All Forum Posts by: Bradley Bogdan

Just as @Heather W. has mentioned, the local PHA can have a lot to do with the ease of of renting to Section 8 tenants. As I've also outlined in other posts, popular misconceptions of what the program guarantees or does not guarantee are also at the root of many poor experiences with the program. @Jeff Rabinowitz has apparently had experiences with a less than helpful PHA, though it should be noted that the program does not guarantee a subsidy level for a tenant for the length of a lease. It guarantees that the subsidy will be adjusted to fit the tenants income, thus if income goes up, the subsidy goes down. Also, much like your taxes, there are allowable deductions from your income that can have a large effect on someone's subsidy. Bottom line, learn the program inside and out or find a mentor who knows the program well. I'm sure there are folks on the board or in your area that can fit the bill and know your particular PHA. 

I know of more than a couple landlords who make some or all of their rental income on Section 8 tenants and have done so for decades, so don't let anyone here tell you its not possible. Whether its right for you, though, is up for you to decide. 

I don't believe the local PHA will give you information on specific rentals or addresses, that would be considered a violation of privacy on their part. The HOA may have that information, though again, I don't think any renters would appreciate having that information shared without their consent. Can I ask why this is of interest to you J.H.? Just curious, as the math involving whether a property will fit (numbers wise) for the Section 8 program can be done regardless of the other units.

Now, I live in an area with drug production being the majority of the county GDP (literally!), so take this with the appropriate size grain of salt. Such an offer would raise all sorts of red flags, but if you don't think illicit or destructive activity is likely, force them into your usual process for sure. If they want it, and they play ball, they'll seem much less shady by move-in. If not, you didn't want them anyway. 

Wow, amazing work. I hope the sale goes through as expected, you certainly deserve it after that project! Thank you for sharing!

I've run into two families that have fallen for this scam. Both were on limited fixed incomes and seemed pretty up and up, though obviously vulnerable. It was an extra shame for the one, as the head of household was a veteran with a clear learning disability caring for an elderly dependent father. Both were out the money they put down for the month and were homeless until the next, as they had both moved up to the area from their rentals in the bay area. Definitely keep your rentals secure until rented!

I don't smoke or vape or anything of the sort, but some of my clients do, and as I understand it, its an odorless byproduct. One gentleman I know does it indoors daily, and I only know because I observe it, I can't smell a thing, perhaps because its steam, rather than combustion, based. I know it keeps a couple of my guys from smoking, so perhaps its worth not banning? Though again, short of observing it, I'm not sure how you would tell. 

@Raymond B. Thanks for the tip! Exactly what I needed.

@Andrew Martel I goofed on mentioning you above, but see my post above for my take on your question.

 Hi @Andrew Martel (for some reason won't do the linky thing),

Sorry to be a bit late to the party, I just joined the BP forum, but a late response is better than never, yes? :-)

I can't speak to the financing of your properties, as my experience has been primarily in helping connect folks with vouchers to landlords with rentals. Since you've already convinced yourself of the upsides, and are asking for the downsides, let me give you my short list of things that could dissuade you:

#1 You will have to keep your rentals simple and durable, as you've already cited. Not everyone wants to have rentals that look all function and no flair. It can be tough to take pride in that rental that looks more like ex-soviet bloc housing than a beautifully landscaped addition to your portfolio. Obviously I'm slightly exaggerating here, but no frills is a different mindset. 

#2 Make sure you will be able to achieve the rents you are expecting. The FMR is a complicated thing, make sure you know there are comps nearby that rent at the rate you're expecting that are on Section 8 vouchers as well.

#3 Make sure people want to live where you're buying. Just because the rents there are below FMR doesn't mean people want to live there, they'll shoot for the best they can get.

#4 #3 will be much more of a slam dunk if housing in your area is tight. If you're in a big and vibrant city, it probably is. If you're in a depressed city, it probably isn't. 

