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In this episode, you’ll discover:

  • Why Section 8 housing is less stressful (and more profitable) than private gated communities (1:23)
  • The “Golden Ticket” reason that makes Section 8 tenants happy to pay their rent for nearly a decade (2:37)
  • The “Section 8 Trick” that forces the government to fork over your tenants’ rent and utilities to you every single month (5:09)
  • How Biggie Smalls can cripple your stress from tenants not paying their rent on time (8:57)
  • The counterintuitive reason you can charge unusually high rents to public housing compared to private housing (10:20)

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Hey! Want to do a deal? Need my help? No cash to make an offer? Send me a quick text at 440-389-3883 and we’ll work together to get you the deal.

Read Full Transcript

Welcome to Cleveland real estate investor. On this podcast, you'll hear about every aspect of the real estate investment business. You will talk to your rockstar investors about their businesses, how they built them, where they came from, and where they're going. Who am I? I'm Joe Lieber and I've made millions of dollars from the real estate investment business over the last 20 years. If you're ready to hear the good and bad from a guy who's learned this business from the school of hard knocks and get educated by some bad ass entrepreneurs, then put your helmet on, strap on your chin strap. Let's ride.

(00:54): Hey, what's going on? What's going on? Yeah, I've got a good show for you today. I'm going to talk to you today about CMHC, which for those of you who don't know, CMH is our section eight program here in the Cleveland area. There's a few of them. This is the big one. It stands for Cuyahoga metropolitan housing authority, CMHA, very near and dear to me, I've spent a lot of years doing section eight properties, and I'm a huge fan of section eight. I don't think folks really understand section eight. And the first reaction when I say, Hey, I got a great section eight property. When I say that to some turnkey out of state, out of area, in know real estate investors that I was like, Ooh, they're going to trash my house. And that is completely wrong. I have more issues with private pay tenants than I do with my section eight tenants.

(01:51): They really, really are a very grateful bunch of folks and they are. They stick around these houses for forever. I would have to say my average turn time is about six or seven years with a CMH tenant. It's really quite amazing. And I'm going to tell you why this one we're talking about today on the show, like, why are these tenants great? I'm going to debunk a few myths. I mean, this isn't something that I can just go over on one show. This is, these are lengthy conversations, but this is what sparked it today for me. So my mother handed me the Cleveland plain dealer dated here Sunday, October 4th. And they were talking about CMA opening it's lottery. So here's how this works. If you have a situation where you need help with your rent and you want to get on the section eight program, you have to apply for it.

(02:46): As you can probably imagine. There are tons and tons of people that want to get the golden winning tickets, right? Because when you get this voucher, if you win your rent's paid and it's awesome who wouldn't want to get that? If you need that, right? And they're opening up the lottery and it says here, I'm just reading off the article here a little bit. They only open up the lottery every couple of years where you can go in and actually apply. And when you apply, you go into for a chance to win a spot, to get on the list for a voucher. So think about that. You have to go make an application. And then from the application, the computer randomly selects 10,000 people. So I'm gonna give you some numbers. They're telling me here, they're going to have about 40,000 people apply of those 40,000, 10,000 people will be selected to have a chance to get a voucher.

(03:48): They're not getting a voucher. They just, they keep dominant down here where now out of the 40,000, they're going to take 10 and then those 10 have a chance, right? So just looking at their article here for those that aren't chosen for the list, the window to apply can take years to even get a chance to reapply. How wild is that? So out of that 10,000 people here flip around this article a little bit for out of those 10,000 people who get the chance to go into a lottery, to get a housing voucher. They're only going to select to 2000. Maybe it all depends on how much money they're going to get from the government and how many vouchers they're going to be given basically. So let me tell you a little bit about section eight and CMH. The tenants that I have. I have a lot of section eight property and the tenants that I have, they're honestly very grateful. They're respectful. Most of them, I'm going to say 98%, keep the house perfect. They don't give me any issues. I've had bad ones. Of course I have. I'm known as 20 years, of course, my bad section, eight tenants, but they're really, really are a good bunch. And they stay long and their rent is guaranteed by the government when I say guaranteed. Now. So there's folks that come in into the house, the program that are fully stocked

(05:20): [inaudible] I have a lot of those

(05:21): Where the government's picking up the full ride, the full tab, and they're even paying their utilities and their water and sewer bill

(05:29): Love those obviously.

(05:32): Well then section eight really is designed as a rehabilitation program. So what they want, they want to get their clients, which is the tenant back out into the workforce, get them adapted with making their own money and contribute to a portion of the rent.

(05:47): I have a lot of those too. So

(05:49): For random number, if I have a house that's a thousand dollars a month in rent, and they're trying to get them rehabilitated, they might pay $200 out of their pocket and they're good. They do pay. I've had a couple of years where they a little pay late, but they'll pay. That's awesome. Right? It works. They lose the job. What they'll do is they'll go back in for a reevaluation and then sometimes their rental get fully subsidized again, which I've had that happen. There really are so many great things that I like about this, especially that the rent is guaranteed. One of the most challenging things as a real estate investor is getting your rent on time. We all stress out about it. We all want to make sure it comes in. None of us want to have any repairs and we just want to, we want the cash, whether we gotta pay a mortgage, cause we have the death on the property, or we want the cashflow to use for whatever we want to use it for.

