Here is one for those that think you don’t need research beyond the essentials leading toward a transaction. As the below linked article explains, the U.S. Department of Housing and Urban Development (HUD) just found the city of Little Rock, AR, in “substantial default” and has taken control away from the municipality of federal housing dollars because of problems they found. This action could significantly impact income potential for landlords (and investors) operating public housing within Little Rock. Although it is too soon to tell, there is a possible impact on public housing in surrounding municipalities, which could be positive or negative.
The problems stemmed from occupancy requirements not being met. There is likely more to the story, but it is still on city officials to execute. That is for a different day. The point here is the ramifications of this action. Suppose you are a new investor with public housing in Little Rock and your future income is possibly jeopardized by the City losing control. It is too soon to tell whether or not federal control will be able to fix the problem.
What happens in Little Rock is likely not top of mind for real estate investors and professionals around the country. However, the message that federal officials are monitoring matters such as occupancy in public housing in specific municipalities should be noted. If you are considering acquiring, building, or partnering in a multi-family property which includes public housing, you need to be aware of the importance of occupancy rates. Some investors might be pursuing an opportunity with a current low occupancy to get a “distressed” price and expecting to attract more tenants and grow cash flow. Not having information such as the “substantial default” could prove very costly. However, it is information which is not tied to the numbers relative to making the purchase.
Let this serve as ANOTHER reminder of the importance of having a research person or team to explore every aspect of a potential project. A competitor could have information that gives them a clear edge against your intentions. Real estate marketing needs to include the entire picture. You want to be “first in” with the right information!
https://www.hud.gov/news/hud-no-26-033