Section 8 how does it work? What are the things to be aware of ?

Question

I just closed on my first property which is a duplex that I am going to live in the top unit and rent the bottom unit. I have a potential tenant that is on disability and gets housing credits through the HUD. I’m completely new to this and I don’t have people just lining up for my listing. So I want to accept her but I have some concerns. Everything check out on background and credit report. She pays on time and has no evictions.

Jay Hinrichs · Answer

One thing that is not mentioned here is you have annual inspections to keep the section 8 prop in the program.. So depending there is always a squawk list.. we had a few hundred doors in Section 8.. and annual inspections were very rarely under 500.00 to meet their inspection report and if you have a bad tenant ( which happens on all rentals regardless) of course it can be a lot more..

I would pencil in 1k per year annually for the section 8 inspection.. if you do better wonderful and some year you will and some years it will be more.. But if your not penciling in anything for the annual inspection on top of cap ex.. could skew your numbers.. IE if you really run the numbers that tight.. like you want to know to the decimal point what your COC is from year to year.

Jennifer Donley · Answer

@Brian Bertschi I'm in St. Louis, have a portfolio of Section 8 tenants and teach other landlords to succeed in the niche. As you might imagine, I love Section 8.  I am currently owed $0 in rent and given the difficulty with evictions right now, I think this is a huge benefit of Section 8, among others.

I would echo what the others have said for the most part.  Here, our inspectors are usually very reasonable, although they will almost always find something wrong on the 1st go-around.  For the city HA, they are currently waiving inspections for landlords (due to COVID) who are in good standing, not sure how they are handling new landlords. This speeds up the process.

We are able to move tenants in within a couple weeks right now if we stay on top of the process, but once they're in, the money comes like clockwork.  I have a lot of tenants who don't pay any of the rent.

I collect $1000 security deposit for all tenants.  It makes it easier than making it the first month's rent because you and the HA will "negotiate" the rent amount so you won't know exactly what it will be until right at move in when the tenant gets the move in slip.

My experience is that good Section 8 tenants expect to a pay a security deposit.

Section 8 does require a little more management because you have a 3rd party involved but not so much that it's  not worth it.  Just follow the processes, respond in a timely manner to tenants and Section 8 requests and communications and you'll be fine.

Feel free to reach out to me if I can help further.

Kenneth Garrett · Answer

@Brian Bertschi

Once everything is setup, payments from the Housing Authority are direct deposited the first of every month.  If the tenant is responsible for a portion, which is typically the case you’ll need to collect from them as well.

Kenneth Garrett · Answer

@Brian Bertschi

I've had a few section 8 tenants. I find them to be not much different then non section 8 tenants. You still need to screen properly. You can reject a tenant if they don't meet your criteria. Your unit can only be approved once a voucher tenant wants to rent your unit. You cannot apply for approval without a qualified section 8 tenant. You are subject to paperwork, an inspection and they will review your lease. The timing can be frustrating to get your unit approved. Takes probably 30 days or so.

Kenneth Garrett

Justin Lee · Answer

@Brian Bertschi I have a few section 8 tenants and I’ve had good luck. However, here are somethings I e learned.

1) Conduct a background & credit check

2) Collect a security deposit of first and last months rent.

3) Download the inspection check list for you city or county and make sure that the repairs are done and up to code. This can take a few weeks to get on the books, so plan to hold the first months rent until section 8 pays out.

Lastly, the stereotype of them ruining the unit is not always true. They in fact have more to lose than you do. If you as an owner (Which most don’t do) complain and they lose the voucher they will likely lose food stamps and Medicare too for a complaint for damage.

Collin Bryston Adams · Answer

@Brian Bertschi

I’ve had 2 section tenants. One who was evicted within 5 months. The other I still have and have had for over 2 years.

What I wish I knew going in is they have been slightly more difficult than normal tenants in these areas.

(This is my experience)

The reason I’ve found it most difficult is adding the 3rd person to the mix (Uncle Sam).

I’ve spent more time dealing with the section 8 office than both my tenants at this duplex combined. It’s the biggest headache I deal with.

I would recommend it though as I never had to worried about not receiving a check during covid. And the tenants I have picked from section 8 pay so little that even if they don’t pay their portion I can still make my numbers work for the property.

I love it but with the take you have to give and that’s dealing with the people at the office and the inspection officer who can be the biggest jerk you meet.

Brian Bertschi · Answer

@Jennifer Donley thanks for the advice!

Collin Bryston Adams · Answer

@Brian Bertschi the way it works in my area is the give you a spreadshit of the max rents you can charge in each zip code based on bedroom size of the house. My area each section 8 tenant is required to at minimum pay $50 but section 8 direct deposits the rest of the rent straight to you (I usually get in on the 3rd of each month but still make my tenant pay her portion on the 1st)

Inspectors can be heaven or hell. As you’d expect there is some (super) dumb rules that need to be met. Some inspectors overlook these and some don’t. For example Fort Worth housing made me put 3 dead bolts on a back door because the patio door only had one look. It was a terrible pain to add 2 more deadbolts to the back door (as I’m not good with my hands, I ended up bidding it out.) but they were threatening to remove my tenant along with make me pay back up to 6 months of rent if it did not meet it in their time frame.

Brian Bertschi · Answer

@Collin Bryston Adams Thanks for your insight and real world examples. What does the inspector look for ie thing that need fixed in the unit, or do they say this rent is too high for this particular unit?

Brian Bertschi · Answer

@Kenneth Garrett thanks for your help.

Section 8 how does it work? What are the things to be aware of ?

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