As a real estate investor, it may be wise to learn how to classify your property as low-income in the Chicago 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
Owning low-income investment property is a great way to find investments with low-vacancy rates while helping to give back to the community. There is always a demand for affordable housing, so you shouldn’t have too much trouble securing a tenant. Plus, you’ll always have some insurance knowing that even if your tenant has some trouble paying the rent, you will still receive the subsidy provided by HUD. It guarantees you will receive at least a portion of your rent while the tenant is occupying the home. The tenant will not want to come up short, however, if they do, their benefits can be taken away completely.
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.
Once you decide to make your house available for low-income tenants, it will need to be inspected by a member of the public housing authority on a contractor acting on their behalf. Inspections are held when a tenant moves in and once a year thereafter. The inspection is done to ensure the landlord is providing a decent, safe, and sanitary environment for the tenants to live, and that the tenants are taking proper care of the home, without causing any damage. Your property can fail the inspection for any one of many infractions, many of which may seem minor. For example, chipped pain with children in the home, a cracked faceplate, or a small leak in a faucet, which may have the potential to burn someone. Overall, there are 13 performance areas that must be met in order for the property to qualify. If any items on the inspection is missed, you will fail your inspection and will need to repair before a reinspection is done, If repairs are not made, 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 Chicago Home Buyers, we can help you to find the perfect properties to qualify as low-income or Section 8 in the Chicago 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.