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INTRO TO SECTION 8 - Your Perceptions VS My Realities
Have you had any luck in finding an insurance company that will provide you insurance that will kick in in the event your tenants lose their jobs? Me either, but that’s just one of the benefit that SEC 8 offers landlords who participate in the program. I’ve participated in the SEC 8 program since about 2010, and between what I own and manage, have about 100 SEC 8 leases right now. With this volume, I’ve learned a lot about what landlords can do to maximize their rents and minimize repair costs, tenant turns, and vacancies. In low income neighborhoods, landlords are significantly better protected financially with a SEC 8 tenant than a non-SEC 8 tenant. I pulled together some information that may help you decide if SEC 8 is right for your portfolio.
SEC 8 MISCONCEPTIONS
- SEC 8 tenants are all users who are cheating the system.
- SEC 8 tenants “tear up” properties.
- The SEC 8 inspections are onerous.
- SEC 8 doesn’t pay market rents.
- SEC 8 tenants live for free.
SEC 8 REALITIES
- SEC 8 tenants have to have a job unless they are disabled.
- No adult on the SEC 8 lease can have a drug or felony conviction.
- When a SEC 8 tenant gives their landlord notice that they plan to move, SEC 8 sends a form to the current landlord giving them 10 days to respond saying the tenant is or is not in compliance with their lease – IE – owe any money for rent or repairs. If they do, and the landlord responds within the 10 day allowance, that tenant’s voucher can get placed “on hold” until compliance is made with the current landlord.
- If a SEC 8 tenant has an outstanding landlord judgment, HUD will not reissue their voucher so they can move until the judgement is satisfied or a payment plan has been agreed upon.
- SEC 8 tenants are educated in the process of home inspections and are quick to call if they see a problem that may compromise the house, such as a water leak.
- In most markets, SEC 8 pays “market rent” based on comparable non-SEC 8 units that have rented in the same city within a 5 mile radius, within the last 6 months.
- After the first 12 months, SEC 8 will consider a reasonable rent increase, regardless of the lease term.
- SEC 8 tenants almost always pay a portion of their rent. SEC 8 sets their subsidy based on the premise that the tenant can spend 30% of their income on rent and utilities.
SEC 8 ACRONYMS
- HA - Housing Authority – This is what HUD calls the local SEC 8 offices.
- HAP - Housing Assistance Payment Contract – This is the contract between the landlord and HUD that will be sent to you after you send SEC 8 the signed lease. You will receive your first rent payment after this is returned to the Housing Authority office.
- HCV – Housing Choice Voucher – This is the official name of the SEC 8 program.
- RFTA – Request for Tenancy Approval – This is the package the tenant will bring for you to complete to submit to the Housing Authority.
SUGGESTED LEASE CLAUSE
THIS LEASE IS CONTINGENT ON TENANT REMAINING IN GOOD STANDING WITH THE HOUSING AUTHORITY SECTION 8 ASSISTANCE PROGRAM. SHOULD TENANT BE TERMINATED FROM THAT RENTAL ASSISTANCE PROGRAM, THIS LEASE TERMINATES ON THE SAME DATE. IF ANY REQUIRED INSPECTIONS SCHEDULED BY THE HOUSING AUTHORITY SECTION 8 ASSISTANCE PROGRAM ARE MISSED BY THE TENANT, LANDLORD WILL ATTEND THE 2ND SCHEDULED APPOINTMENT AND A TRIP FEE OF $50 WILL BE CHARGED TO THE TENANT.
USE THIS RECEIPT TO HOLD A PROPERTY FOR A SEC 8 APPLICANT
(Be sure to check your state’s landlord tenant law to ensure this is in compliance.)
If all goes perfectly and you pass inspection the first time, you can usually move a SEC 8 tenant in 20-30 days from the day your submit their package to the Housing Office. If you don’t pass the inspection for the first time, this time span could be longer. At the end of the year when government staff are using up the last of their vacation budget a few more weeks than usual to get final approval.
Lease Hold Fee Receipt
$______________ was received from _______________________________________________ (tenant) on _____/_____/_____ as a fee to take the property at _________________________ off the market and hold it for the tenant to occupy. Upon move-in, this Lease Hold Feewill be applied towards the rental deposit required in the lease. If tenant fails to move in due to no fault of the landlord, this fee will be forfeited and kept by the landlord as compensation for lost rental income. Tenant SignatureLandlord/Agent Signature
HOW RENTS ARE DETERMINED
- HUD dictates the maximum amount they will pay per bedroom size per market. This is what the HUD chart shows for max rents allowance for every city in our market.
- You can find the Far Market Rent amounts for every Housing Office in the country on the HUD website at this link. https://www.huduser.gov/portal/datasets/fmr.htm
- Below is an example of the data that will be displayed.
- Comparable Rent Test. SEC 8 compares your requested rent to non-SEC8 properties of the same bedroom size, same property type, similar size and age, same city, within 5 miles.
In Hampton Roads all of our cities pay 100% of market rent. Ask your Housing Office what their allowance is so you know how to guesstimate what your rent will be based on rent comps.
Some HAs use an outside vendor to determine their comparable rents. Most HAs, however,do their own comparable rent test analysis by using rent comps from similar units that have rented outside of the SEC 8 program in the same city within the last 6 months. If you have the ability to pull rent comps, print them and use the cover sheet on the next page to submit them with the RFTA.
