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Section 8 Rental- To Install Central A/C & Washer/Dryer
I put my first investment property in Baltimore, MD recently. I am about to start the rehab and plan to rent it as a Section 8 property once I'm finished. I am deciding now what level of renovation will give me the most "bang for my buck." I've heard that Section 8 pays more for properties that have things like ceiling fans, central air conditioning, and washer/dryer in unit. That said, I haven't been able to find definitive confirmation on this topic. Moreover, I would be interested in hearing some firsthand experience on how much extra income I could expect to see if it justifies the added initial expense.
@Brandon Rosenblatt I have a property I rehabbed and has been rented to Section 8 tenants for the past 4 years. You might know this, but The Housing Authority does a market analysis of comparable properties to decide how much they are going to pay. Every year I request more and they approve an amount based on comps. I've never seen a report, and I could be corrected by somebody that has worked for a housing authority, but I don't think it's that advanced (although this year they authorized an amount $5 less than I requested haha). My guess is they go based on primary features i.e. # Bathrooms, # Bedrooms. Either way, my recommendation would be to not put in AC. It's expensive and even if you get more rent, it's probably not enough to be worth it. Because of the lack of landlords that accept Section 8, I don't think people with housing vouchers can be that picky. I have several houses with AC and it costs me on average a couple hundred dollars per year in service calls (these aren't particularly old systems either, two of them installed in last decade).
If you are going to have the ceilings open as part of your rehab and you can put the ductwork in so you can easily add AC in the future, I think that's a great idea. With no AC, I would put in some inexpensive ceiling fans.
I would make sure there are washer/dryer hookups, but I wouldn't supply the appliances themselves. The fewer appliances you are responsible for, the better. No garbage disposal either. Put in the most durable materials you can (e.g. Tile Floors).
Central AC is a tricky one. If you can afford it, I say do it. There's a chance your unit will not always be a Section 8 rental. It's easier to rent to regular tenants if you have central AC. Even with S-8 tenants, having a central AC helps protect the landlord. Once, I had a tenant install a window AC improperly so that the condensation dripped into the window sill and inside the house. Actually, it happened more than once, but I was made aware of the other time and was able to rectify the problem before it caused any damage.
I understand what @David Shapiro is saying about service calls expense. But, if it works out that you both get higher rents than normal and you screen for a competent tenant, I think you'll come out okay. And central AC makes for happier tenants.
Regarding, washer/dryers, I vote no for the actual appliances. It's too risky to install your own washer and dryers. You'll be responsible for every service call to those machines. However, it is important to have connections available for washers and dryers. Even if they don't currently own a washer/dryer, they'll want to know that they can install them if if they ever luck into a pair.
Originally posted by @Brandon Rosenblatt:
... I've heard that Section 8 pays more for properties that have things like ceiling fans, central air conditioning, and washer/dryer in unit. ...
Section 8 reduces the amount of the voucher given to the landlord by the amounts that Section 8 calls utility allowance. In my area, when a unit has air conditioning, Section 8 subtracts an additional utility allowance amount for the additional electricity that the AC is projected to consume - resulting in less of the voucher dollars going to the landlord.
You would be better off actually learning how Section 8 works in your area so that you don't end up paying extra for some feature that won't net you any more money, and might even cost you money in both capital expended for the feature and reduced net rent ...
minimal, save your money. people like to steal condensors, linesets, accoils as well....
For the sake of argument I'd like to put out something about the step that comes before the Housing Authority assigns the rent: the tenant has to designate your property as the place where he or she wants to live. Thus the name Housing Choice Voucher Program (HCVP). And yes, I'm told they can be picky, although I have not personally had a problem. Perhaps landlords in higher end neighborhoods may not want voucher holders but in the working class communities that dominate Baltimore, many landlords actually market to voucher holders.
For this reason some of my colleagues make their houses as attractive as possible (within the norms of a rental property)--even going to granite (indestructible) counters at times. Their units do not tend to stay empty for long.
I'm agnostic on the question of AC units vs. CAC, although I do think the Baltimore summers require some sort of AC. I have AC window units in one rental and the other unit came to me with central air already in place. Both take maintenance. Both use a lot of electricity. David, I did like your point about not installing AC ducts unless you are already opening the ceiling for something else.