#5 To achieve low vacancy rates, you'll have to know where to advertise and probably lower your expectations of applicants a bit. Its not reasonable to expect low income tenants to have great credit and the most stable employment. That said, find a level of tenant you're comfortable with, I literally have a landlord I work with at both extreme ends of the screening spectrum

#6 It will be tough to get high deposits, but you should. Low income folks obviously don't have much to put down, Section 8 doesn't provide assistance for deposits, but there are often Rapid Rehousing an Housing Stabilization programs in urban areas that can help. It would behoove you to know them well before renting. 

#7 Find someone who is an expert in Section 8 housing in your area to show you the ropes of your local PHA. Like any big organization, its as important to know the rules as to know the people who enforce them. Making a few good friends and knowing the rules of the program inside and out aren't necessarily quick and easy tasks, but they'll set you up with all the info you'll need to succeed. 

Hope this helps! :-)

-Brad

Hi all,

While I'm a newbie to BP and pursuing my own investments, please allow me to comment on Section 8 and related programs as someone who's day job involves housing veterans in the VA version of Section 8, HUDVASH, and formerly was to house homeless folks at a local shelter who had just received Section 8 vouchers.

I can certainly vouch for the general notion that Section 8 renters, and low income renters in general, require a bit of a different approach to management than your average middle or high income renters. They are, as a whole, tougher on rentals, tend to move more frequently, and generally lack the social grace we expect in fellow people. This DEFINITELY does not mean that, in the right circumstances, you can't still make a great cashflow on your rentals catering to the low income or subsidized renter niche. Podcast #79 talks about this, the challenges, and the benefits. As with any rental, you do need to be educated about your market. Section 8, and subsidies in general, is a different market than than the middle class renters the majority of rental advice is designed for. 

Now the landlords I work with on a daily basis have generally devoted a major portion of, or their entire portfolio to, rentals that fit under the Fair Market Rent (FMR) rates with an aim to capture that niche. They've adopted many of the same strategies to make their cashflow work that are advocated in the Section 8 Bible (the portions I've read at least) and BP Podcast #79, basically outfitting their rentals with the aim of simple and durable. They advertise their rentals at the local PHA, get plenty of referrals from current tenants, and have been willing to network with local community agencies that provide assistance, financial and otherwise, to people likely to have vouchers (read: services for poor people). They charge a high to maximum allowable deposit, either screen stringently or basically don't screen at all, and have very low vacancy rates.

This strategy seems to work best where A) the FMR is high enough for you to have good cashflow B) you have a rental where someone actually wants to live (ie not a War Zone) and C) the market is tight enough where your rentals are in demand (ie there aren't an abundance of nicer looking units under the FMR that will accept Section 8). THIS IS NOT ALL MARKETS. FMRs are calculated using a complicated rolling 3 year calculation of rents in an area buy HUD, so places where rents have risen rapidly (San Francisco, for instance) is not someplace to use this strategy, because FMR isn't close to what you could get in the market for rent.

Now on to addressing @Gail K. 's issues. I always hesitate to counter individual examples of anything as single examples aren't rules, but I feel a lot of excellent investors and landlords run into the same issues, simply because the system of Section 8 isn't easy to understand though it sounds like it should be. Please don't see this as a personal criticism, Gail, but just an illustration of what I see as some common misconceptions. 

#1 Excellent, most tenants, including Section 8 tenants, are normal renters who pay rent on time. 

#2 Section 8 tenants fall into 3 categories: The Working Poor, The Fixed Income Poor, and The No-Income folks. In broad generalities, those who have steady low income jobs or quiet folks on retirement or disability seem to be the most attractive, consistent, and best tenants. Other than some potentially poor decisions in the family planning dept., it sounds like these are pretty good tenants thus far. 

#3 A good relationship with your local inspector(s) is key. Be at the rental for EVERY initial inspection, get to know him or her, show that you are proactive in maintaining your units, and you will generally be given some leeway. Perhaps you forgot to swap out a 9V in the smoke detector after the last moveout, or perhaps that pesky drain pan went missing. If the inspector knows you and trusts you they will often let things slide with a promise that you'll be right back with that battery or they'll offer to swing back by in an hour or two to check that you found a drain pan and pass you. They don't want to have to come back to re-inspect, as protocol dictates that he/she notify you in writing of the repairs necessary (which must be mailed if you're not present), schedule a re-inspection (which could be a week or two down the road) and then have to drive to your place to do said inspection for 2 minutes. The best landlords I work with have earned the local inspector's cell #, as have I, which understandably is a great way to cut through red tape. Like any relationship though, it takes time and good will. 

