Inherited Section 8 Tenant = Now What?

[Nina Granberry]

I just finished reading a recent article by G. Brian Davis on the pros and cons of having section 8 tenant during this recession and it made me reflect on my own situation.

I just closed on a duplex last week that has inherited tenants. In Cass County in Belton, MO. One unit is section 8 and the tenants have lived there since around 2006. The rent is way below market rate ($300+) and the unit needs repair and rehab. There are more people living there than stated on the tenant verification form my buyers agent had them complete (maybe adult children now?). I am wondering what the best plan of action is that I can take with this tenant and this unit. I’ve heard lots of advice to leave these tenants where they are and ride out their agreements. But this tenant is month to month and has been there for over a decade. It doesn’t look like they’ll ever leave.

In one sense, I am not in a huge rush to move the tenant out because I am building my cash reserves to be able to do big ticket repairs and rehab in the future. But also, I am not trying to stay in this position for long-term, receiving way less than market rate rent. Especially when I know that once value add upgrades are made, it would not be challenging to rent the unit to qualified tenants at market rate.

What are some ways I can play out this situation to come out on top? Any advice is greatly appreciated.

Thank you!

[Filipe Pereira]

It's always best practice to give the tenants as much notice as possible @Nina Granberry. Once you are ready to start renovating the unit, let the tenants know 30 or 60 days out that you would like them to relocate. That may not make you their best friend, but this is business.

Another option is to reach out to their Section 8 provider, and see if a bump in rent is an option. They may be able to fill in some of that $300 gap. In my experience though, that's been very difficult.

We manage a duplex where I was able to rent out one unit at market rate for 1475. While the Section 8 tenant next door has the same exact apartment, Section 8 would not pay more than 1375, even after I proved that we rented the other unit for an extra $100 a month.

Madness.