(06:46): That's the big stressor is getting the rent. I don't care if you have a, a year in a B plus neighborhood or you're in a D plus neighborhood, there's always that stress there. I have excellent properties are an a minus B neighborhoods and I have challenges getting rents. So sometimes it really doesn't matter where the house is located. It just matters the person you're putting in there. And I do take some, a lot of time anymore. Really try to select quality tenants because I know what the issues you're going to have with turnover and how expensive turnover can be between loss of rents and having to pay water bills after they move out. And just the sheer, you know, getting the house back to rent, ready status can cost a lot of money. So I'm just a big fan of the CMHC. It's working really good for me right now.

(07:33): I have a few CMH properties right now that I'm going to sell that are producing very well, long term tenants and whatnot. So if you do have any interest in some of these CMH properties, just hit me up on email it's R E broker, the number's two, one6@gmail.com. And then we can just schedule a conversation and let you know what I've got that CMH rented right now that I'm going to sell. But I just was interested in seeing this, you know, and they're making the process you've been better and better. You know, CMAA got a bad rap in 2008, they were raided by the FBI was all over the news. It was shady business practices. And I remember those days, they were awful. I remember how inspectors would always call me or call. They always want to talk to the owner. Can the owner Munis at the property?

(08:21): This is back, you know, Oh five Oh six Oh seven Oh eight. And I would have to meet them. The inspector at the property. And all it was was, it was so corrupt. It was just a hand greasing session. You know, you had to grease hands in order to get these properties to pass. And I'm glad those days are over. I actually pulled away from the program at that time. Cause it was just so ridiculous that I just, I didn't want to run a business like that. So, but since then, they're really getting people excited about the program. Again, I talked to one of the higher ups at CMHC a few years ago and she was telling me CMHS public housing, right? It's government housing. So for those of you who grew up in the nineties, I remember that biggie small song. When you say no more public housing, well that's what this is.

(09:07): That's what CMHA is designed for. They have all these public housing buildings all around the city and that's the first place you have to go. If you were to, you know, win a lottery ticket, here you go to public housing, apartment style units and that's CMH, but they got full. They were a hundred percent occupied and there still was a need for these tenants. They needed a place to go. So that's when they started the housing choice voucher program. And for any of us that have filled that paperwork out, we know they had the big block letters on it that say H C P V or whatever housing choice voucher program. And that's what that is, is exactly what it is. It's the housing choice. So you're giving the tenant a choice to live, where they want to live. And that's how they got the independent landlord guys like me involved the small mom and pop shops who might have one to 20 rental properties.

(10:00): And they started placing these tenants in the house of their choice, but all the bad rap it had. I mean, it was good for a lot of years. It just got bad, but the bad reputation, it had people really shied away from the program. So they needed a way to get independent landlords back involved in the program to service their client base. And they started paying what I feel is more than market rents. If you have a house that's a private pay, that'll bring in eight 50 CMHA is they're paying tax 50. So it really gets you to excited about the program. And I first discovered what they were doing probably about six or seven years ago. I said, wow, that's unusually high. What they're paying me? You know, the market rent was like the example, eight, eight 50. They're giving me 10 50, 1100 and I'm blown away.

(10:49): I'm like what? And it wasn't for a few years after that is when I had a conversation with an executive at CMHA. And they were saying they did that deliberately to try to entice the independent landlord, to come back to the program. And it's working, it's working very well. Word's kind of traveling now and now you cats out there hearing me Blab about it on this podcast. And you're like, damn, I gotta take another look at CMH. And you should, it's a great program. You're going to get your rent money. You're very likely going to get a great quality person in the property and you're gonna get paid. That's the most important thing you're going to get your money. And you're not going to have that turnover because they are going to stay a long time. Think of those numbers, right? If you are lucky enough to even break out of that 40,000 and be one of the 10,000 that goes into a lottery, that right there is huge, right?

(11:40): Like, yeah man, you want it right. But you still didn't get the voucher. So then out of that, how small is a percentage there's only a 20% chance after that, that you're even going to get, get a voucher. So if you get that, are you going to mess it up? Are you going to destroy someone's house? No, of course you're not. And the tenants I'm telling you, they're so incredibly grateful when they get these vouchers, they have not messed my house up. They've been awesome and they stay so long. It helps me get these crazy ROIs on my house. You know, a lot of times you'll look at an ROI on paper and say, Oh, this is a nine cap or an eight cap or a 10 cap. And then you don't get it because it doesn't perform. But with CMHA, it's very, very, very likely that that house is going to stick and it's going to be a good experience. So I just want to get on here and kind of just talk to you about that today. A little bit about CMHA and what's going on over there. And I think it's a wonderful opportunity. So if you're interested in one and you want to talk about CMHA and more detail, ping me while, have a conversation. Thank you very much for tuning in. Have a great day.

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