Section * works on "Fair Market Value"(including utilities) . In my market they usually use a local realtor who is also a big residential investor to provide them with a fair market housing report each year. You can find the 2014 results of their study online at http://www.huduser.org/portal/datasets/fmr/fmr2014...Note: this is a gross or "all in" value. They then have the landlord fill out a voucher where you will detail who pays which utilities and how your mechanical are configured. ie. nat gas steam heat vs. heating oil on a force hot air system. Section 8 workers then deduct any utilities paid for by the tenant from the gross rental value. In my area the worker has a chart that provided the utility and cost based on number of bedrooms. Sample worksheet can be found here. http://www.huduser.org/portal/resources/utilallowa...This figure results in the net rent the landlord will receive. in my market gross rent for a 3 bedroom is $881 per month my tenants are responsible for water, nat. gas and Electric. HW heater is electric. Furnace is nat. gas/steam. The net rent I can receive for this unit is currently $595 per month. I can increase this ammount to $673 if we pay water but thats a big wildcard.Of that tenant would pay no more then 30% based on tenants income.

@Robert Steele it all depends on what the homeless vulnerability rate vs the market rent. The higher the vulnerability the higher the subsidized rent will be. The housing authorities now pay by location not just a set rate anymore. The neighborhood and what street it's on determines what the rate will be now. Not if you have all the bells and whistles on the inside. Let me know if you have any other questions.

It is illegal to discriminate against section 8 tenants, meaning you have to use the same criteria for your selection and all other things, however if the rent offer did not meet your requirements, you may decline the offer and the tenant will be issued moving papers for find another place.With that said, Section 8 usually pay slightly below the market rate in my market. They have areas divided into zones using the zip codes, whereby if your rental falls in Zone A, the min and max rent offers may range between $950 - $1,000, while the same rental in zone F may range between $1,000 - $1,300. This information is usually included in the moving package that is provided to the tenant and you can quickly determine if the rent offer for your zone or zip code is within your asking range. Yes, you can refuse to rent due to a low rent offer - a purely business decision and not discrimination.

@Corey Demuth That is definitely a regional/municipality rule, not a national one. Oregon isn't the only place to have it though. Folks should definitely know their local fair housing laws to make sure they don't accidentally violate the law in screening tenants. Even in localities with "income discrimination" laws, you can still obviously screen tenants for prior evictions, criminal history, charging a higher deposits, etc.

Excellent explanation that I'll piggyback off of. That worksheet with the utility costs is used by every PHA, but varies by region (obviously utility costs are different in different areas). I believe the PDF calculator (Called the Happy Assistance Estimator, or something like that) is in the BP downloads section, where you can total up the utility costs from your local worksheet, punch in your local FMR, your tenant's income, and it will spit out all sorts of numbers for you, such as maximum allowable rent. A word of caution, there are a bunch of possible deductions from income for the purposes of calculating a tenant's portion of rent, so just because Jimbob gets a check each month from SSA for $1000, it doesn't mean that thats the number the PHA will use for rent calculations. Another small tidbit, most, if not all, PHAs will allow a tenant to go up to 40% of their income in calculated rent/utilities for a month at move-in, so you can often get a bit more in rent than you would off of just adding up the utility numbers and deducting that from the FMR. The exact number varies depending on a tenant's income, as its 40% of income and not a flat rate, but if your tenants have income of $800+/mo, its worth running the numbers to see if you can get an extra $50+/mo. Again, the calculator can help.

I have a question about all this - I could swear I read somewhere that it is illegal to discriminate against section 8 tenants. But you guys all talk about it as though you can opt in or out of accepting section 8 applicants in your rentals...I looked around online a bit, and here is one article about this issue in Oregon:http://news.streetroots.org/2013/07/27/discriminat...So is it basically a regional thing - ie in some areas you can choose not to accept section 8 tenants, and other areas you have no choice about it?

Often it's higher than the market rent for that area, but it's not a premium. It's just they have a set price and it's higher than market some places and not in others. That's all.

