section 8 , good way to protect your investment?

Question

I have been considering turning my units into section 8 rentals before this corona virus, but now im seriously considering it. I own a 4 plex in las Vegas ( arguably one of the hardest to be hit by all this ) currently have one vacant unit, and I will have another vacant unit at the beginning of may. My other 2 units are occupied. out of the 3 units I have occupied only 1 person paid rent! the other 2 just decided not to pay with no explanation ( that's another conversation I need to have with my pm for, I fill like they are not taking the proper steps needed to protect their clients investment. asking for partial payments, asking for proof of not being able to pay rent due to job loss, etc.) I know that section 8 at least guarantees rent payments at the beginning of each month. the tenants portion is usually 10-20% and section 8 pays the rest. I fill like this would be a good way to protect my investment for non paying tenets? Any advice FROM CURRENT SECTION 8 landlords  would be greatly appreciated!

Terry Lao · Answer

@Maurice Smith

Hope all is well my friend. Coronavirus has thrown all markets into chaos.

I know we had a conversation regarding section 8 rents awhile ago. I mentioned that one of my 4plexs are all section 8, and get direct deposits the first of each month. Some section 8 tenants pay 10%, and section 8 pay 90%. This is what I call recession proof. Who knew that coronavirus would happen, but any event like 2008 during last recession, say the same cycle. People lost their jobs, tenants did not pay rent. Owners who had loan on property, and did not get rents, eventually lost to foreclosure.

Not sure if they cycle will repeat, but similar. If LV strip can reopen soon and find vaccine to Coronavirus, then can avert repeat.

To address your question, getting section 8 tenants. The time to get section 8 tenants was before something like coronoavirus or recession occurs. Now, I would say nearly impossible. The Southern Nevada Region Housing Authority (SNRHA) is the office that administers section 8, is closed and maybe will re-open later this month or next. Perhaps some employees work from home. However, for most part, cannot sign up new tenants, and cannot process paperwork for new landlords.

In hindsight, need to think about problems before they happen, and have in place preventive measures like section 8 tenants when regular tenants cannot pay.

Terry

Terry Lao · Answer

Here are a few more item that most do not know about section 8 tenants.

1. Section 8 gets about 10-15% more than market due to funding guaranteed by Federal government.

2. Most landlords have negative image of section 8 tenants. However, the tenant takes more care of the property than normal tenants. This is due to having responsibilities place on tenant in exchange for paying 90-100% of rent. This is true of the landlord, who have to repair or replace any broken items. If both parties, do their part, could be long term mutual benefit. I had two section tenants since Dec'14, who both never missed a rent payment.

3. On annual basis, landlord can request rent increase. There is no set amount rent increase, but guidelines say need to provide two market comps, and if you ask too much they have right to decrease your amount.

Terry

Terry Lao · Answer

Here's how to pick the right section 8 tenant. You will need to read between the lines of the below story.

I had a young section 8 tenant, who halfway through lease, got a pet dog and did not bother to mention. During the summer, where temperatures could get into 110-115 degrees, she went out of town, and left the puppy on the balcony. She also left another dog inside with the AC going all day and night. What was suppose to be a few days, turned into a week. As she ran out of money, car broke down, and had no way back. When she got back, puppy on balcony died. Dog inside survived. Then she tried to blame downstairs neighbor poisoned dog.

The tenant was ending her lease early at end of month and the above story occurred during the last few weeks of lease. I emailed her section 8 case worker, who was transferring her case to the next city she moved to. I said, not sure that this matters, but this is what happened and she killed a puppy. The case worker replied, it matters to me.

Anyways, if you read above, there is a hint to what kind of section 8 tenant not to get.

Terry

James G. · Answer

I've personally had a good experience with section 8. The government pays most if not all of the money every month, so for times like these it can be some really good insurance! That being said, sometimes your quality of tenant may not be the best; however, if the tenant does anything that is against section 8 policy, they will be kicked out of the system. Personally I would recommend it for my market and I would do some more research for your personal market.

Brock Mogensen · Answer

Section 8 is definitely beneficial in times like this.  We have around 23 units on housing currently.  However, there are the obvious headaches and obstacles that come with Section 8.  I recently read this great book called Section 8 Bible..provided some good insight.

Marlen Weber · Answer

@Terry Lao great information on section 8. Thanks for sharing.

John Warren · Answer

@Maurice Smith I wouldn't jump in with both feet just yet. Section 8 is a bit of a game and your success with this strategy is going to revolve around your PM. It sounds to me like your PM is not performing... it is obviously a trying time to manage properties, but a good PM should be doing the extra things for the next few months to make sure the rents come in. Don't be afraid to "manage" your PM.

Maurice Smith · Answer

I appreciate your response my friend. I am going to inbox you. I have a few questions about my current situation

section 8 , good way to protect your investment?

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