Now, as for the yearly re-inspections, I would use those as an opportunity to lay eyes on the unit yourself a week or two prior. I know its time and hassle to walk through your own units while rented, but for renters of any income level, its a good idea. You'll notice the cat that the rich lady moved in, or that the middle income techies fresh out of college haven't cleaned their shower in months and its starting to stain the tile, or that your low income folks have an extra family member or two staying over that aren't on the lease. In all of those situations, you now have the ability to give notice to those tenants that they need to correct their behavior or get out, because you were proactive. At that point, you can also educate your Section 8 tenant on exactly what needs to happen before they get inspected. Letter of the law states that the tenant have the carpets cleaned, the house clean, and that either the landlord or tenant be present. You can decide for yourself ahead of time whether the little repairs that become toss ups or responsibility (like that broken handle) are worth your trouble to keep the tenant, or are left totally up to them. You can also educate them that if they do not take care of their responsibilities and lose their voucher, you will move to terminate their rental agreement, per the laws of wherever you are. Remember, if Section 8 is confusing for you, the savvy investor, its usually pure Greek to the folks with the vouchers. There are exceptions, but usually people that have their vouchers terminated had no clue about what could happen to them if they did/didn't do X. They simply haven't been educated to know better. I'm guessing your stay-at-home mom either didn't get a letter about the re-inspection date (PHAs are generally poor at sending out all the required notices), or didn't have any concept that they would lose their voucher if she missed the appt. 

#4 This is where being knowledgeable about the program is key. The FMR for an area is a maximum allowable amount of rent and basic utilities that the PHA will subsidize a tenant for. There are all sorts of reasons why your rental doesn't rent closer to the full FMR rate. Your rental could be located in an area of the county where the average rental rate is lower. If the PHA determines that your rent is $200 higher than everyone else on your block, they likely will reject your tenant's request to rent, even if your rent is well under the FMR. That FMR also includes the PHA's determination of what average utility costs are. If you include no utilities in your rent, the amount you may charge for rent will be lower than if you include all utilities. It is really up to you as a landlord to decide whether the calculated utility rates for your area are advantageous to you to include in your rent (water, sewer and sometimes garbage often are) or aren't (power and gas usually are not). Your tenant's income actually affects your maximum allowable rent, despite what you may have heard. Without going into painful detail, a person making $1000 a month will be approved to rent your unit at a higher rate than someone making $500 a month, due to how PHA's are required to calculate the subsidy based on the non-included utilities. Finally, as a landlord, I would hound the HUD website every January and February to make sure I knew the new FMRs for the new year. Usually, they go up if rents in your area are increasing, thus allowing you to potentially raise the rents for your tenants. If, by chance, they go down and place your tenants over their allowable limits, HUD WILL NEVER TELL YOU TO LOWER THE RENT OR RESCIND THE VOUCHER. They will simply expect the tenant to cover the new difference in subsidy and rent. This will affect how much you can charge new tenants, however. Bottom line, have a firm grasp on the math that will go into your tenant's rent before you start, and not just expect to achieve the full FMR with each rental.

#5 The PHA will never lower their payments to landlords due to budget cuts, with one exception. They will cease to issue as many vouchers, lay off staff, stop allowing exceptions to the FMR for tenants with special needs, etc. but the rules governing payments and their calculation are in stone. The one exception is that if a PHA issues 1 Bedroom rate vouchers to 1 person households, they may elect at some point to move those vouchers to studio rate vouchers (0 bedroom rate), which could serious impact the rate that new tenants could rent at, but again would not change the total amount of rent collected by you for tenants currently under a rental agreement. In theory, a gov't shutdown could cause problems as well, but I didn't hear of a single PHA missing rent payments during the most recent (and longest) one.

