Investing in South Side rental property - Section 8 (Chicago, Elk Grove Village: apartment, crime)

[Manigault]

When you figure in cash flow, please figure on getting paid rent 10 months out of the year. That amount is far more realistic.

[snoylekim]

Originally Posted by Attrill

I think if you get a real estimate you'd find that a lot more work than $10,000 would need to be done. $10,000 doesn't go nearly as far as you might think in fixing a place up. As noted above the risks in renting in many of these areas are pretty high.

I know one guy who tried to do something similar and it ended up being A LOT more work than he had anticipated. The worst was the time he showed up at the building and found the tenants gone, along with the furnace, hot water heater, and most of the fixtures.

agree ... 50K for a two flat has got to be absolute bottom of the barrel in terms of location and habitiility.. the lot itself would probably go for 5 -15K, so what's left.. smells like a lot more than 10k to get it up to code .. even without the shrinkage/security premium ..

[lincolnparker]

Forgive me for my simple mind, but can you have nonpaying renters arrested, their wages garnished, or bank accounts seized to pay for outstanding rent?

Originally Posted by Manigault

When you figure in cash flow, please figure on getting paid rent 10 months out of the year. That amount is far more realistic.

[GoCUBS1]

Eva01, Have known landlords who have successfully run Section 8 housing in poorer areas of the city. But be prepared for lots of (possibly dangerous) tenant issues and the higher cost of maintenance (works well if you can do your own maintenance at cost). Also, expect only the Section 8 voucher amount (nothing above as many tenants can't/won't pay it) when calculating rental cashflow. Even w/a break even cashflow, long-term profits can be made from possible property appreciation, tax write-offs, etc. However, you must choose your location wisely. Have found that the suburbs are much more favorable for Sect. 8 landlords due to Chicago Tenant laws. Some suburbs have specific ordinances (e.g. called "Crime-Free Rental Housing Law") that allow for landlords to quickly evict tenants (without having to go through normal 30+ day filing process) for even suspected minor crime. Good Luck.

[Attrill]

Originally Posted by lincolnparker

Forgive me for my simple mind, but can you have nonpaying renters arrested, their wages garnished, or bank accounts seized to pay for outstanding rent?

Yes - that is exactly what I meant when I told the OP it is a lot more work than most people realize. Also realize, if you are renting sec. 8 you are dealing with people who will not have bank accounts (or $ in them if they do) or wages. Any wages that might exist may be under the table and unreachable.

You can end up with a full time job trying to get blood from a stone and also find new tenants to replace the old ones, with no guarantee that the same thing won't happen all over again.

[GoCUBS1]

Originally Posted by Attrill

Yes - that is exactly what I meant when I told the OP it is a lot more work than most people realize. Also realize, if you are renting sec. 8 you are dealing with people who will not have bank accounts (or $ in them if they do) or wages. Any wages that might exist may be under the table and unreachable.

You can end up with a full time job trying to get blood from a stone and also find new tenants to replace the old ones, with no guarantee that the same thing won't happen all over again.

But if you calculate cashflow based only on the Sect. 8 voucher amount, you only need govt. pmt. (not tenant pmt.) to make your #'s. Correct? So you just file for the govt. $ but can go after the tenant amt. for extra profit (but probably won't receive it). This is how I thought profitable Section 8 situations work. But I haven't looked at it for a few years...

I've also heard that the owner needs to basically make their property undestructable (e.g. painted concrete floors (no carpeting), etc.) as things will be destroyed and you need to keep costs as low as possible.

Also, isn't there a very high demand for Sect. 8 housing so you should be able to quickly find new tenants to fill vacancies? We own rental housing (not Sect.8) and every other call seems to be from someone desperate for a Sect. 8 apt. I must say that many of these people sound very professional (although I'm sure they've been coached).

[chet everett]

Demand for Sec 8 in nicer safer areas is VERY different than for areas that even bad dudes know are bad...

[GoCUBS1]

Originally Posted by chet everett

Demand for Sec 8 in nicer safer areas is VERY different than for areas that even bad dudes know are bad...

Agree... Best to be in safer, up-n-coming neighborhoods. But she didn't give her exact South Side location so I'm not sure if it is the area with the REALLY BAD DUDES....

[Manigault]

Originally Posted by lincolnparker

Forgive me for my simple mind, but can you have nonpaying renters arrested, their wages garnished, or bank accounts seized to pay for outstanding rent?

I used to teach a class on real estate. Eviction is about a 4 week process, or more. Most folks who get evicted don't have a job so what are you going to garnish? You just get back your possession of the flat. And since there is no debtor's prison in the US, why would failure to pay rent result in an arrest? If you have incorporated the property, you cannot ask for possession and damages in court, without a lawyer. Corporate officers can only represent a company in court seeking one type of relief. Ain't that special?

I've practiced law in Chicago for about 30 years and the worst place (after child support) is eviction court. Most rascals will pay to keep a roof over their heads so you get the halt and the lame as defaulters. Lotsa disabled folks in wheelchairs.

I once evicted a family from a house on Section 8. They were three months behind with about three adults (1 able-bodied) in the house. Rent each month for them was $51.00. It takes all kinds.

[ajolotl]

This thread has me ready to jump out my window. And this is before Humboldt1 has even had a chance to chime in with a depressing anecdote about HP. One thing I've learned from looking at real estate over the years is that there aren't too many gifts out there -- if something is remarkably cheap there is always a very good reason, just takes a little time to find out what it is.