Comps used have to be within 5 miles of the subject, within the same city, same number of bedrooms (as the unit, not the voucher), same or similar property type (single family, town home, apartment, condo, etc), similar size and similar age. The closer you can get your comps to the property you are submitting, the more likely your HA will use them.
- Affordability Test. For this test the voucher holder cannot spend more than 30% of their income on housing – rent + utilities.
You could meet your requested rent amount based on comparable rents, but not get approved because the tenant doesn’t have enough income.
To find out more, call your local Public Housing Office to sign up for their next landlord orientation. Try it, you must might like it!
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RENT COMPARABLE COVER SHEET
RENT COMPARABLES FOR: _______________________________________________________
Tenant Name: ____________________________________________________________________
Date Comps Were Pulled:_____/_____/_____
Source :MLS
Criteria Used:
- Rented within the last 6 months
- Located in the City of ______________________
- Located within 5 miles of Subject
- # of Bedrooms = __________________________
- ________________________________________
- ________________________________________
- ________________________________________
******************************************************************************************************************** Section 8 Inspection Checklist Summary
(A full checklist can be obtained on the HUD website.)
Windows and Doors
- The windows must not be damaged or missing and must stay open when opened half way
- All ground floor windows must have locks
- All doors leading outside must have locks and deadbolts
- All windows must have screens with no holes
- Window sills must be clean
- All interior doors must stay latched when closed
Flooring, Ceilings and Walls
- The flooring, walls and ceilings must not have any serious defects such as serious bulging, sagging, large cracks, loose surface or other major damages
- The flooring must not have any serious damages and cracks that will cause someone to trip and fall
- The ceiling and roof must not leak. Stained ceilings are often a tell-tale sign of leakage
- The interior walls of the property must not have chipped or peeling paint
- Walls must be clean of dirt for the initial inspection (no mid-lease inspections)
Plumbing and Sanitation
- The property must have a fixed water basin, flushing toilet and shower/bath tub
- There must be no plumbing or water leaks
- There has to be hot and cold running water in both the kitchen and bathroom
- The bathroom must have either a window or exhaust fan
- Sinks and tubs must have stoppers
- Toilets must be firmly bolted
Lighting and Electrical Fixtures
- There must be at least 1 working light each in the kitchen and bathroom
- All electrical outlets must be working and come with cover plates
- There must be a working heating system for the property
- All three prong plugs must be grounded. If no, simply replace with a 2 prong plug.
- Exterior light bulbs must be covered by a globe.
Structural and Fire Safety
- There must be a working smoke detector in every bedroom and on every story of the property
- All stairs and railings must be secure
- If you own a rental building - The walkways, porches, lifts and other common areas have to be properly maintained to avoid tenant injury.
See more at: http://www.propertydo.com/section-8-inspection.html#sthash.Fbrexq3F.dpu
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Below is the checklist we use to ensure each step is completed in a timely manner.
Comments (26)
Patty, thank you very much for sharing.
Suraj Thapa, 3 months ago
great info. I was wondering if you would be stuck with a tenant if they lose section 8 status but I love your lease clause. thanks!
David Harris, over 2 years ago
This is great information, thanks Patti.
Luis Salas, over 2 years ago
Matthew Bowling, almost 3 years ago
Great post - here's an updated link to the market data: https://www.huduser.gov/portal...
Kevin Hofstee, over 3 years ago
Embarrassed to say I might have had a few of those misconceptions. Thanks for the great info.
Lenny Park, over 4 years ago
@Tammy Coughlin Thanks great info here.
Frank Robinson, over 4 years ago
Patti, your blog provided me with great information. Thank you so much!
Jeffrey Clark, almost 6 years ago
Awesome information and thank-you. I am getting baptized in all things Real Estate estate and hope to invest in the Hampton Roads area before the year is out. Take care.
James Sharpe, almost 6 years ago
great article! Thanks for sharing patti
Brian S., almost 6 years ago
Great article! I am now going to start looking at Sec 8 properties where I live.
Marc Heverly, almost 6 years ago
This was concise but informative, great blog. Do you have any experience with Section 8 in the state of Maryland? If so, I would love to reach out to you.
Eric G., almost 7 years ago
Do you target SEC8 tenants? How do you get them into your properties?
Rory Compton, almost 7 years ago
thank you for the post
Hau N., almost 7 years ago
Patti this is great!!! Thank you for sharing
John Morgan, about 7 years ago
Welcome!
Patti Robertson, about 7 years ago
This is excellent info, Patty -- thank you! I'm going through the process of accepting a Section 8 tenant and this helps clarify a lot of things!
Brandon Yee, about 7 years ago
Just got your PM. Will message you there.
Patti Robertson, about 7 years ago
Great info. Thanks.
What utilities are the tenant normally responsible for.? Power, Water?
Shar Day, about 7 years ago
All if possible. It's the same as any other tenant. If you have a shared meter the owner usually includes that utility in the rent. The preference is always to have tenants responsible for all utilities.
Patti Robertson, about 7 years ago
Patty - Great info. and very helpful. Thanks for Sharing!
Mahesh Sundaram, over 7 years ago
Welcome you guys. Feel free to reach out if I can help.
Patti Robertson, over 7 years ago
Very informative, thank you for this!
Porsche Thompson, over 7 years ago
Great stuff, very helpful . Thanks.
Joseph Gaston, over 7 years ago
Great comments and summary Patty ... very helpful.
Michael Hutchinson, over 7 years ago
Patty - Thanks for sharing your experience and these details. - Tammy
Tammy Coughlin, over 7 years ago