usually boarded up, in
terrible condition and in undesirable   How They Originate

With receding incomes, more people      Buying HUD Properties
that purchased homes with FHA
financing are finding themselves
unable to keep those homes. This is     Resources
why not only more inventory is
coming to the market, but higher
quality as well.
HUD explained…

For whatever reason, there seems to
be some confusion between HUD
homes & Section 8, so let’s start

How HUD foreclosures originate:
Previously were properties w/ FHA
loans, insured by the government. If
an owner defaults on their
mortgage, FHA pays the bank for
their loss and in turn, acquires the
property. That is how a HUD home is
Buying HUD properties…

HUD prefers that these properties
be sold to people that are going to
live in them- they want owner
(The theory is that a home owner will take
better care of a property than a renter)

HUD offers the homes to owner
occupants for the first 10 days on the
market & if no offers are accepted
that meet the minimum net they are
looking for, they will then offer the
house for sale to investors. They will
review and consider all offers at that

HUD does an initial inspection of
the home and offers the report free
of charge for you to see. They even
list the repairs needed to the
property in order to bring it back to
working order. Clearly this free
report is very valuable.

HUD Properties:
                                        New properties are listed every Friday.
Recent Events…
HUD recently lifted the ban on 90 day
seasoning for investors…

If you’re a real estate scavenger, who likes
to buy foreclosure properties at a deep
discount and “flip” them to retail home
buyers, the FHA anti-flipping rule has
always been a thorn in your side.

Come Monday, February 1, 2010, HUD
has agreed to suspend that prohibition for
a period of 12 months.
                                               The bank still has to agree to fund it…
Why Consider It? Demand.
In many areas, the PHA
waiting lists for Section 8    The Tenant Process
vouchers may be thousands of
families long, waits of 3-5
years to access vouchers is    The Investor Process
common, and many lists are
closed to new applicants.
                               Some Numbers

how it works…
1.   A household applies to the
     local PHA for a tenant-based
2.   An eligible household finds a
     unit on its own.
3.   Tenant pays no more than 30%
     of gross income
4.   PHA pays the subsidies directly
     to landlords if the units meet
     the program's property            Families who participate in the
     standards                         program must abide by a series of rules
5.   Households maintain the           and regulations, often referred to as
     subsidy when they move to a       "family obligations," in order to
     different unit.                   maintain their voucher.
Investor Process
1.   Contact your local Section 8 Rep
     (Public Housing Authority)
2.   Determine FMR’s
3.   Application
4.   Inspection
5.   Screen Tenant
6.   Outsource Property Management
1. Home Inspection - If you decide to rent to section 8 tenants, your rental property will first have to pass the Section 8 inspection that is
    carried out by the public housing authorities. These inspections are conducted to make sure that your rental home is in habitable condition
    and meets the minimum standards set by the Section 8 housing guidelines.

2. Rental Period - Section 8 rules state that when you sign a new lease agreement with a Section 8 tenant, your rental period has to be at
    least 12 months.

3. Security Deposit - You can ask for a security deposit from your tenant as long as the amount is not more than 1 month of rent payment.
    Since the Section 8 housing authorities are not responsible for any damages caused by your tenants, we will highly recommend that you
    ask for a security deposit to protect yourself.

4. Pets - According to Section 8 rules, you can choose to accept or refuse pets on your rental property. If you do agree to having pets on your
    rental property, you may want to charge a slightly higher rent and ask for a pet deposit.

5. Lease Agreement - Once your rental property passes the home inspection, you will be given a housing assistance payments contract
    HAPC and lease agreement. You can either choose to use that free lease agreement or prepare your own copy. You will have to return the
    HAPC and lease agreement to receive your monthly payments.

    According to Section 8 housing guidelines, you will also have to attach a document known as the Tenancy Addendum to your lease

6. Collecting Rent - You will receive a mailed in check for part of the rent from the housing authorities every month. For the remainder of
    the rent you will have collect it from your tenant.

7. Increasing the Rent - After the first 12 months of your Section 8 lease, you can apply for a rent increase by submitting rent increase
    request form to both your tenant and the housing authorities 60 days in advance. The amount of rent increase has been be approved by
    the housing authorities and it is limited by the current fair market rents.

8. Eviction - According to Section 8 guidelin
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