As a real estate investor, it may be wise to learn how to classify your property as low-income in the Milwaukee area. There can be many benefits to doing this when you get the right tenants in place. In our latest post, we outline the process and the benefits classifying your property as low-income can mean for you!
The Department of Housing and Urban Development (HUD) provides a rental assistance program to help low-income families by providing them with a voucher to receive reduced rent. In turn, the landlord receives a subsidy covering the remaining balance of the rent. By opening your house up to low-income individuals with a Section 8 voucher, you are opening the door (literally and figuratively) to an entire group of renters who may not have been able to afford the property otherwise. Some people worry about crime and other problems with low-income housing, however, the right property, with the right tenants, can lead to a steady income stream for years to come. Section 8 can assist people in all areas of their lives from young families to the elderly with little to no income.
The Benefits of Owning Low-Income Housing
When you own low-income investment property, you can find investments that have low-vacancy rates while giving back to the community. The demand for affordable housing always exists, so you shouldn’t have too much trouble securing a tenant. At the same time, this way you’ll provide some peace of mind knowing that even if the tenant can’t pay rent, you’ll be secured by HUD. It guarantees that you will receive at least a portion of your rent as long as you have that tenant. However if the tenant ends up owing you for too long, their benefits will be taken away.
To make your home available to Section 8 renters, you must fill out an application with HUD. The application includes standard information about you and the property you wish to make available to low-income tenants. You must also let them know how much you are charging in rent to make sure the amount is within the “fair market rents” as outlined by HUD. The application is pretty standard and will be followed up with a detailed inspection of the property.
When you decide that your house will be available for low-income tenants, you will need to have it inspected by a member of the public housing authority or a contractor acting on their behalf. Inspections have to be held when a tenant moves in and annually after that. The inspection provides as an insurance that the landlord is providing a decent, safe and sanitary environment for their tenants, but also that the tenants are taking good care of the home and not causing any damage. Of course, keep in mind that there are many minor reasons that you can fail the inspections. For example, chipped paint, cracked faceplate or small leak in the faucet. Overall, there are 13 performance areas that you must meet in order for your property to qualify. If just the single one is missed, you will fail the inspection. This means that you’ll have to repair everything before you schedule a reinspection, and if you fail again, you will no longer receive the subsidy.
Low-income families receive vouchers for housing assistance based upon their income levels. However, you will still screen the tenants just as you would anyone else. Make sure to run background checks to ensure you have people of a high character moving into your home. Just because someone is dealing with some setbacks in life, does not mean they won’t be an absolutely wonderful tenant.
If a tenant is no longer able to pay you the rental amount owed, or if they cause damage to the property, you will need to go through the same eviction process as you would with any other rental property. If tenants breach their Section 8 lease, they will likely no longer be able to receive Section 8 assistance in the future. As a landlord, it can be tough when you see people struggling to pay rent. While it is commendable to have a big heart, a repeated pattern of letting rent be paid late or not at all will only make the problem worse and cause you to lose even more money.
At Sparks Property Investors LLC, we can help you to find the perfect properties to qualify as low-income or Section 8 in the Milwaukee area. We are here to answer all of your questions so you can learn how to invest in there profitable investment properties while helping people at a time when they need it most.