Landlording & Rental Properties

How to Profit Big & Help Those in Need by Renting to Section 8 Tenants

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Defining Section 8 Housing

It can make a lot of sense for a landlord to rent to tenants who qualify for Section 8, or government subsidized, housing. In California, the Section 8 program is sponsored by county governments and subsidizes the rent payments for citizens unable to afford the entire amount of a market rate rental. The idea is that over time the tenants in the Section 8 program will become self-sufficient and essentially won't need government assistance.

Related: Rent to Section 8 or No?

Subsidized housing in general has a certain negative stigma associated with it. There is this notion that subsidized tenants are worse tenants because they will “trash the place” or “won’t pay rent.” In my experience renting to hundreds of Section 8 tenants, I have encountered a very high quality of person and renter. In fact, focusing leasing efforts on subsidized renters was one of the biggest things that made my single-family business successful.

Section 8 can be a little tricky because different counties can have different rules. There has also been an increase in bureaucracy in the program, which is obviously a deterrent for landlords. On the whole, though, I still believe in the Section 8 program.

Here are the six best reasons to give subsidized tenants a chance at your next rental.

6 Reasons for Landlords to Rent to Section 8 Tenants

1. Higher Rents and Built in Increases

Section 8 tenants pay a fixed percentage of their income, and the government or Section 8 program pays the difference. When I was trying to raise rents on a number of homes in my portfolio by increasing asking rental rates, I found that there were a lot of Section 8 tenants applying to the homes that were on the higher side of market rate. This actually makes a lot of sense because whether the Section 8 tenant rents a home that is $1,000 or $10,000, their portion of rent actually stays the same.

For example, if a Section 8 tenant makes $2,000 per month, they will only pay about 40 percent of that as their portion, so about $800 in this case. If this person rents a house that costs $1,000, then the government will pay $200, and if they rent a house that costs $10,000, the government with pay $9,200. The tenant pays $800 in both scenarios.

There are obviously limits to how much the government can pay, and there is also some diligence to make sure that the rental rate is around market, but as long as it’s close, there usually isn’t an issue. In some cases, I have been able to get about $100 over the nearest market rate comp.

Many Section 8 programs also have built in rent increases that the landlord can apply for on an annual basis. The tenant is indifferent because they only pay the fixed monthly rate. Again, the rent increases need to be around market, but any increase is a good thing for an owner.

2. Tenants Stay Longer

tenant-renter

The key here is to make sure the homes you are leasing out are in great condition and that you are an attentive landlord. If something is broken, then fix it! I’m not saying that you should put in gold-plated countertops, but it is important to make the home nice and an excellent place to live. If you do this, then it is likely that the tenants will stay longer.

My Section 8 tenants stayed over three years on average. One of the main reasons is that I was a good landlord, but it was also due to the fact that it takes a while to make enough money to get off of the Section 8 voucher. This is by no means a knock on the tenants—they were great people. They just didn’t make a lot of money and couldn’t afford a different place.

The other reality is that there aren’t going to be many better places if you take care of your property and are a good landlord. There are loads of Americans who will be renters for life, and if you are a good landlord, this will end up benefitting you.

The real thrust of this point is that you make more money as a landlord if you can keep your tenants in place. Vacancy and turnover costs are killer. Section 8 tenants are more likely to stay long term, and remember that you also get a higher rental rate.

3. County-Guaranteed Rent

This is obviously a safe net. Many Section 8 tenants have lower credit than an ideal tenant. However, if the tenant loses their job or comes up short on a payment, then the county, or in some cases the city, will step in and pay you the entire amount owed.

I was somewhat shocked when I found this out. I was renting homes in lower-end cities that were partially guaranteed by other cities in the same county with $10 million homes. While you never want a tenant to be unable to pay, it helps reduce risk if you know you have a wealthy guarantor (particularly in the form of the government).

Related: Section 8 Success Story

4. Lower Maintenance

apartment-home

I have heard people say, “Section 8 tenants destroy the place!” In my experience of renting to hundreds of Section 8 tenants, they are actually less likely to destroy your home, and they also require less maintenance! The reason is that most of my requests for maintenance happen within the first month of a tenant moving in.

This makes sense because we have just done repairs, and the house hasn’t been lived in for a while. As a landlord you expect this for the first month, and usually the maintenance issues iron out over time. Since Section 8 tenants stay longer in a home, the average maintenance costs end up going way down.

The other part of this is that many Section 8 tenants realize that they will never own their own home. I won’t get into the social issues of this point; it is just a financial reality. Because of this, many Section 8 tenants end up taking “ownership” of the home they rent—once they are there for a while. This is a key point because it is important as a landlord to make the home nice and fix the things that go wrong so tenants want to stay.

