Worst case scenario for an underfunded HOA

[sfexporter]

FLU,

I rented to a section 8 tenants when I had my investment property in Phoenix. I love section 8 because of the following:

-you get at most of the guarantee money from the gov
-tenant must keep the place in decent shape
-tenant can’t have illegal substance (drug)
-tenant can be removed from section if don’t comply so this automatically forced the tenant to be on their best behavior.
-tenant can’t trash your property because this will affect their ability to rent on the next property. You as the landlord, can check up their rental history.

I love section 8 tenant!

[EconProf]

There are pros and cons to having Section 8 tenants. On the plus side, they tend to stay longer, are financially motivated to keep up the unit and not break the rules, and you get the guaranteed check on time. Sometimes, they pay above market rent if you have a crappy unit or neighborhood that would not command decent market rents.
OTOH, the tenants are, after all, needy with all that that implies. This may not go over well with your other tenants. You get government inspectors to make you fix stupid & silly things, while ignoring more obvious or aesthetic shortcomings that you would readily cure for a private sector tenant. Example: they will make you replace a window with a one inch crack in a corner that is going nowhere, but ignore a worn out & dirty 5 year old carpet that a private sector renter would rightly ask you to replace.
Finally, it is extremely hard to get rid of a Section 8 tenant unless your reason for doing so fits the government’s rules. Many landlords swear to never again take a Section 8 tenant after having trouble getting rid of one. The bureaucrats are a real pain to work with.
I suspect it boils down to whether your building and neighborhood is not attractive enough to pull in the more desirable tenants. There is an undeniable stigma to having Section 8 tenants.

[EconProf]

There are pros and cons to having Section 8 tenants. On the plus side, they tend to stay longer, are financially motivated to keep up the unit and not break the rules, and you get the guaranteed check on time. Sometimes, they pay above market rent if you have a crappy unit or neighborhood that would not command decent market rents.
OTOH, the tenants are, after all, needy with all that that implies. This may not go over well with your other tenants. You get government inspectors to make you fix stupid & silly things, while ignoring more obvious or aesthetic shortcomings that you would readily cure for a private sector tenant. Example: they will make you replace a window with a one inch crack in a corner that is going nowhere, but ignore a worn out & dirty 5 year old carpet that a private sector renter would rightly ask you to replace.
Finally, it is extremely hard to get rid of a Section 8 tenant unless your reason for doing so fits the government’s rules. Many landlords swear to never again take a Section 8 tenant after having trouble getting rid of one. The bureaucrats are a real pain to work with.
I suspect it boils down to whether your building and neighborhood is not attractive enough to pull in the more desirable tenants. There is an undeniable stigma to having Section 8 tenants.

[EconProf]

There are pros and cons to having Section 8 tenants. On the plus side, they tend to stay longer, are financially motivated to keep up the unit and not break the rules, and you get the guaranteed check on time. Sometimes, they pay above market rent if you have a crappy unit or neighborhood that would not command decent market rents.
OTOH, the tenants are, after all, needy with all that that implies. This may not go over well with your other tenants. You get government inspectors to make you fix stupid & silly things, while ignoring more obvious or aesthetic shortcomings that you would readily cure for a private sector tenant. Example: they will make you replace a window with a one inch crack in a corner that is going nowhere, but ignore a worn out & dirty 5 year old carpet that a private sector renter would rightly ask you to replace.
Finally, it is extremely hard to get rid of a Section 8 tenant unless your reason for doing so fits the government’s rules. Many landlords swear to never again take a Section 8 tenant after having trouble getting rid of one. The bureaucrats are a real pain to work with.
I suspect it boils down to whether your building and neighborhood is not attractive enough to pull in the more desirable tenants. There is an undeniable stigma to having Section 8 tenants.

