Section 8 vs. Standard Lease - Pros and Cons

[Danielle DeCormis]

Seeking advice on best approach...

Just purchased a property in the greater Pittsburgh area.  It's in a C+ area that's on the rise, but it's located on the crappiest street.   I ran quick numbers (see below) and it would seem that we'd cash flow better with Section 8, but the horror stories from other investors scare me.  

SECTION 8 ANALYSIS

Section 8 Rent permitted            $1785.30

Subtract Utility Allowance             - 468.00

    Actual Rent Charged               $1317.30

Subtract Mortgage                         - 500.00

Subtract Prop Mgmt Fee               - 131.73

Subtract Taxes (20%)                     - 263.46

Subtract 10% Vacancy                   - 131.73

Subtract 10% Cap Ex                      - 131.73

            CASHFLOW TO US             $ 158.65

STANDARD LEASE ANALYSIS

Monthly rent (asking amt.)          $1100.00

Subtract Mortgage                         - 500.00

Subtract Prop Mgmt Fee               - 110.00

Subtract Taxes (20%)                     - 220.00

Subtract 10% Vacancy                   - 110.00

Subtract 10% Cap Ex                     - 110.00

             CASHFLOW TO US             $ 50.00

Thoughts????  Pros/Cons?  

[Nathan Gesner]

In my experience, Section 8 tenants are low-quality. They aren't spending their own money, so they are less likely to take care of the rental or follow rules. Think about it: most of them are able-bodied adults who choose to live (mostly) free off the backs of others rather than contribute to society.

Rent payments are usually steady, but Section 8 tenants took a lot more work upfront, throughout their tenancy and at the end of their tenancy. About 80% of them resulted in an expensive turnover. About 1/3 of their leases had to be terminated or evicted.

I finally got tired of it and stopped accepting Section 8 about six years ago.