Section 8 H.A. versus direct renting?

Question

Basically I was just wondering if anyone has had any township issues with doing a section 8 / housing authority, type renting of your rental units. I realize there is additional paperwork done with the housing authority but am curious in others experience renting this way if they have had any kind of bad or aggressive behavior experienced from any of the local township personal when doing these type of rentals.

Thanks.
T.K.

Joel Owens · Answer

Hi Tom, I have had section 8 tenants before. My experience has been they run down the units as they are not paying for it. You have to understand you will get conflicting opinions here as the section 8 varies wildly by state and even counties. Some give a different name to the section 8 program entirely on the local level. Section 8 isn't the end all to be all. You have to know for the area the building will be in if the vouchers for the area are at market, below market, or above market?? Also sometimes section 8 for an area has below market for a 1 bed unit mix and above market for a 2 bed unit mix. Some section 8 organizations locally are heavenly to deal with and others are nightmare where the case workers are overloaded and do not care about tenant violations or kicking them out of the program. The minute they do a surprise inspection however and the GFCI is missing from the tenant messing with things they want to stop payment until fixed. I have had issues where they changed inspection companies mid stream and the reports didn't match up at all. The new company was picking out things that were not even violations. You can have whole buildings deemed section 8 and then have buildings where you rent to some section 8 and some regular tenants as well. I do not like section 8 because the minute that person has more income or hides income they get re-evaluated and are asked to pay more and they never have it. I just see people having to earn things ( a place to stay) take better care of things usually versus people who are given things and other people or entities pay for them. My experience was not positive with section 8 but I have heard others like them. It goes back to what kind of market rents are you getting for your area with section 8 and how much of a pain is the process.

Account Closed · Answer

Tom I don't consider myself an expert, but I do have one rental with section 8. The payment is never late, and it is direct deposit. Not really too much additional parerwork here in South Carolina. There are annual inspections with certain requirements they have, but you basically just have to keep the home up to reasonable living standards. That is probably a good thing for any house! Brad

Joel Owens · Answer

Hi Tom, What I mean by market rates is the local section 8 office will have a guideline of what they payout for an area for a 1 unit, 2 unit, 3 unit property etc. So research for the building you want to buy so there is 4 2 beds and that market rates to regular renters is 700 a month. For whatever reason section 8 rates are at 600 a month. You make 1,200 more by renting to regular tenants. Yes section 8 as long as you maintain the property to their standards and get through the red tape you get the guarantees payment BUT there is no guarantee that the TENANT will comply with your lease or not cause a bunch of damage to your unit. So while payment is guaranteed under certain conditions others things are not. In certain areas to get a section 8 tenant out certain remedies are laid out that can take much longer than regular evictions. Also as mentioned most section 8 tenants will be virtually judgment and collection proof. I have found very few to be hard workers who only want to stay on it for a short time and then get off of it. Most I have seen are working the system and they do not want to work because whatever they start making is then deducted off of what they are getting in assistance. It is to me one of the most nonsense things out there. Not many people will work when they can make the same amount of money or assistance by doing nothing. If someone works 10 hours a week but then that is deducted off of assistance then they essentially worked for free and could have stayed home and done nothing and collected the same amount. That is what is wrong with the system is that it does not promote effectively weaning people off of the system and leaving only people who need it in a time of crisis getting through a legitimate hardship.

Jason Carter · Answer

Know some who love it but I've had negative Sec. 8 experiences. Prefer to avoid it. Think large part depends on city/county you're in as far as how much support you'll get. My experience in Austin was they could've cared less about my issues, very unhelpful. Long story short: Tenant, who was constant headache, did 6k in damages that i was never able to recoup. She got to continue on Sec 8 program as well. In Memphis current tenant is refusing entry to do Sec 8 repairs so Sec. 8 won't pay rent and she will get out of her lease for nonpayment. I could force my way in to do repairs but i risk her sabotaging them. Ill probably be looking at another impossible to collect judgement.

Tom King · Answer

Joel Owens thanks for the reiteration I had a good idea what you meant just wasn't sure precisely. Thanks for your input as well. @david Barlow. I fully agree with you. With at least some level of uncertainty, if you fail to screen properly it would only liken your chances of experiencing that bad situation. But when done properly and sticking to a good game plan without faltering your chances of success are so much better. Taken care to keep in mind the neighborhood is also a great attitude to have, I think, so kudos for that advice as well. @Harry M. Thanks for sharing your experience. I know my mother had a regular tenant convert over to section 8 years ago and when she did they had her paying five a month and my mother had told me she had trouble getting that from her. So I know its not impossible to find some people who simply want everything for free but, again Its situations like this your screening should avoid at all costs.

Harry M. · Answer

I've had one unit rented to a section 8 tenant for the last three years, so I'm certainly no expert, but I can share my experiences. - Housing authority pays like clockwork. Direct deposit at midnight of the day rent is due. - Inspections vary quite a bit by inspector. The first year we failed and had around $580 worth of mostly arbitrary stuff to address. Not a disaster by any stretch of the imagination, but a pain in the rear for sure. The second year it sailed through without a single thing being noted. - Other than that the inspections the housing authority is completely hands off. - The bigger percentage S8 pays the better. Every time we hear that our tenant is working again, my wife and I sigh and say "here we go again". Then a couple of months pass, tenant gets laid off, and S8 is back to paying 90% of the rent. - Other than having to chase her a bit for her portion, our tenant is a good, decent person and keeps the property in good shape. So I'm sure this has colored our perceptions a bit towards renting to S8. I'm sure I would be singing a different tune if we had a bad S8 tenant. But then again, this is true of tenants in general. To address your original question, we haven't had any problems with the city at all. But then, it's a solid blue collar neighborhood, and I believe the cities in those areas tend to be more down to earth as a rule. Where we live (a set from the Stepford Wives), I'm sure that the city would be finding that our grass was 1/8" too long or some such nonsense if we rented to S8! -Harry

David B. · Answer

In response to your initial question, I never experienced any direct blowback from any townships or neighbors for that matter. I had a section 8 tenant in a A+ historic neighborhood in Wisconsin. Our immediate neighbor was the local DA, a judge and principle were on the other side and SC Johnson & Co. owned a mansion a couple houses down. No complaints at any time. Screening well is a form of respecting your neighbors regardless of what their titles maybe.

Tom King · Answer

While I totally respect the opinion of others (in most cases hah) I am more interested in hearing from people who have actually done the section 8 thing and to share their specific experience in with dealing with it from all perspectives exp.Tenant,Housing Authority, Township, etc Those who have done both and can put up real life comparisons would also be awesome to add to topic Thanks all in advance for your time and sharing.

Tom King · Answer

Thanks to everyone so far who has shared their experiences etc. April Adams basically what Steve Babiak said is what I meant by township issues. I've never heard solid evidence that this was true so I was curious if anyone had experienced anything in particular. Joel Owens I'm not really sure exactly what you mean by "You have to know for the area the building will be in if the vouchers for the area are at market, below market, or above market??" Specifically the part about the vouchers being above or below market? I assume it has something to do with price. You guys have made some great points so far. Gathering the information I have now it seems like most other variations of investing, it really comes down to the variable conditions of the business. If all the steps are laid out right it can be great but once some of the steps are missing or broken it starts to take out the luster of the overall experience. Anyway I really look forward to reading many more stories you guys are awesome.

Steve Babiak · Answer

Only Tom King knows what he meant; I'll guess that there are some towns that will make their municipal inspections more stringent, that neighbors will complain to code enforcement, etc.