Insights on Section 8 as a landlord/Investor

[Nathaniel K.]

Hi everyone, I would really love to get some insights on what it is like to be an investor renting out to Section 8 tenants. I feel like this is a great way to start in real estate as a new investor considering a few factors. I would be looking into properties in the midwest and southeast states, under 100k, 3 bed, younger than 1955 and no more than 1,200 sqft, and turn key for the most part. Looking to put in 5k in rehab IF needed. I live in California so this of course would be me managing the property remotely to start (unless I can find a great property manager.) I am aware that I would need to be extra vigilant in screening tenants so they don't trash the place. 

I wanted to know if anyone has any experience renting to Section 8 tenants and if you would be so kind as to share any insights/tips. 

Thanks, Nathan

[Patricia Steiner]

Some of my clients target a portion of their portfolios to SFH for rental to Section 8 tenants. Not all Housing Authorities operate the same way so it pays to interview them (county office versus city). What has worked for my clients with Section 8 has been:

1. Rehabbing the houses as any other rental - new flooring, granite, etc. And, expecting the tenant to maintain it in that condition by actually teaching them how to do it (the right cleaners, etc).  Photos are taken a move-in and the tenant signs each acknowledging condition; they are given a copy for their records (and many use the photos as bragging rights with their friends and family).

2. Tenants are screened like any other; any past eviction is a deal breaker as is any criminal behavior.  What's different from non-Section 8 to Section 8 is the credit score; many of these candidates have no credit history at all so the score is low (versus being low due to non-payment). 

3. We look for tenants who are employed - most are single parent households, where the mother is a nurse/caregiver, and there are 2 or 3 children who are in school or even in college.  We don't want those folks who have nothing to do so they do nothing good while hanging out full time in the property.  We look at it as a 'hand up' versus a 'hand out' opportunity.

4. Security deposit and renter's insurance are required. There is no grace period on rent...it is due on the 1st and if not paid on the 1st, their caseworker will be notified on the 2nd that eviction for non-payment of rent should commence.  

5. Inspections are at least semi-annually.  No lease is renewed until the property is inspected.  Section 8 will also inspect the property pre-tenancy and annually). Tenants are required to report maintenance issues, maintain the yard, pay utilities and for pest control.

Inherited Section 8 Tenants (those that came with the purchase of a property) have not been the best and we part with those quickly. But every tenant acquired and screened as stated above have been long-time, multiple year tenants - with several who worked their way out of the program to become financially independent (celebrate that!) and remained on as tenants.

Know the program, know the caseworker, meet all the deadlines - including the short window to request rent increases annually - and it's a 'do good' with a great ROI (since our city office pays market rent - and sometimes higher - for a SFH) while providing the landlord with a more secure cash flow source.

Hope this helps...