[EconProf]

There are pros and cons to having Section 8 tenants. On the plus side, they tend to stay longer, are financially motivated to keep up the unit and not break the rules, and you get the guaranteed check on time. Sometimes, they pay above market rent if you have a crappy unit or neighborhood that would not command decent market rents.
OTOH, the tenants are, after all, needy with all that that implies. This may not go over well with your other tenants. You get government inspectors to make you fix stupid & silly things, while ignoring more obvious or aesthetic shortcomings that you would readily cure for a private sector tenant. Example: they will make you replace a window with a one inch crack in a corner that is going nowhere, but ignore a worn out & dirty 5 year old carpet that a private sector renter would rightly ask you to replace.
Finally, it is extremely hard to get rid of a Section 8 tenant unless your reason for doing so fits the government’s rules. Many landlords swear to never again take a Section 8 tenant after having trouble getting rid of one. The bureaucrats are a real pain to work with.
I suspect it boils down to whether your building and neighborhood is not attractive enough to pull in the more desirable tenants. There is an undeniable stigma to having Section 8 tenants.

[EconProf]

There are pros and cons to having Section 8 tenants. On the plus side, they tend to stay longer, are financially motivated to keep up the unit and not break the rules, and you get the guaranteed check on time. Sometimes, they pay above market rent if you have a crappy unit or neighborhood that would not command decent market rents.
OTOH, the tenants are, after all, needy with all that that implies. This may not go over well with your other tenants. You get government inspectors to make you fix stupid & silly things, while ignoring more obvious or aesthetic shortcomings that you would readily cure for a private sector tenant. Example: they will make you replace a window with a one inch crack in a corner that is going nowhere, but ignore a worn out & dirty 5 year old carpet that a private sector renter would rightly ask you to replace.
Finally, it is extremely hard to get rid of a Section 8 tenant unless your reason for doing so fits the government’s rules. Many landlords swear to never again take a Section 8 tenant after having trouble getting rid of one. The bureaucrats are a real pain to work with.
I suspect it boils down to whether your building and neighborhood is not attractive enough to pull in the more desirable tenants. There is an undeniable stigma to having Section 8 tenants.

[recordsclerk]

I would have to agree with what everyone else is saying about Section 8. I do like the fact that they know that they have a good thing going, so they do tend to stay out of trouble and keep the unit/house in decent shape. There is a yearly inspection and depending on the inspector, you usually fail during the first inspection. They get you for things you would have never thought about. They will give a list of failed items that are usually easily remedied. I also like the fact that the tennants stay for longer periods of time. My current tennant has been with us for 4 years and we just signed another 2 year lease with them.
The worse thing that I think can happen to an Condo HOA is probably not being able to pay water and insurance. There is a complex that I have been following and there are only 7 people paying out of 72 units. They have no reserves and owe $5K for a pumbling job. There is still a water leak that they cannot afford to fix. They have not paid the insurance and water for at least the last couple of months. The Management company quit this month and the HOA is on their own. As of a couple of weeks ago, the management company said that the water was to be shut off, but I don’t think that it has happened yet. I wonder what will happen if the water gets shut off. I also wonder what will happen if there is a fire or flood and they don’t have any insurance or money for repairs. Obviously there has not been any routine maintenance for awhile and the gounds have not been attended to. The pool doesn’t look bad, but I don’t think that is has been attended to either. Also the older of the 3 buildings needs a new roof from my observations (I am not a roof specialist, but it just looks really worn out). This complex has 9 units available and there are also 2 currently pending. They units available are 40K-70K below market for that area. I will continue to check in on this place because I think at some point in the near future the banks will have to unload these units. If enough people buy into this complex and pay HOA’s everything should begin to get better. I’m sure there will be a couple of special assessments due, but overall I think it will make for a good investment.

[recordsclerk]

I would have to agree with what everyone else is saying about Section 8. I do like the fact that they know that they have a good thing going, so they do tend to stay out of trouble and keep the unit/house in decent shape. There is a yearly inspection and depending on the inspector, you usually fail during the first inspection. They get you for things you would have never thought about. They will give a list of failed items that are usually easily remedied. I also like the fact that the tennants stay for longer periods of time. My current tennant has been with us for 4 years and we just signed another 2 year lease with them.
The worse thing that I think can happen to an Condo HOA is probably not being able to pay water and insurance. There is a complex that I have been following and there are only 7 people paying out of 72 units. They have no reserves and owe $5K for a pumbling job. There is still a water leak that they cannot afford to fix. They have not paid the insurance and water for at least the last couple of months. The Management company quit this month and the HOA is on their own. As of a couple of weeks ago, the management company said that the water was to be shut off, but I don’t think that it has happened yet. I wonder what will happen if the water gets shut off. I also wonder what will happen if there is a fire or flood and they don’t have any insurance or money for repairs. Obviously there has not been any routine maintenance for awhile and the gounds have not been attended to. The pool doesn’t look bad, but I don’t think that is has been attended to either. Also the older of the 3 buildings needs a new roof from my observations (I am not a roof specialist, but it just looks really worn out). This complex has 9 units available and there are also 2 currently pending. They units available are 40K-70K below market for that area. I will continue to check in on this place because I think at some point in the near future the banks will have to unload these units. If enough people buy into this complex and pay HOA’s everything should begin to get better. I’m sure there will be a couple of special assessments due, but overall I think it will make for a good investment.

