Renting to Section 8 tenants

[Anja Brey]

Hello, 
We are currently looking for a buy and hold investment in the SF Bay Area. Can somebody give us input on the Pro and Cons of renting to Section 8 tenants? 
Thanks, 
Anja

[J. Martin]

Originally posted by @Anja Brey:

Hello, 
We are currently looking for a buy and hold investment in the SF Bay Area. Can somebody give us input on the Pro and Cons of renting to Section 8 tenants? 
Thanks, 
Anja

Anja, I have one Section 8 tenant, and had several applicants and a Sec 8 inspection of the property I bought in E Oakland earlier this year.

IMHO, section 8 rents are not even keeping up with the market in the Bay Area. Typically, Section 8 rents are significantly higher than market rents, and guaranteed rents when you may otherwise not have very good credit quality in the tenant pool, from many things I have seen. It may be different for others.. So that's why I don't think it makes sense in the Bay. Here are the numbers..

Oakland housing authority was offering $1,200 or $1250/mo (can't remember which..), and were going to require some exhaustive changes to the property that I did not think were necessary. I rented them to qualified non-section 8 tenants for $1,390, $1,395, and $1,400. I don't think I could do it 3 times in one month if I was incorrect on all of them. So far, so good.

The Section 8 tenant I do have is a house I own with a partner in Richmond. She is overall nice, and pays her small share of rent on time. Richmond housing authority pays the rest. I inherited her when buying the property. It is also significantly below market. The house needs to be renovated, but should get about 40% more than she is currently paying. I know this because we also own a house next door that's slightly bigger getting about 50% more in rent. Part of the issue is that she has a 1br voucher, and is living in a 2br. And also because the housing authority put a freeze on all rent increases.

She has a son who works on cars on the street outside, and has some friends that are all car guys who litter and drive too fast in the neighborhood. But she tries to keep them in check. Definitely do your due diligence on the tenant screening, and I would drop by their existing residence to check it out. You are allowed to. Just drive to where they live from the application, and call.. "I'm in the neighborhood, so just wanted to stop by and drop off some papers for you."

I use mysmartmove.com for the tenant screening: eviction, criminal, credit check. The Section 8 crowd is different than many of the people that may live near you. And it will depend a lot on the area you are in also.. But again, I just don't think the numbers make sense in the Bay for this..