Are you nearing retirement from your corporate career and seeking ways to diversify your investment portfolio with something that can bring in long-term cash flow? Financial advisors may tell you that real estate is a great investment diversification strategy because it’s far less volatile since you don’t have the same extreme highs and lows of the stock market. But maybe you want something even more steady, like reliable monthly cash flow from your investments. Well, the Chicago Housing Authority’s (CHA) Property Rental Assistance Program (PRA) can help property owners secure and retain renters for years to come.
What is the Property Rental Assistance Program?
The city of Chicago has been implementing the largest public housing redevelopment effort in U.S. history. As part of that plan, the CHA aims to deliver tens of thousands of affordable housing units to help low-income families maximize their economic success. Currently, they have 42,000 families on the waitlist, with 80% seeking one or two bedroom units. So, in order to achieve their goal, CHA offers financial incentives through the PRA program to owners of multiple single-family units or a multi-family unit. These rental units may be going through the rehabilitation process or they may be tenant-ready.
As part of this incentive for rental property owners, the PRA provides a long-term rental assistance contract for a specified number of units that are designated as affordable housing units. Property owners currently receive a rental subsidy, or the difference between the contract rent for the unit and the tenant’s income ability, for a contracted period of between five and 30 years, with the option of renewal once this period expires.
But don’t worry that you’ll be stuck with a long-term rental contract that doesn’t keep up with the market. Initially, the contract rent is determined by the lowest of three determining factors. These factors include: 1) 110% of current market rents for the number of bedrooms in your unit, 2) average market comparables, or 3) your requested amount. Before the anniversary date of your contract with CHA expires, you can also request an increase in the monthly remittance, which will be determined by similar factors.
What if I Have a Vacancy in One of my Units?
As we know, unit vacancies are a financial drain on a rental investment, but the PRA program offers some certainty for keeping your rental units at capacity. With so many families on the waitlist, whenever you have a vacancy, they will send you a list of ten prospects from their wait list. After finding one that meets your tenancy criteria, let CHA know and they will do their own interview to ensure the prospect still meets the program specifications. If all is well on both sides, a rental contract can be signed with the new tenant and you will get the monthly subsidy via direct deposit.
If in the unlikely event that the CHA does not fill your vacant unit within 30 days, they will help you mitigate the financial loss. First, if outreach attempts to the prospects on CHA’s wait list are unsuccessful after that period of time, you may qualify for rental payments anyway. CHA can pay up to 50% of the contracted rent for up to 60 days. If the unit is still vacant after that and CHA believes they have an eligible applicant on their waitlist, they will pay the rent for an additional 30 days at 100% of the contracted rental rate. However, you may begin to select from your own waiting list after 60 days. The CHA will help you screen those applicants.
Building Your Retirement Rental Portfolio
The key to building a rental portfolio that can provide regular, long-term income for years to come is rooted in finding good leads on investment properties. There are lots of ways to generate leads on good purchases, like knocking on doors and even attending local investment club meetings. But, that requires a lot of effort and little certainty.
Perhaps it’s time to look into other ways to strengthen your retirement business plan. HomeVestors® franchisees enjoy both the structure and the strategy that new real estate investors need, since they may have the business savvy but not the industry experience to achieve their desired amount of financial gain in their retirement years. It all starts with the best marketing tools for real estate investors based on the “We Buy Ugly Houses”(R) campaign. If this sounds like it could be the next step for you, reach out to HomeVestors® to obtain more information.
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