All Forum Posts by: Jennifer Donley

@Juan David Maldonado, this question has come up a bunch in other posts lately.  Unfortunately, there is not a simple answer to this question. 

Initially, in the landlord packet that you submit to your local Housing Authority, you will request a certain rent amount.  Then the HA will let you know whether they will give you that rent amount or not and if not, how much they will give instead.

Typically, your local Housing Authority will pay a "reasonable" rent for the unit (basically a comparable rent amount to what similar units of same size/amenities for market units in the area) up to what the local HA has determined to be the "payment standard". You can Google payment standard but basically every HA sets a payment standard, which should be close to the "Fair Market Rent" set for your market. The FMR is a rent rate set by HUD based on rent averages for the area. You can find the FMR for your area by going to Google.

Your local HA may or may not publish their payment standards.  Some HAs are very open about their payment standards and some are not. 

So I think of it like this - the "rent reasonableness" sets the first ceiling for rent. Then the payment standard sets the 2nd except that the tenant can make up the difference between your rent and the payment up to 10% of their income. (Basically Section 8 doesn't want the tenant paying more than 40% of their adjusted income to housing expenses).

And there's a whole bunch of other factors, like number of dependents, child care expenses, etc. that play into the formula.

And each Housing Authority has some autonomy in how they set rents so it varies from one to the next somewhat. Silly but true.

Lastly, the range of tenant portion of rent can range from almost all to none.  I've had tenants who paid 80% of their rent and I have some who pay $0.  It's all based on their tenant's income (the tenant is supposed to pay 30% of their income to housing expenses, including utilities).

Quite honestly, I believe your best bet is to find a successful Section 8 landlord in your area who can give you an idea of rents. Some Housing Authorities are very transparent in expected rents and others aren't, so you could also try calling the HA locally to see if they can give you a firm answer as well.

@Tyler Puzio, the article referenced above does a great job explaining rent percentages.

But I wanted to add - a lot of landlords who take Section 8 think along the lines that you are - I want Section 8 to pay as much as possible and the tenant to pay as little as possible.

But here's what I'll tell you from my real world experience of having a portfolio of Section 8 rentals - my tenants who pay a portion of the rent are in general better tenants.  I don't have to chase them down for rent, they are easy to deal with and follow their lease.

My tenants who have very little income and so pay none of their rent seem to struggle the most and are the ones that I have to worry about keeping utilities on, taking care of the lawn maintenance, reporting issues, etc.  

So I now require some income in my screening process.  

@Jason Hahn, I answered a similar question in another Forum post yesterday, so I'm copying/pasting from that response.

Unfortunately, what Section 8 will pay isn't usually as simple as just finding the payment standard or online HUD amounts.

Typically, a Housing Authority will pay a "reasonable" rent for the unit (basically a comparable rent amount to what similar units of same size/amenities for market units in the area) up to the payment standard.

So I think of it like this - the "rent reasonableness" sets the first ceiling. Then the payment standard sets the 2nd except that the tenant can make up the difference between your rent and the payment up to 10% of their income. (Basically Section 8 doesn't want the tenant paying more than 40% of their adjusted income to housing expenses).

And there's a whole bunch of other factors, like number of dependents, child care expenses, etc. that play into the formula.

And each Housing Authority has some autonomy in how they set rents so it varies from one to the next somewhat. Silly but true.

Quite honestly, I believe your best bet is to find a successful Section 8 landlord in your area who can give you an idea of rents. Some Housing Authorities are very transparent in expected rents and others aren't, so you could also try calling the HA locally to see if they can give you a firm answer as well.

@Michael H., unfortunately, what Section 8 will pay isn't usually as simple as just finding the payment standard.

Typically, a Housing Authority will pay a "reasonable" rent for the unit (basically a comparable rent amount to what similar units of same size/amenities for market units in the area) up to the payment standard.

So I think of it like this - the "rent reasonableness" sets the first ceiling.  Then the payment standard sets the 2nd except that the tenant can make up the difference between your rent and the payment up to 10% of their income. (Basically Section 8 doesn't want the tenant paying more than 40% of their adjusted income to housing expenses).

And there's a whole bunch of other factors, like number of dependents, child care expenses, etc. that play into the formula.  

And each Housing Authority has some autonomy in how they set rents so it varies from one to the next somewhat.  Silly but true.

Quite honestly, I believe your best bet is to find a successful Section 8 landlord in your area who can give you an idea of rents.  Some Housing Authorities are very transparent in expected rents and others aren't, so you could also try calling the HA locally to see if they can give you a firm answer as well.