Whew! I hope I've been somewhat informative, as subsidized rentals require a good knowledge base to execute well, but in the right market, can be a conveyor belt of good tenants and great cash flow. 

It's been some time since this thread was active, but I figured I'd chime in on it anyway, as it seems no one had a totally clear understanding of the programs and partnerships the VA currently seeks and offers. I have first hand experience in all four of the available programs, so I speak from a good base of knowledge. Currently, as a property owner, you could be interested in any of the following programs: HUD-VASH, Supportive Services for Veterans and Families (SSVF), Grant and Per Diem (GPD), and Healthcare for Homeless Veterans (HCHV). If you own commercial rental space, the VA may be interested in leasing space for any planned expansions of services in their area, but I haven't had much experience in that realm. I just know that those deals happen.

So, other than being a mess of acronyms, what do those programs actually do?

HUD-VASH: This is the program most likely to be a good fit for people who manage or own rentals. From a financial side, this is Section 8, but exclusively for veterans. To qualify, they need to be eligible for medical services from the VA, be low income and homeless. Slightly more complex than that, but that's all that's important to us here. The beauty of the program is, unlike regular Section 8 tenants, the VA provides wrap around supportive services to the veteran. At minimum, each voucher holder is assigned a Social Worker, such as myself, to provide regular meetings and case management to the veteran to ensure they succeed in housing. This can take on a lot of different forms, from making sure they're budgeting well, maintaining their premise appropriately, assisting with transportation, facilitating in-home care for more medically fragile veterans, etc. In urban areas, HUD-VASH also has a specially assigned medical team that also works with veterans in the program, to make sure they are able to get timely access to any medical or mental health care needed. In more rural areas, the Social Worker ensures timely access to local medical and mental health services, as necessary. I've often wondered how landlords deal with problem tenants when they can't call someone like myself to assist. Reading here and talking with my parents, it seems that the options are few and messy.

Bottom line, this support translates to a fantastic success rate with veterans in the program, especially impressive considering most, if not all, of the veterans in the program have some aspect to their rental history, credit, or at least their current homelessness and limited income, that would cause most landlords to deny their application. Over 95% of the over 80 veterans I've helped find rentals and use the program were still in their rental and current on rent and utilities at the one year mark. Our local Public Housing Authority statistics indicate that roughly 50% of Section 8 vouchers go unused in the 2-4 month search window after they are issued, usually because of an inability to come up with a deposit or locate a rental willing to rent to them. Another sizable portion are returned to the PHA, or revoked from the tenant, for breaking program rules each year, all of which reinforces the negative stereotypes of Section 8 renters in our community. This program solves both of those issues for the vast majority of tenants, and if the fair market rent values in your area work out well with your financial picture, this could be a fantastic way to have VERY low vacancy rates at your rentals. If people are interested, I can definitely talk more in depth about how to successfully engage with this program. 

SSVF: Most areas of the US have local non-profits who run this program on a contract basis for the VA. The program is designed to be a one-time rental assistance program, able to fund part or all of a security deposit, move-in costs, etc. for a veteran moving into housing, as well as a time limited period of case management. Also, the program is able to fund veterans to cover back rent or utilities, if its determined the veteran is in a temporary situation which could see him/her evicted. These housing stabilization services also come with a time limited period of case management, though on a broad basis compared to HUDVASH, SSVF case management is significantly less involved. This program could be a great way to help veteran tenants avoid eviction or afford the hump of costs to get into a rental, including a nice high security deposit.

GPD/HCHV: These programs are both contracted programs run by local non-profits. They are both group housing programs, GPD more transitional living, longer term and lower level of services while HCHV is usually shorter term, high level of services and more focused on mental health, physical health, or substance abuse treatment. Neither program is likely something anyone here would be interested in investing in, unless they also had a related non-profit they would like to run these programs, but the non-profits who run they programs often rent the site that they operate them at. I'd encourage anyone here to keep an open mind to any rental pitch for a program like this, as they have little to no impact on the local community, despite the NIMBYism that they usually have to fight through to get off the ground in a community. 

I hope this helps clarify what is out there and available to our veterans in your local area!