[recordsclerk]

I would have to agree with what everyone else is saying about Section 8. I do like the fact that they know that they have a good thing going, so they do tend to stay out of trouble and keep the unit/house in decent shape. There is a yearly inspection and depending on the inspector, you usually fail during the first inspection. They get you for things you would have never thought about. They will give a list of failed items that are usually easily remedied. I also like the fact that the tennants stay for longer periods of time. My current tennant has been with us for 4 years and we just signed another 2 year lease with them.
The worse thing that I think can happen to an Condo HOA is probably not being able to pay water and insurance. There is a complex that I have been following and there are only 7 people paying out of 72 units. They have no reserves and owe $5K for a pumbling job. There is still a water leak that they cannot afford to fix. They have not paid the insurance and water for at least the last couple of months. The Management company quit this month and the HOA is on their own. As of a couple of weeks ago, the management company said that the water was to be shut off, but I don’t think that it has happened yet. I wonder what will happen if the water gets shut off. I also wonder what will happen if there is a fire or flood and they don’t have any insurance or money for repairs. Obviously there has not been any routine maintenance for awhile and the gounds have not been attended to. The pool doesn’t look bad, but I don’t think that is has been attended to either. Also the older of the 3 buildings needs a new roof from my observations (I am not a roof specialist, but it just looks really worn out). This complex has 9 units available and there are also 2 currently pending. They units available are 40K-70K below market for that area. I will continue to check in on this place because I think at some point in the near future the banks will have to unload these units. If enough people buy into this complex and pay HOA’s everything should begin to get better. I’m sure there will be a couple of special assessments due, but overall I think it will make for a good investment.

[recordsclerk]

I would have to agree with what everyone else is saying about Section 8. I do like the fact that they know that they have a good thing going, so they do tend to stay out of trouble and keep the unit/house in decent shape. There is a yearly inspection and depending on the inspector, you usually fail during the first inspection. They get you for things you would have never thought about. They will give a list of failed items that are usually easily remedied. I also like the fact that the tennants stay for longer periods of time. My current tennant has been with us for 4 years and we just signed another 2 year lease with them.
The worse thing that I think can happen to an Condo HOA is probably not being able to pay water and insurance. There is a complex that I have been following and there are only 7 people paying out of 72 units. They have no reserves and owe $5K for a pumbling job. There is still a water leak that they cannot afford to fix. They have not paid the insurance and water for at least the last couple of months. The Management company quit this month and the HOA is on their own. As of a couple of weeks ago, the management company said that the water was to be shut off, but I don’t think that it has happened yet. I wonder what will happen if the water gets shut off. I also wonder what will happen if there is a fire or flood and they don’t have any insurance or money for repairs. Obviously there has not been any routine maintenance for awhile and the gounds have not been attended to. The pool doesn’t look bad, but I don’t think that is has been attended to either. Also the older of the 3 buildings needs a new roof from my observations (I am not a roof specialist, but it just looks really worn out). This complex has 9 units available and there are also 2 currently pending. They units available are 40K-70K below market for that area. I will continue to check in on this place because I think at some point in the near future the banks will have to unload these units. If enough people buy into this complex and pay HOA’s everything should begin to get better. I’m sure there will be a couple of special assessments due, but overall I think it will make for a good investment.

