Scott Allan of NJ Real Estate Guys has respectable experience in Section 8 investing in NJ. Our current Section 8 markets include but are not limited to Jersey City, Clifton, Passaic, Newark, and East Orange. Contact Scott for further details on available multi-family properties. Stay tuned for our "Section 8 Property of the Week" Post which we will post a link to right here.
I've been asked by several investors recently to share my take on NJ Section 8 Investment property. My partner is a landlord who owns a 22 apartment unit building. Of those 22 units, 18 of them are rented to Section 8 tenants. He has owned this building for almost 7 years and has only had to evict 3 tenants.
The biggest benefit in investing in Section 8 is that you get paid by the third of the month. The check from the Section 8 office comes to you by mail by the 3rd, and by the 5th of the month, the tenant pays their share. Their motivation to pay is that they know if they don't comply with the lease payment schedule, they will lose their Section 8 privelege. This is one of the big reasons we like Section 8. Tenants have a huge motivation factor to abide by the lease and respect your property. The loss of Section 8 priveleges are PERMANENT if loss of privelege occurs.
The Housing Authority or Section 8 office will inspect your property before the tenants move in. Additionally, they inspect the property annually. There are typically minor repairs, but considering the payment schedule with practically no effort, these minor repairs are of no consequence and is rather inexpensive.
A few areas that Section 8 and the Return On Investment (ROI) is favorable is Hudson, Passaic, and Essex County. Any home can qualify for Section 8 under specific conditions. In our experience, a Cerfificate Of Occupancy (C of O) inspection is more challenging than Section 8 approval; C of O's are not difficult to achieve either. Another benefit is that Section 8 has a "Fair Market Rent Table". This table, which you can find HERE, states the maximum Market Rent that is due to the landlord, specified by number of bedrooms the property has.
You can list your property for free by contacting the local Housing Authority. They will give you a "listing sheet" that you need to fill out. Hint: The more info, the better. All of this information is implemented in their book/database where tenants look for their preferred property. Some landlords have found immediate occupancy by including a small and used furniture package. Some include TV's. This all could be put into the listing and is likely to stick out to tenants.
As the landlord, it is up to you to screen the tenant and maintain your property. If you are not up to the task, you can hire a property manager to do this for you. You are also responsible for collecting any Security Deposit agreed upon between the tenant and yourself.
The housing agency will pay a check to the landlord during the first couple days of the month for the difference between the jurisdiction payment standard and the tenants total payment. The tenant would pay the difference between the total rent and the voucher amount.
Damages to the property must be agreed upon between tenant and landlord. If there is damage that the tenant is responsible for, you may enforce your lease and go after him for the damages or work something else out. The Housing Authority does not provide compensation for any property damage.
If you have repeated issues with the tenant, you may enforce the lease and take the necessary actions against the tenant. Keep in mind, that when making a complaint against a tenant, you must follow your local regulations. If you write a "warning letter" to your tenant, you should send a copy as well to the Housing Authority. In some cases, and depending on severity, the Housing Authority could take action and evict the tenant for you immediately.
As stated above, before the tenant moves into the property, the Housing Authority sends an inspector to preview the property. Here is a list of the most common factors they look for:
- No chipping or peeling paint anywhere on the INSIDE of the property.
- No chipping or peeling of paint five feet and under on the exterior of the property.
- Cooking stove must be clean and in working order
- Refrigerator must be clean and in working order
- Heating system must be in working condition
- Must be hot and cold running water in kitchen and bathrooms
- Shower or bathtub must be useable
- Toilets flush with no leaks
- Bathroom must have a window to the outside OR and exhaust fan.
- No plumbing leaks
- Ground floor windows must have locks and exterior door must have working locks and deadbolt
- Outlets must have cover plates
- No missing, cracked, or broken windows
- No rook leaks
- Must be GFI outlets around all sinks
- Flooring cannot be torn which can cause tripping
- Smoke detectors must be in working condition
- Stairs and railings must be secured.
In conclusion, Section 8 makes great investments. The ROI on multi family dwellings can be much higher than a normal traditional rental. You can't beat getting guaranteed rent checks from the Housing Authority! Contact us if you are interested in hearing more about Section 8 or looking to purchase Section 8 property. We always have condusive buildings we look at for this matter.