Significance of the Right Location in Real Estate Investment

by jay.raman@ashokalion.com 6, August 2012 00:43

While purchasing a rental property (commercial or single family homes), one of the most important factor for a property investor is to choose the right location. In order to stand out in the real estate market, your property should be in an area with lots of potential for future growth or sustained growth.  Real estate in a certain location around Houston or Dallas are always in demand, but some real estate investors find it impossible to sell their property. This is reflective of how crucial it is to choose the right location for a successful real estate investment.

Couple of weeks ago, I came across an interesting news article on Twitter Inc.’s relocation to a gritty area in San Francisco. The news stated that Twitter Inc. will be relocating to Mid-Market in San Francisco next month as a result of which the rent of the area has gone up to 60 percent. Mid-Market is in high demand amongst the tenants since last few weeks as leasing by several technology companies have accelerated in the area thus escalating the rent of the properties. For more information, read:http://www.bloomberg.com/news/2012-05-11/twitter-rent-surge-makes-san-francisco-best-office-market.html

When you sell your property commercially, a prospective buyer will be willing to pay you a hefty amount if they are confident that they can make money from the location where the property is situated. Similarly, if you are selling your property to a family, they would prefer to be in an area that is safe and secure with good transportation facility, shopping complexes, parks, restaurants, good schools and colleges, etc. People are always enthusiastic of purchasing a home that is located in a pleasing area.

Location always plays the key role in property investment; thus, in order to be a successful real investor we always recommend our real estate and property management clients in Houston and Dallas to keep this in mind. While purchasing a home or a commercial property in Houston or Dallas, individuals stress on the following factors:

Safety and Security of the Area:
It is difficult to sell or rent a home or commercia propertyl in an area which is not considered safe or secure. A buyer or tenant will always prefer a secure area to reside as their home or business. Thus, it is always prudent to buy investment property in an area that has good surroundings with adequate security.

Beneficial for business:
While investing in commercial property, a real estate investor needs to consider various factors such as

  • popularity of the area
  • market competition in the neighboring area
  • kind of products you are planning to sell
  • kind of products your competitors in that area are selling
  • if the product can compete with the similar products that are already being sold in that locale
  • if the area is easily accessible, traffic flow in the locality, parking facilities and so on.


The visual appeal of a home or a commercial property loses value if it is not situated in the right location. Investing in commercial property located in shabby or remote underdeveloped areas can prove to be a disaster as you would not be able torent or sell it at a good price. Therefore, in order to be a successful real estate investor, make a prudent decision and evaluate the location. Great prices for a property can be reflective of those issues, and so real estate investors should be wary.

In the following video, Real Estate Broker Doug Buenz emphasizes on how location can affect the significance of real estate transaction.

http://www.youtube.com/watch?v=Cwj0RxPJfZw

The Facts of Life- Houston Section 8 is swamped with applicants

by jay.raman@ashokalion.com 2, May 2011 15:53

Today, I read a article about the Galveston County Housing Authority being swamped with applicants, and it made me realize how difficult the position is for the Houston Housing Authority as well. In the past 6 months, the Houston Housing authority has accepted thousands of applicants off their wait list. This make sense that the Housing Authority would try to help tenants find housing assistance, especially in light of this economy; as it is their mission.  With such a good, noble mission; you can forget how difficult it can be for rental property owners and real estate investors who work with the program.   The Houston Housing Authority now has delays that go beyond its 60 to 90 day "normal" processing period for landlords to be paid their check from Section 8 ("Section 8" is a catch all term for the county and city rental assistance program for low income individuals). Therefore with all the good that the program is doing, there are a lot of bad things that the owners are dealing with.

For example, two of our Houston owners who accepted Housing tenants for their vacant properties in November and December of 2010 have only received contracts in April of 2011 after having passed the inspection in December and January of 2011 for the two properties that I am referring to. This means that after marketing the property for tenants in the Houston area and accepting a tenant that the there was a delay of 3 to 4 months to even be approved for payment with payment coming in May 2011. What makes this delay of payment worse is that in one of the owner's cases that the effective date of the rental contracts was that it was made as of April, 2011. This means that the owner lost two to three months of rent keeping the property vacant while the Housing Authority dealt with their internal processing issues. 

These kinds of delays must be dealt with for Houston area rental owners to want to take on the additional burdens placed on them by accepting housing authority standards.  These burdens include:

  • Lengthy Paperwork: The Houston Housing Authority request copies of deeds, w-9, management agreeements, prefilled out leases signed by tenant, voucher, and housing authority packets.
  • Requirements for Tenant Appliances to be at the property: If you rent the property without a refridgerator, it must still be there for the inspection.
  • Inspectors inspection criteria not being uniform: Different inspectors in the Housing Authority program will pick out minute issues to "fail" a property requring a 2 week delay for reinspecting a property.
  • Delays in intial payment: Traditionally, the Housing authority process can take up to 60 to 90 days to process and get payment out. However with this influx of new applicants (some tenants have told our property management firm that there are as many as 6000 new voucher issued in past 6 months).