Hey Dom, when I'm analyzing deals, my formula is:

Rent Minus:

Taxes

Insurance

Property mgmt of 8% (even though I self manage, I put this in for future sake in case I want to hire out someday)

Vacancy 5%

Maintenance, Repairs, Capex reserves - $150 per month if rehabbed, $250 per month if not rehabbed

As for Section 8, in general, this is a learning curve to managing it well.  There are extra hoops to jump through (paperwork and inspections) but once you figure those out, it can be a great niche.  Since you already have a tenant in place who has been there a while, you should know exactly what the property will look like at move out.

Moving forward with a new tenant, just screen extremely thoroughly including a home visit to their current residence as part of the screening process (just as you would do with market - nonSection 8- tenants) and you can and will find good tenants.  Don't get in a hurry to get the place filled.  Worry about finding a great tenant.

I have a portfolio of Section 8 rentals.  Here's what I (or maybe in your case, your PM, up to you) would do.

Contact the tenant to inquire about happened.

If their income has changed, they can & should contact their caseworker to submit new income docs.  Section 8 may (in my experience, they almost always will) change their rent portion.  They might even back date it depending on when the income change happened.

If it didn't change, let the tenant know that my process is to file for eviction when 30 days late. Then I'd say - I don't want to do that and I don't want to put your voucher at risk (if they get evicted and as long as you notify the caseworker/Housing Authority, they should lose their voucher until you're paid).  So what's your plan to pay?  I suspect this will get them to pay.

As long as they have a plan, it's short time-wise and they stick to it, I wouldn't notify the caseworker.

I would enforce whatever late fees are in my lease.

If they say they can't or won't pay, send a statement by email to tenant and caseworker ASAP and let them know I plan to send to the attorney for eviction on XXX date.  I would request a response/receipt from caseworker and would email or call daily until I get one (politely, of course).

As for utilities, notify the tenant that these utilities should have been in their name from day 1, and I will be billing the utility charges to them (as long as that's what the lease says).  Add the utilities to the tenant ledger, send copies of the statements to the tenants and caseworker.

Finally, if a tenant leaves a subsidized unit still owing $ to the landlord, they shouldn't be able to move elsewhere until they've paid the landlord in full.  But this requires communication to the caseworker/Housing Authority on the landlords part.

I find good Section 8 tenants pay their portion religiously because they value that voucher.  Almost all of my tenants pay a portion of their rent and I don't have trouble collecting.  But I make clear from move in that the lease will be enforced, including payment policy, late fees and evictions.  

I agree with the other replies you've gotten.  I love Section 8 for the guaranteed income, higher rents in certain areas, long tenancies, additional accountability for the tenant through the Housing Authority and supply/demand disparity (very high demand and not enough supply), which helps me attract & retain great tenants.

Cons you will usually hear revolve around typically bad tenants (this can be mitigated through very strong screening including a home visit at their current residence as the last step of the process) and dealing with the bureaucracy of the Housing Authority.  Housing Authorities operate differently from one to the next so one can be great and another not.  

Hi Lilee, I'm surprised to hear that you're having trouble filling the vacancies - I very rarely hear this anywhere in the country unless the rent is too high.  Like most things, lowering the price will usually solve the problem.

You can certainly try the Section 8 route - are you getting people who are interested who are asking if you take Section 8?  If not, you may still have trouble finding tenants.

My very quick feedback on Section 8 - I love it and it's all I do.  But it's not for everybody and there is a learning curve.  Most of the issues that people have with it can be solved through extremely strong tenant screening (including a home visit as the last piece of the screening process) and learning as much as possible about how your local Housing Authority works.  Frankly, if your current management company is having trouble figuring out how to fill a vacancy, then I would expect they would not be good at screening or dealing with the Housing Authority/Section 8.

Also, Section 8 rents may not keep up with market rents in A and possibly B areas.  That would be something to check with with other successful Section 8 landlords in your area to find out.  

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

@Evan Westerman, Section 8 is all I do.  The negativity around it can usually be solved through very strong tenant screening and understanding of the Housing Authority processes.  I answer a lot of questions here on Forums about Section 8 so you can go to my profile to see all the things that come up about it.  Reach out to me if you have more questions.

@Tim Kappel, I'd recommend contacting Real Property Management - Three Bridges, particularly for Section 8.  I can dm you with the contact info.  I self manage but have worked with/dealt with a lot of property managers as I've looked at properties and in my experience, very few are GOOD at managing Section 8 rentals.  A lot of them do and will claim to be knowledgeable but very few are.  The guys are RPM-Three Bridges are good at it.