Laundry appliances, yes absolutely. So important for families with small children!
Best,
Nancy Roth
.
Hey, I'm also in Baltimore, Maryland. My first buy and hold is out in the suburbs (a former primary residence) in Belcamp. I have a friend who is doing some rentals downtown, including 3 section 8 tenants. I'd love to hear about what you decide and how this works out for you. I may be facing a similar dilemma in the coming months.
@Nancy Roth I was saying somebody with a voucher can NOT be picky. Although that's based on a small sample size of my one house that I've had Section 8 requests. Also, that house is relatively nice four bedroom with AC, so maybe they were being picky when they chose my house. I rescind my picky comment now that I realize I don't have enough data to back it up.
Both central and window AC might need maintenance (I've never owned a window unit so I can't speak to that), but if I weren't providing central AC I wouldn't provide window units. That would be up to the tenants if they choose to do so, that way any maintenance is on them. Also, to @Randy E. 's point, condensation leaking into the house could be a concern, I would hope that window units are designed better than that, again I don't have any experience with them, so I can't really comment. I do know that there is a reason many property managers won't even take on a property with a Section 8 tenant. Are they going to change the AC filter every three months? I wouldn't count on it. I had an appliance repair company tell me the range and the over-the-range microwave, both only 3 years old, were beyond repair. I'm not sure what the tenant was doing with them, but that's absurd.
I agree with Randy that you may not always have section 8 tenants in there, maybe one day you decide to sell and central AC is big selling point. That's why I recommend you future proof by installing any duct work now that's easier to do based on your current renovation project (but don't install the air handler or condensing unit).
And yes, central AC makes for happier tenants, I just don't know if it will result in more money in your pocket, and based on Steve's comment it sounds like it might actually be less.
Originally posted by @David Shapiro:Also, to @Randy E. 's point, condensation leaking into the house could be a concern, I would hope that window units are designed better than that..
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And yes, central AC makes for happier tenants, I just don't know if it will result in more money in your pocket, and based on Steve's comment it sounds like it might actually be less.
The window units are designed well. It's user error that results in water damage. Window ACs are designed to hang downward toward the back of the unit, so gravity will pull the condensation out of the back drain which results in the water dripping outside the house. Some windows (sills, window framing, etc) are situated such that sometimes a window AC will naturally sit tilting downward toward the front. That can be rectified with a little tinkering and readjustment, but some tenants are clueless and the AC will be put in use while it is leaning the wrong way.
In that situation, the condensation will possibly end up dripping inside the house, or worse into the window sill. The second scenario is worse. If the water drips inside the house, the tenant will see it and immediately know there is a problem. If the water drips in the window sill, the tenant may never notice there is a drip and the water could rot the wood there, not to mention drip into the wall and cause damage there and on down to the subfloor, etc.
Regarding central AC creating happier tenants, I wasn't clear. What I wanted to say was more along the lines of creating happier, more enthusiastic applicants. Some prospective tenants (maybe including some of the better qualified ones) will bypass rentals that don't have central AC. Having central AC might lead to the landlord landing a better quality tenant, which is something everyone wants.
I've had great tenants in rentals that don't include central AC, but here in North Carolina with our 100-degree + high humidity summers, it's almost a certainty that every household will run AC most days from the end of the school year through the end of September. That's usually one of the first questions potential tenants ask me. Not having central AC isn't a deal breaker for all, but it is for some.
Originally posted by @Brandon Rosenblatt:
I put my first investment property in Baltimore, MD recently. I am about to start the rehab and plan to rent it as a Section 8 property once I'm finished. I am deciding now what level of renovation will give me the most "bang for my buck." I've heard that Section 8 pays more for properties that have things like ceiling fans, central air conditioning, and washer/dryer in unit. That said, I haven't been able to find definitive confirmation on this topic. Moreover, I would be interested in hearing some firsthand experience on how much extra income I could expect to see if it justifies the added initial expense.
Always check local laws regarding requirements. I thought that CAC was a requirement in Maryland, but maybe window units are acceptable.
