Pros and Cons of Section 8?

Question

Hey everyone,

I know what section 8 is and I know some landlords prefer not to rent to section 8 tenants. Beside the obvious that lower income tenants are a higher risk for damaging your property, what are some of the other risk associated?

Patti Robertson · Answer

You submit the paperwork and a sample lease identifying the rent you want.  The housing authority will then validate that the rent is...

1) “Reasonable” compared to comparable non-SEC 8 units within 5 miles of yours in the same city that have rented in the last 6 months.  Most HAs pay somewhere in the neighborhood of 100% times market rent.  We have one in our market that will pay 110%. My property management firm submits rent comps with our paperwork to substantiate the rental amount we are requesting for our owner.  If you have an agent you are working with you can ask them to provide you some comps from MLS - or you can find them from another source.  You are not required to provide comps, and most people don’t. If you don’t, the HA staff will look for properties and they will be choosing your comps. I’m much more likely to choose ones I like the rent amount on than them!

2) “Affordable” for the particular tenant.  A SEC 8 tenant can only spend 30% of their household income on housing - rent plus utilities.  The info you submit about the property will allow the HA to guesstimate the cost of utilities.  They back this out of the total budget to determine how much is left for rent.  The higher the utilities, the less there is for rent.  Because of this, SEC 8 actually has a higher budget for an apartment than a single family, although the Reasonable test would usually negate that. Having a huge house, a really old house, or a house with gas will also reduce the rent because of the utility expense.

There is so much more, but my fingers get tired of typing over and over, so I wrote a blog with a lot more info.  Just click on my profile, scroll to the bottom right, and you will find it.

Rita Medeiros · Answer

Pro’s are annual inspection keep your properties up to code, Section 8 tenant risks losing voucher for LIFE if they damage property, consequently I have had no issues. Less turnover as tenant usually places children in local school system. As always check your local area as geographical regulations differ.

Matt M. · Answer

@Aidan Mulligan

Sec 8 in my area is a piece of cake. The paperwork isn’t bad, and the inspections are pretty basic. Have a decent house and you won’t have issues. Tenants typically pay their share because if you evict for non payment they lose their voucher.

Jason D. · Answer

@Thomas S. It may be area specific, but section 8 standards in my market are not strict at all...

Heat and AC must work

All outlets must work

All windows must open and have screens

Working smoke and Co detectors

And then, of course, clean and safe

All things I I would repair, regardless of who was moving in.

Account Closed · Answer

@Aidan Mulligan I inherited a section 8 tenant, and it wasn’t a good experience at all. Of course this tenant ended up being the stereotypical welfare recipient. I eventually got her out, but it took some time. If I did it again it would probably go much better because I’d be able to screen the tenant myself. Ask other investors in your area what their experiences have been. Every market is different. This property was in the Seattle where the rules are all in favor of the tenant, not the owner. When I spoke to the section 8 office I was always the greedy landlord, and she was the poor defenseless tenant.

Matt Vezina · Answer

It depends so much on the housing authority you will be dealing with as the program is administered by state and local governments.  I inherited two section 8 tenants and in my state the inspections are a piece of cake, if you're not a slumlord you'll do fine pretty much.  It's nice getting a portion of the rent direct deposited on time, and the tenants I have experience with are religious about paying their portion on time.  Having the money tied to the government is a double edged sword though, that last shutdown ended a few days before the first of the month but prior to that the answer wasn't completely clear from the state as to whether landlords would be paid on time if HUD remained closed.

Sergio Altomare · Answer

@Aidan Mulligan I attend our local apartment association meetings, and have heard many horror stories where the tenants have damaged the property and the subsequent inspections hold the landlord liable to fix the damage. Not just that, but they don't receive payment of rent until repairs are made.

My philosophy is that it's not easy to get someone who doesn't own a property to take good care of it, and much harder if they're not even the ones who are paying for the rent. No thank you!

Aside from all this, my guess is these properties would be in a very low to no appreciation neighborhood. I personally do not like the investment model.

Mark Fries · Answer

@Aidan Mulligan

You couldn't pay me $10,000 a month to deal with section 8....its not the tenants...its the office staff...its the useless government workers that ruin it.  Did it for 2 years then walked away from it all...never again...

Pros and Cons of Section 8?

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