how does section 8 determine rent price

Question

Need some help from the savvy investors in the forum. I am looking to get into section 8. Obviously one of the most important steps is to identify a property and then figure out how much section 8 will pay for it (assuming S8 will pay 100%). Does anyone have experience with this? How do we know how much the Government will pay? Thanks in advance!

James Wise · Answer

To be clear the Section 8 program is ran by local housing authorities. As this is the Cleveland real estate forum you will be dealing with CMHA. To answer your question on how CMHA determines the exact rental price of a particular unit, nobody has a clear answer on this...................... Lol Nobody.

Brian Garlington · Answer

@kevin zheng I'm not sure of their exact formula, and whait I'm about to say may be a conincidence because I have Section 8 rentals in Cleveland as well as Concord, CA and Oakland, CA. After they have told me the amount they will give me, I look up on a website called rentometer what their median estimate is based on the address I type in and without ail, they are within about $20-$25 of those amounts. It could be a coincidence, I don't know. Do not fall into the trap of looking at the Housing Authority Website and assuming that what is on there is what they will pay. What they pay for a 3bd in Piedmont/Montclair (A Neighborhoods in Oakland,CA) is vastly different from what they will pay for a 3bd in the Castlemont (D-F Neighborhood) area.

Steven Dragmen · Answer

In my dealings with Section 8 the amount they end up allowing for a unit is never very clear. My understanding is it starts with their determination of fair market rent for the county. Then when there is a prospective tenant they make a determination after the property inspection taking into account overall condition and the tenants adjusted gross income. The adjusted gross income also determines the amount Section 8 will pay vs the tenant portion. I have had situations where section 8 pays the entire monthly rent but for most this will not happen. It is also important to be patient with the churning of the government gears. When a tenants income changes for the bad, you can be with out the tenants portion for a month or two but they will always catch up. Section 8 works well for me. BTW I get more rent with Section 8 in the city on the west side for a 2 br single than I have ever been allowed for a 2 br single in Euclid, same sq ft with far less in property taxes for the Cleveland property.

James Wise · Answer

In short, here is a visual representation of how Section 8 works.

Dan Sarao · Answer

You might be able to get AN ESTIMATE from looking at gosection8.com for similar type properties in the same neighborhood, although the price variations everyone is bringing up might make that hard. It would be recommended to talk to the CMHA to get a data point from them as well as have a conversation with your PM if they have section 8 rental experience in the areas you are interested in. One of my section 8 investments is actually well above market rent, and was like that when I acquired it. Even my PM was shocked at how high the rate was. I guess to the comments from @James Wise its going to be a bit of a crapshoot, but you should have enough sources to get a fairly good idea (gosection8.com, CMHA rep, your PM or other PMs in the area).

Michinori Kaneko · Answer

you can search your local government's website for that information. they usually take the prior year's rent rate and apply some adjustments for it. here is an example from the location i invest in. click here they make various adjustments based on lots of criteria i think like the quality of the home, how big it is, etc

Nigel Guisinger · Answer

Where I am from they have a value chart range. Example is that a 1/1 might be 900 a month and a 2/1 is $1100. The tenant pays a percentage of that rent and the housing pays a voucher amount for tithed portion. Example is that on $900 gross the tenant may pay $300 and housing pays $600. You receive the full $900 but in comes in two checks. So you will have additional accounting and both sides are subject to late pay penalties if not paid on time. However housing will set the date that they pay and you must sign off on that. It really not a bad system because you know that your housing check will come in every month.

James Wise · Answer

We have a ton of Section 8 units. The thing you've got to understand about CMHA is if you ask 5 employees a question you'll get 7 different answers lol. It's a bureaucratic mess, that said getting through all of the B.S. is still worth it when you finally get the tenant placed in the unit and start collecting the guaranteed rent. It makes investing in low income areas very profitable.

Vadim F. · Answer

Are you local to Cleveland and self managing the property? If not, I would highly recommend you get a PM who is experienced with working with Sec 8. Some more question, have you worked with CMHA in the past? Have you looked at other govt subsidized programs in the Cleveland area such as Eden, VA, etc?

Balkar Singh Kang · Answer

Steven,I listed my two-bedroom single-family house for $1250, which is below the Fair Market Rent (FMR) of $1284 in the Cleveland zipcode 44125. However, today I received a rental determination from CMHA for $953, which is below the FMR. I have not accepted their offer yet. The message from CMHA states that "The Housing Assistance Payment will be $953.00 and the tenant portion will be $0.00" The tenant agrees to pay the balance. I need guidance on whether I can approach CMHA to request an adjustment for the rental determination. Additionally, how should the contract be structured to cover the remaining portion to be paid by the tenant?