In addition to the higher rent, how many other locals get yearly increases? Baltimore us giving a 2.5% increase and told me it could be done every year.Also- in addition to paying more depending on a neighborhood or street, don't they pay extra for stuff such as screen doors, microwaves, ceiling fans, A.C.etc.?Jeff

Baltimore City "Housing Voucher Program" closed their waiting list in 2003. Today (9/22) they should announce reopening the wait list on Oct 22. There is talk of >50,000 applications. (It will be done online to avoid disasters that occurred in other cities.)The Baltimore program has an extra 800 vouchers that they need to place by June. When asked how this budget change came about from the tighter budget position @Ned Carey mentioned, the reply was, It is an election year. They have a normal turnover of 800 vouchers, so this is a big increase, and they are not sure the property inventory will be available to fill 1600 vouchers.Baltimore pays a premium to market rent. They should pay a premium as it makes renting more complicated by adding a third party. I don't want to deal with the third party, but every year a bill goes to our assembly to end "income discrimination." So far it has failed to pass.Baltimore is unique in trying to reduce the annual inspections. If you pass inspection this year, you get skipped next year. This brand new program is an effort to reduce the time spent inspecting properties that never fail. They are also developing a self-certification program where you correct minor issues, sign a form saying job done, and inspection is complete without revisiting property. (also not going to be available elsewhere.)All this was learned at my local REIA meeting which hosted a Section 8 presentation. It pays to support/attend your local REIA.

In my local area where I am looking at properties I found 2/1's that will cash flow at just over $100 per month with a CoC return of around 14% and that's what I decided to buy. Then I found out there is a local non profit that is similar to section 8 I guess (state funded) that pays 20% premiums for rent. I need to look into this program some more but if it holds water then cash flow triples. If it doesn't pan out I can always fall back to my original plan, I figure I will build up higher reserves to account for potentially higher maintenance/repair costs.

Followed Discussions Followed Categories Followed People Followed Locations

General Landlording & Rental Properties

Market News & Data

Market Trends & Data

Buying & Selling Real Estate

Out of State Investing

Real Estate News & Current Events

Real Estate Technology

Investor Mindset

General Info

BiggerPockets Exclusive PRO Area

PRO

General Real Estate Investing

BPCON

New Member Introductions

Questions About BiggerPockets & Official Site Announcements

Off Topic

Starting Out

Real Estate Success Stories

Real Estate Horror Stories

Real Estate Strategies

House Hacking

BRRRR - Buy, Rehab, Rent, Refinance, Repeat

Commercial Real Estate Investing

Innovative Strategies

Mobile Home Park Investing

Land & New Construction

Multi-Family and Apartment Investing

Wholesaling

Rehabbing & House Flipping

Short-Term & Vacation Rental Discussions presented by

Tax Liens & Mortgage Notes

Medium-Term Rentals

Buying & Selling Small Businesses

Outdoor Hospitality

Landlording & Rental Properties

General Landlording & Rental Properties

Managing Your Property

Marketing Your Property

Tenant Screening

First-Time Home Buyer

Real Estate Professionals

Mortgage Brokers & Lenders

Contractors

Real Estate Agent

Financial, Tax, & Legal

Creative Real Estate Financing

Personal Finance

Insurance

Private Lending & Conventional Mortgage Advice

Tax, SDIRAs & Cost Segregation presented by

Foreclosures

1031 Exchanges presented by

Goals, Business Plans & Entities

Legal & Legislation

Real Estate Classifieds

Classifieds

Real Estate Events & Meetups

Reviews & Feedback

Ask About A Real Estate Company

Real Estate Deal Analysis & Advice

Guru, Book, & Course Reviews

Syndications & Passive Real Estate Investing

Updated over 10 years ago, 09/29/2014

618
Posts: 351
Votes

Robert SteelePoster

Investor
Lucas, TX

General Landlording & Rental Properties

Section 8 Premium?

Robert SteelePoster

Investor
Lucas, TX

Posted November 27, 2013 19:21

I have one section 8 rental that I keep in my portfolio because it kicks off so much cash flow.

I can't seem to keep ahead of the rents. I'm getting a little above market rent right now but I know that section 8 pays a premium to attract landlords. What percentage is that premium in your areas?

0 Votes

22 Replies

Jump to Last Reply

Sort By:

Oldest

Loading replies...

Your Profile Views

Curious to see who's interested in your profile? Unlock your views with Pro

Connect with others

7 day free trial. Cancel anytime.

PRO

Upgrade to Pro

Market Finder - key investor metrics for all US markets

Deal Finder - investor-focused filters and notifications for new properties

Calculators - Unlimited access to 9+ property analysis calculators

Find an Agent

Find & Match With an Investment Friendly Real Estate Agent

Enter your market to get started

Rent Estimator

Address or ZIP

loading related articles...