(FAQ) Frequently Asked Questions
- What is Section 8 Housing?
- Do tenants take care of the homes?
- How hard is it to collect rent?
- Who does the rehab?
- What is the timeline?
- Do I have to pay taxes?
- What is the risk?
- Who manages the property?
- Do I have to live in Birmingham to invest with you?
What is Section 8 Housing?
The Section 8 housing program is under the U.S. Department of Housing and Urban Development (HUD). It is managed by local Public Housing Authorities or PHA's. They have a process they go through to approve the homes and the families that will qualify for those homes. Once a home is approved the owner can list the house with the PHA or can be provided a list of families that have a Section 8 voucher. The owner or property manager will interview the family and if everything is ok we will have the family sign a rental lease agreement. The owner also has a contract with Section 8 requiring an inspection one time per year to keep the property qualified. We have the checklist of items that the inspectors require and we make sure the property will meet those qualifications.
Do Tenants take care of the homes?
According to the lease between the owner and the tenant and according to the Section 8 agreement the tenant has signed, the tenant is responsible for the property in terms of basic upkeep and maintenance. If the tenant breaks anything or has problems that they are responsible for, such as a toilet backing up due to something being flushed, then they must repair it. If they do not they will be evicted and their Section 8 qualification will be permanently canceled. These families have waited in many cases 2 years to become eligible and find a house so they are very motivated to please the owner and keep the property in good repair.
How hard is it to collect rent?
The rent payments are made by the PHA and are sent directly (direct deposit) to the owners of the properties or their property management company, NOT the tenants. Therefore, rent collection is simple.
Who does the Rehab?
We have our own contractors that we rely on and who have the process down to a science and they take the guess work out of it. The lenders know them and their work and so approvals are simpler and draws are quick and easy. Each home is guaranteed by our contractors to meet or exceed the Section 8 requirements and comes with a 1 year contractor warranty, therefore you the investor do not have to worry.
What is the timeline?
From the time the loan closes, the process of rehab, approval, tenant move in and reception of first check in most cases is about 2 - 3 months give or take. You may have to make a mortgage payment(s) prior to the tenant being moved in and the PHA sending their payment to you. Sometimes the process at Section 8 can be quick but other times it can drag out depending on different factors like if the tenant has gotten them all the proper documentation or the caseworkers case loads etc. We also rent to qualified straight rent tenants. We do back ground checks, credit checks, past landlord referral checks among other qualifications to make sure they are qualified to rent one of our properties.
Do I have to pay taxes?
We cannot answer specific tax questions. However we strongly urge you to seek professional accounting advice as you move into the real estate business. Real estate investing can be very lucrative and therefore could have tax consequences. You should look at this as a business and you will have revenue that may be taxable. You may also enjoy tax write offs called deductions when owning real estate investment properties. PLEASE consult a tax professional so that you are not surprised at the end of the year.
What is the risk?
Whenever you make a real estate investment it can be a risk. In this case the risk is small and the potential upside can be great. In most cases your loan to value is going to be between 75 and 80% which means that if you needed to sell the property, subject to market conditions, you would be in a terrific position to market to other real estate investors or primary borrowers (owner occupants).
Who manages the property?
Impact Realty Advisors Real Estate & Property Management, LLC offers property management services to the public but you are not obligated to use our services. There are numerous property management companies in Birmingham that can help you with your management needs. You should make your own choice for this service and decide which company is best for you.
Do I have to live in Birmingham to invest in rental properties with you?
No. We have many out of state real estate investors as well as out of the country that we manage rental property portfolios for. We have the ability to handle everything for out of town owners or there are other companies that offer services similar to ours.
