Different types of properties offer investors different advantages.
The vast majority of rental properties are “market rate” meaning that the landlord can charge whatever price is set by the rental market, without any subsidies or discounts. These properties are the most straightforward for owners to purchase and lease out. Having a strong market rate property means you’ll need to pick an excellent location and know the market you want to reach.
The term “affordable housing” has a broad meaning, but generally, it’s a proper term for any rental agreement where the tenant pays a percentage of their income (usually 30%), and the rest of the rent is picked up by a government entity. Affordable housing has become popular with investors because it’s in such high demand, and the properties are consistent. With an experienced property management company, owners of affordable housing can consistently maintain high cash flows at low risk.
The federal low-income housing tax credit program allows private landlords to claim credits on their property taxes (for eligible buildings) if they agree to rent to low-income individuals and families at restricted rent. Typically, this type of property also requires the owner to commit to the development of the property. This type of investment is a win for investors because they receive dollar-for-dollar tax credits and they’ll collect tax benefits for ten years after.
HUD (Section 8)
Property owners can sign a contract with HUD (U.S. Dept. of Housing and Urban Development) where the owner is subsidized directly to rent to low-income tenants. Tenants generally pay 30% of their income in rent, and they pay the remainder to the owner by HUD. The pros of investing in Section 8 housing is that you’ll have an extremely reliable source of revenue (the federal government always pays) and you’ll be in-demand among tenants. Moreover, a property management company with HUD experience can help you get through the red tape quickly, screen out risky tenants, and make sure that you’re always compliant.
Are you Looking for an experienced property management partner?
McDougal Property Management has extensive experience in the building, marketing, management, renovation and revitalization of multifamily and commercial properties in Lubbock and northwest Texas locations.
Our portfolio includes premier, market rate, affordable, tax credit and HUD properties across the state of Texas. We look forward to discussing what we can do to help your properties increase their value. Contact us online or call 806-797-3162.