Originally posted by @Randy E.:
Originally posted by @David Shapiro:
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In that situation, the condensation will possibly end up dripping inside the house, or worse into the window sill. The second scenario is worse. If the water drips inside the house, the tenant will see it and immediately know there is a problem. If the water drips in the window sill, the tenant may never notice there is a drip and the water could rot the wood there, not to mention drip into the wall and cause damage there and on down to the subfloor, etc.
...
If you have ever had a house with a wooden porch floor with a window AC unit mounted above the porch floor, you realize soon enough that it might be a no win situation when it comes to the condensation flowing out of the AC unit :)
Catch pan and drainage tubing sometimes are needed ...
Originally posted by @Russell Brazil:Always check local laws regarding requirements. I thought that CAC was a requirement in Maryland, but maybe window units are acceptable.
I'd be interested to hear the answer to that. I don't believe AC is mandatory here in Texas, and 105 degrees is pretty routine in the summer. Last summer I had an AC unit break and despite my best attempts to get it fixed it took 7 visits from the repairman and 6 days to get it working properly. My tenant would complain and say this was unacceptable and that I should put him up in a hotel. I told him it was out of my control, and it wasn't a safety issue... plus, 100 years ago nobody had AC and they lived in the summer heat of Texas, so you'll be fine.
@David Shapiro I do know of a situation (not a rental) where Child Welfare Services was called and got involved because a parent/homeowner did not fix their broken CAC. They almost had their kids taken away over it. I guess I just assumed because of this that CAC or AC was a requireMent.
Originally posted by @Randy E.:The window units are designed well. It's user error that results in water damage.
Regarding central AC creating happier tenants, I wasn't clear. What I wanted to say was more along the lines of creating happier, more enthusiastic applicants. Some prospective tenants (maybe including some of the better qualified ones) will bypass rentals that don't have central AC. Having central AC might lead to the landlord landing a better quality tenant, which is something everyone wants.
ahh, a case of good ol' user error... seems to be an epidemic amongst tenants haha
True, the better qualified tenants could potentially pass on the house. However, since he's marketing specifically to Section 8 I don't know that I would install AC based on that. As I believe you said Randy, it comes down to good screening. Even when I've thought I did a good job screening, or my management company did, I've been let down on how well they maintain the property. My applicants have always had vouchers that cover 100% of rent so I don't think I can screen based on income (correct me if I'm wrong), but let's say they have good credit, no evictions, what else are you looking for with a Section 8 applicant?
At least we all agree on the washer/dryer :)
Originally posted by @Russell Brazil:
@David Shapiro I do know of a situation (not a rental) where Child Welfare Services was called and got involved because a parent/homeowner did not fix their broken CAC. They almost had their kids taken away over it. I guess I just assumed because of this that CAC or AC was a requireMent.
Wow. If it were a rental, my understanding is that the landlord would have to fix it because they provided it initially (unless maybe if it was stated in the lease that maintaining the CAC is the tenants responsibility).
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funny in the south Sec 8 won't approve any home that does NOT have central AC that works... !! and no deduct for utls cost...
Originally posted by @Jay Hinrichs:
funny in the south Sec 8 won't approve any home that does NOT have central AC that works... !! and no deduct for utls cost...
I don't know if you count NC as the south, but Section 8 in NC definitely approves homes without central AC for Section 8 tenants
@Jay Hinrichs & @Randy E. - how Section 8 operates can be expected to vary all over the country; that is why I suggested that the OP learn how it works in his area. Since he is in MD, my guess is the AC is going to be treated more like it is in PA rather than how it would be in FL or AL.
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ya Texas MS AL GA all those areas if you don't have central air it can be pretty miserable ..I was speaking about MS as that's were I encountered these rules...
I got tired of our condenser units getting stolen and wanted to put in window units but that was a no go for the hud contracts we had
Thank you all for your comments. I have a friend who knows a retired Section 8 inspector. I'm hoping to talk with him in the next week or so to get some more details on what benefits, if any, there are in terms of being able to collect higher rents from the government. It seems unlikely to me that the government would pay more for a house that has central A/C, as that seems more like a luxury than a necessity. That said, stranger things have happened. I will repost once I have more information on this topic and let everyone know what I decide.
@BrandonRosenblatt let me know what your inspector friend says. I'd love to see some info on what the requirements of section 8 are. I know some of them from a friend who rents to section 8. But a nice checklist i could go down when doing rehab work would be awesome.