Also, real estate agents are not educated on this process, so it makes the process longer for them to deal with leasing these properties that have accepted the Section 8 Rental Housing Assistance Program tenants. For example, our property management firm will not pay any real estate agent's commission till the owner is paid by the Housing Authority.  This policy is in place to insure that the final amount is agreed upon, and the effective date is appropriate. Additionally, the Housing authority warns agents, landlords, and property management firms that tenants could potentially be reviewed for eligibility during this submission of their rental packet to the Housing authority for review.  If the prospective tenant is found to be inelligible then the rental owner will be forced to find another prospective tenant.

These delays and risk towards getting payment is why our firm created this policy of waiting till the payment is made by the Housing Authority prior to releasing any commission payment for real estate agents. However, many real estate agents are not used to these kinds of delays and this can cause confusion and resentment. This is why we hope agents read our "Agent Remarks" that our listing agents put which explains that the receipt of a check by the owner is a prerequisite for a Section 8 tenant to be considered approved and for commission to be paid out. 

We hope that real estate agents and property owners understand the risk of dealing with the Section 8 Housing Assistance program. However, there are some benefits to the program:

  • Consistent rental payments
  • Tenants could potentially stay longer as they have to come out of pocket for deposits
  • Housing Authority does provide periodic review of a applicants background

As the TV show the "Facts of Life" would sing in their intro song,

"You Take the Good, but you Take the bad. You Take Them Both, and There You Have the Facts of Life."


 

 

 

Navigating the maze that is known as Section 8 or Government Housing

by jay.raman@ashokalion.com 11, January 2011 17:39

Today, Ashoka Lion has been working with several property owners to help assist them fill a vacancy. These owners were open to the Section 8 housing program tenants, and we have located tenants to fill those vacancies. The Section 8 or Government Housing Program is a huge program that provides subsidized rent for hundreds of thousands of tenants a year. When we work with the tenants, we have to not only lease the property to them, but we must help get all paperwork for these governement housing programs on behalf of the owner and provide the housing officials all the appropriate documents.

The typical housing packet submission requires a general warranty deed, copy of the rental owner's drivers license, copy social security, and a signed w-9 form to prove the owner's identity and mailing address. In addition to these documents, the assistance packet provided to the tenant must also be filled out. In addition, you must examine the voucher as the packet of information is commonly called to insure that all the appropriate signatures have been obtained. A packet missing a signature will not be allowed to be submitted to the housing department if the intake personnel notices any missing items. Though this is a good thing, it can also be extremely painful, when they try to tell you that a w-9 filled out by a owner in 2009 is not valid for submission with a packet being submitted in 2011, even though the owner's information has not changed. Another painful rejection that we have encountered is that they try to require that the w-9 be in original ink, which is very difficult to get in a timely manner from owners who are not in state owners in the Houston or Dallas areas.

After wading through the paper intensive submission process, the housing authority will call to setup a inspection of the property that we submitted the packet. The inspection will consist of a variety of issues from requiring that all the utilities be on for the inspection, insuring appliances are present at the property (even if landlord is not providing them), and having a person over the age of 18 present for the inspection. Ashoka Lion requests that tenants be present at the property for the inspecction, but if not, we will be at the property if given proper notice of when a inspector will arrive.

After the inspection is passed, the landlord will have to now sign the lease that was partially filled out (housing usually keeps the effective date blank) till it is determined after the inspection. Additionally, if our property management submitted the lease with a rent amount and this rental amount is not accepted; then Housing Authority will request our property management team adjust lease to the acceptable rent by the housing authority (assuming the landlord is okay with this approved amount). After this is submitted, a contract is then mailed to our rental owner to sign with the contracted amount, and period of the initial lease (usually one year). This contract must be signed and submitted to housing to process the paperwork.

It is important to keep copies of all documents submitted.  It has been our experience that the Housing authority will not accept a fully completed packet, but if they do not locate the paperwork will try to blame the property manager for missing documents. How can a document be missing if the Housing Authorities intake personnel are not allowed to accept partially completed voucher packets?  In our property management team's experience, this usually has to do with the housing authority misplacing these document and then deferring blame to the property manager.  Also, it is important to make sure your prospective tenants provides you a case worker to contact to insure that the paperwork is moving along in a timely manner. We try to email correspondence to show a time stamp with our communications just in case it is argued that we were not making good faith attempts to resolve matters.

The entire process of submission to payment can often take 60 to 90 day for a check to be issued. Even with our history, it is always fun to hear a prospective tenant tell me interesting facts like "Housing will pay you in 2 weeks" or "Housing will allow me to pay more then the stated rent". If Housing were to allow you to pay more rent, then why would they subsidize your rent for the amount that they will? Tenants rarely have a answer to that question.

Working with the Housing Authority is like working with any large entity (slow and often times confusing), however the rewards to owners can be a steady stream of rental income. As long as the owner is comfortable with slower delay at the begining of the contract, as well periodic inspection spurring repairs; then the Housing authority does provide a steady stream of rent for owners. In this day and age, the certainty of rent may trump the discomfort with the process of dealing with a large organization with tons of red tape.