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Acquiring a property occupied by Section 8 tenants in Chicago or its suburbs, such as Country Club Hills, Hanover Park, South Holland, or Flossmoor, can present an excellent opportunity to grow your real estate portfolio. However, it's crucial to familiarize yourself with the full process before finalizing the purchase.
In this article, and the accompanying video, I will outline the steps involved in transferring the tenant's Section 8 housing assistance from the seller's name to either your name or that of your property manager upon closing.
Why is this process so important?
This process holds significance because Section 8 payments will not be sent to you until the paperwork for the Change of Ownership has been successfully submitted and approved.
This submission process typically takes 30 to 60 days, which means you should submit it the same day you close, if possible.
To ensure a smooth transition, it's essential to obtain certain information from the seller prior to closing, including the lease, the tenant's voucher number, and their contact details.
Additionally, you must indicate the desired destination for future rent payments—whether it be your personal bank account details if you're self-managing or your property manager's information.
With this pertinent information at hand, you can proceed to complete the Change of Ownership packet and submit it to the Housing Authority. Providing the right information is important, as any errors may result in its rejection, further delaying the already time-consuming process.
As soon as the Housing Authority acknowledges receipt of the Change of Ownership paperwork, funds will be placed on hold until it is completed. However, if you delay submitting it, or if the paperwork is submitted prior to the Housing Authority’s data entry cutoff date, rent payments may be sent to the seller.
Therefore, it is imperative to arrange a smooth transfer of the following month's rent after the closing with the seller or relevant parties involved in the closing process (including attorneys). If you promptly submit the Change of Ownership packet immediately after purchasing the property, this should only be a one-time issue affecting the first month following the acquisition.
It's worth noting that when purchasing an occupied property, the closing statement should reflect a prorated rent credit for the month in which the closing occurs. For instance, if you close on June 15th for your newly occupied investment property, the seller should credit you with 50% of June's rent at the closing, considering that you legally own the property for half the month, whereas the seller has already received the full month's rent.
Don't go it alone - hire an experienced property manager! Managing Section 8 housing requires specialized knowledge and expertise. A professional property manager can help you:
- Navigate the application process and compliance requirements
- Find and screen reliable tenants
- Handle maintenance, inspections and rent collection
- Reduce vacancies and maximize your investment
Let the experts handle the hassle - contact us today to get started!
