Section 8 Question

[Account Closed]

If I close on a MF that has one section 8 tenant (whose lease expires at the end of April) and do not renew the lease, does that automatically mean I am agreeing to take on Section 8 going forward? The MF that I am currently purchasing has one Section 8 tenant who is paying about 1/2 of the current market rent for the area. I do not want to take Section 8 going forward so I have been holding out on closing until her lease expires and she moves out. Should I continue to wait until she is gone?

[Robert Musallam]

Hey @Account Closed I worked for the San Francisco Housing Authority so I can provide some insight. First, as @Bill Gulley pointed out, contact the housing authority. Each PHA has their own regulations in regards to change of ownership. In SF, if the owner wanted to remove the Sec 8 tenant, the tenants had to be given a 90 day notice to move. It may be more/less in your area. This could save you valuable time if you didn't want to wait till the lease expired.

Second--and this seems more of an FYI since it seems like you're planning on renovating the unit--if you decided to look into section 8, you should get familiar with the payment standard, or as you pointed out the $1245. That doesn't mean they will pay you that amount. They have to do a rental analysis using three comparable non section 8 units in the area. However, in most cases, if you have a four-plex and the other three units are being rented to fair market tenants, you can offer those three lease agreements as evidence of comparable rent. You can get more than the payment standard if there are sufficient comparables, however, most PHAs are unwilling to do so.

Third, elderly section 8 tenants are typically the holy grail of renters. Low turnover, majority of the rent coming from HUD, and less likely to destroy and/or fulfill the (unfair) stereotype of section 8 tenants.

There are plenty of section 8 experts on BP--I would never claim to be one--but if you have any further questions, I'd be happy to answer them if I can. Best of luck on your investment!