I’m not making a social comment, but purely a business one. If you do your job as a landlord, then the maintenance will be lower with Section 8 tenants as compared to regular tenants.

5. Tenant Accountability and Extra Screening

It is really hard to get a Section 8 voucher in many communities. There is far more demand than there is supply of vouchers and homes willing to take Section 8. This creates an environment of accountability for the tenants once they get into a good home—they will do everything they can to keep it. Again, it goes back to the point that it is important as a landlord to be a good owner.

Along with accountability, Section 8 tenants go through extra screening in order to get their voucher. Due to the high demand to get a Section 8 voucher, the program can be selective with its criteria. Some municipalities will do background checks and that type of thing. You should be doing your own screening of Section 8 tenants, but it is always nice to know that they have been screened by the government already.

6. You’re Helping People and Making Money at the Same Time

I'm in real estate to make money. I have to be because it's my business. However, I also feel a responsibility to give back to society and the communities where I do business. If you read most of my blog posts, you will know that I'm usually against most things government.

The Section 8 program really is a good thing, though. One of the most fundamental needs of humans is to have a safe place to live, and this is particularly true of children.

It is the responsibility of the community, which includes businesses, to take care of those who are less fortunate. The selfish reality is that giving back is also good for business. The biggest bang for your buck in terms of giving back is to provide a great home for a family who couldn’t otherwise afford it.

Embrace the Section 8 program and other programs like it. It will be good for your wallet—and your soul.

Landlords, weigh in: What do you think of renting to Section 8 tenants? What has your experience been with this?

Leave a comment below!

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Conor has experienced every aspect of the foreclosure and rental business for single-family homes. He was VP of Acquisitions at Silver Bay Realty Trust, and has flipped over 100 homes. Conor starte...
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    Jeff Rabinowitz Investor/Landlord from Farmington Hills, Michigan
    Replied over 4 years ago
    Your experience with Section 8 will vary greatly according to the area and the agency involved. I participated with 4 different agencies in Southeast Michigan (the Detroit suburbs) for 3 years and will never do so again. One of the agencies had a great director who told me my houses were among the nicest he had placed people in. He treated me with respect and was a resource if there was a problem. Unfortunately, he retired 1 1/2 years after I met him and his successor did not seem to give a flying f..k whether I or an one else participated. My experiences were that the social workers were understaffed and apathetic. One agency had very limited hours for a landlord to leave messages (they did not answer their phone directly) and the calls were rarely returned. Rent was, most certainly, not guaranteed. The agencies frequently reviewed the contracts and changed the amount of the vouchers. I once had a change of ~50% within a couple months of signing a contract which bound me for a year. When I objected I was invited to sue the agency. I only participated for 3 years and had less than 10 tenants but I could fill this page with atrocious conduct by agency workers and problems with the tenants which the agencies’ failures to intervene in made much worse.
    David Soest Investor from La Marque, Texas
    Replied over 4 years ago
    One of my customers told me she only rents to section 8 disabled. She said there’s a real shortage of homes for them and most of the time there are no kids so less damage if they ever do move out but she said they rarely do,. Something to think about……
    Deanna Opgenort Rental Property Investor from San Diego, CA
    Replied over 4 years ago
    I’ve looked into section 8, but the not able to get rid of troublemakers & “entitled” attitude of those calling discouraged me from pursuing Section 8. ” You’re guaranteed to get paid” isn’t much of a sales pitch coming from a potential renter, since I’ve ALWAYS gotten paid. In full. Even the tenants I’ve asked to leave. “I’ve been here over 3 years but the landlord refuses to put I new carpeting for me” (how old is your carpeting? It was new when you moved in? but you figure you are entitled to new carpet every three years? really? I’m not going to be replacing your carpeting every three years either!)
    Michael Simpson Real Estate Agent from Livermore, California
    Replied over 2 years ago
    I rent apartments in San Francisco. I have had some prospects with section 8 apply and get approved, but then the housing authority inspector doing the inspection denies the person because utilities are not covered. Does anyone know about this? I can not find anything else online
    David DuCille Residential Real Estate Agent from Tampa, Florida
    Replied over 2 years ago
    Yes, the published rental payment t figures include an allowance for utilities. Housing authorities are trying to make sure the total cost of renting is affordable for these people so that gets considered. Every area has a different formula that can be confusing. Here in Tampa we have coordinators at the housing authority that are usually pretty helpful with letting me know what the max rent is that they will pay to me the landlord.
    Account Closed Rental Property Investor from Johnstown, PA
    Replied almost 2 years ago
    Here’s my comment: Conor, thank you for your perspective. I wish BiggerPockets would have published mine right next to yours in the daily email. In case any of you missed it, I am including a link to it, here on BP. Tim Sabo https://www.biggerpockets.com/blogs/11099/76035-4-reason-landlords-wont-rent-through-section-8