[recordsclerk]

I would have to agree with what everyone else is saying about Section 8. I do like the fact that they know that they have a good thing going, so they do tend to stay out of trouble and keep the unit/house in decent shape. There is a yearly inspection and depending on the inspector, you usually fail during the first inspection. They get you for things you would have never thought about. They will give a list of failed items that are usually easily remedied. I also like the fact that the tennants stay for longer periods of time. My current tennant has been with us for 4 years and we just signed another 2 year lease with them.
The worse thing that I think can happen to an Condo HOA is probably not being able to pay water and insurance. There is a complex that I have been following and there are only 7 people paying out of 72 units. They have no reserves and owe $5K for a pumbling job. There is still a water leak that they cannot afford to fix. They have not paid the insurance and water for at least the last couple of months. The Management company quit this month and the HOA is on their own. As of a couple of weeks ago, the management company said that the water was to be shut off, but I don’t think that it has happened yet. I wonder what will happen if the water gets shut off. I also wonder what will happen if there is a fire or flood and they don’t have any insurance or money for repairs. Obviously there has not been any routine maintenance for awhile and the gounds have not been attended to. The pool doesn’t look bad, but I don’t think that is has been attended to either. Also the older of the 3 buildings needs a new roof from my observations (I am not a roof specialist, but it just looks really worn out). This complex has 9 units available and there are also 2 currently pending. They units available are 40K-70K below market for that area. I will continue to check in on this place because I think at some point in the near future the banks will have to unload these units. If enough people buy into this complex and pay HOA’s everything should begin to get better. I’m sure there will be a couple of special assessments due, but overall I think it will make for a good investment.

[4plexowner]

HOA let the insurance lapse?

no units are going to get through loan underwriting while that is the case

before someone can close escrow on a condo they have to show that the HOA has adequate insurance

I’m wondering what happens when the HOA’s insurance lapses – how do the mortgage holders/servicers of the individual units find out that the HOA no longer has insurance? – I’m guessing that they don’t

if I let the insurance lapse on my property the lender sends me a bill for the insurance that they purchased on my behalf

~

I have always considered condos a less-than-ideal real estate investment – the current downturn is uncovering some condo issues that I had never considered – the relative price declines of condos vs single family residences is showing how the market values SFRs over condos – condos get hit first and HARD when real estate corrects

[4plexowner]

HOA let the insurance lapse?

no units are going to get through loan underwriting while that is the case

before someone can close escrow on a condo they have to show that the HOA has adequate insurance

I’m wondering what happens when the HOA’s insurance lapses – how do the mortgage holders/servicers of the individual units find out that the HOA no longer has insurance? – I’m guessing that they don’t

if I let the insurance lapse on my property the lender sends me a bill for the insurance that they purchased on my behalf

~

I have always considered condos a less-than-ideal real estate investment – the current downturn is uncovering some condo issues that I had never considered – the relative price declines of condos vs single family residences is showing how the market values SFRs over condos – condos get hit first and HARD when real estate corrects

[4plexowner]

HOA let the insurance lapse?

no units are going to get through loan underwriting while that is the case

before someone can close escrow on a condo they have to show that the HOA has adequate insurance

I’m wondering what happens when the HOA’s insurance lapses – how do the mortgage holders/servicers of the individual units find out that the HOA no longer has insurance? – I’m guessing that they don’t

if I let the insurance lapse on my property the lender sends me a bill for the insurance that they purchased on my behalf

~

I have always considered condos a less-than-ideal real estate investment – the current downturn is uncovering some condo issues that I had never considered – the relative price declines of condos vs single family residences is showing how the market values SFRs over condos – condos get hit first and HARD when real estate corrects

[4plexowner]

HOA let the insurance lapse?

no units are going to get through loan underwriting while that is the case

before someone can close escrow on a condo they have to show that the HOA has adequate insurance

I’m wondering what happens when the HOA’s insurance lapses – how do the mortgage holders/servicers of the individual units find out that the HOA no longer has insurance? – I’m guessing that they don’t

if I let the insurance lapse on my property the lender sends me a bill for the insurance that they purchased on my behalf

~

I have always considered condos a less-than-ideal real estate investment – the current downturn is uncovering some condo issues that I had never considered – the relative price declines of condos vs single family residences is showing how the market values SFRs over condos – condos get hit first and HARD when real estate corrects

[Author]

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