Should You Accept Section 8 Tenants? Take a Look at the Pros and Cons!

Should You Accept Section 8 Tenants? Take a Look at the Pros and Cons!

3 min read
Brandon Turner

Brandon Turner is an active real estate investor, entrepreneur, writer, and podcaster. He is a nationally recognized leader in the real estate education space and has taught millions of people how to find, finance, and manage real estate investments.

Experience
Brandon began buying rental properties and flipping houses at the age of 21. He started with a single family home, where he rented out the bedrooms, but quickly moved on to a duplex, where he lived in half and rented out the other half.

From there, Brandon began buying both single family and multifamily rental properties, as well as fix and flipping single family homes in Washington state. Later, he expanded to larger apartments and mobile home parks across the country.

Today, Brandon is the managing member at Open Door Capital, where he raises money to purchase and turn around large mobile home parks and apartment complexes. He owns nearly 300 units across four states.

In addition to real estate investing experience, Brandon is also a best-selling author, having published four full-length non-fiction books, two e-books, and two personal development daily success journals. He has sold more than 400,000 books worldwide. His top-selling title, The Book on Rental Property Investing, is consistently ranked in the top 50 of all business books in the world on Amazon.com, having also garnered nearly 700 five-star reviews on the Amazon platform.

In addition to books, Brandon also publishes regular audio and video content that reaches millions each year. His videos on YouTube have been watched cumulatively more than 10,000,000 times, and the podcast he hosts weekly, the BiggerPockets Podcast, is the top-ranked real estate podcast in the world, with more than 75,000,000 downloads over 350 unique episodes. The show also has over 10,000 five-star reviews in iTunes and is consistently in the top 10 of all business podcasts on iTunes.

A life-long adventurer, Brandon (along with Heather and daughter Rosie and son Wilder) spends his time surfing, snorkeling, hiking, and swimming in the ocean near his home in Maui, Hawaii.

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Brandon’s writing has been featured on Forbes.com, Entrepreneur.com, FoxNews.com, Money Magazine, and numerous other publications across the web and in print media.

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Section 8 is a rental subsidy program funded by The Department of Urban Housing and Development (HUD) and run by local public housing agencies. In other words, Section 8 will help pay all or some of a tenant’s rent. Section 8 is available to low-income, elderly, and disabled tenants to help pay their rent and utilities. According to the HUD’s website, in order to qualify for Section 8, the applicant’s combined total family income cannot exceed 50 percent of the average income for the area, and over 75 percent of vouchers go to applicants whose income is 30 percent below the average income for the area.

Additionally, Section 8 requires that properties be held to certain HUD-approved standards, and all Section 8 rentals must be inspected before the landlord can receive money from the Section 8 program. Most of these requirements are common sense things that you shouldn’t have a problem making sure your properties have, such as windows that open, heat, ventilation in the bathroom, and more. Furthermore, Section 8 defines the maximum amount of rent they will pay based on bedroom, which can be both good and bad, depending on what they define for your area. In our area, Section 8 pays almost $100 more per month over what we can get from other non-Section 8 tenants, which provides added incentive to take the Section 8 Program.

Related: 8 Myths About Section 8, Corrected: Here’s the Profitable Truth

So should you accept Section 8? Let’s look at some of the pros and cons to help you decide.

section_8_housing_misconceptions

Pros of Section 8:

1. You’ll generally not need to worry about the Section 8 paid portion of the rent being late, as it comes directly from the local public housing agency every month.

2. Tenants must meet and adhere to certain requirements of the Section 8 program or potentially be faced with being dropped from the program. For example, one of the expectations is that the tenant complies with the terms in their lease.

3. Housing Authority will conduct annual inspections of the unit, making sure the tenant is not destroying the property.

Cons of Section 8:

1. In order for the rental to qualify for Section 8 tenants, the unit must be inspected by the local public housing agency and meet the program’s standards for habitability on an annual basis. We listed this as a “con” since it requires that the landlord adhere to the government’s standard of habitability, not their own. It’s not necessarily a bad thing, just something to keep in mind.

2. If the landlord presents a nice, clean, habitable home that meets all Section 8 requirements, then the tenant allows the home to fall into disrepair by not caring for it properly or failing to report maintenance issues, not only is that a problem in and of itself for the landlord, but it can also lead to the tenant being dropped from the program. This means no income, no rent, and no reimbursement for forthcoming damages.

Related: Should I Accept Section 8 Tenants — Or Run the Other Way?

3. Even though the tenant must meet the Section 8 program’s guidelines to keep their Section 8 status, there is no guarantee they will, once again resulting in being dropped from the program and leaving the landlord with a tenant who can’t afford the rent.

4. Finally, in our experience, Section 8 tenants can be more difficult to manage than their unsubsidized counterparts. We’ve typically found that Section 8 tenants cause more damage to the property and often allow more garbage and junk to pile up than our other tenants. Perhaps this is due to the fact that (in their mind) they aren’t financially responsible for what happens, or perhaps it’s simply a correlation between low-income tenants and cleanliness. But whatever the reasons, whether financial or socio-economic, Section 8 tenants are often harder on a property, which is the number one reason why we don’t jump to rent to Section 8 unless a weak rental market makes it advantageous.

rent to section 8

We have had both good and bad experiences with Section 8 tenants. One bad experience we had with Section 8 involved an inherited tenant (they were in the rental when we purchased it), and it was really bad. We’ll spare you all the dirty details, but it went from bad to worse very quickly and ended in a long, drawn out eviction, a house full of cockroaches, a death threat, and a few thousand dollars in rehab costs—plus months of lost rent! This situation could probably have been avoided altogether had the property manager who placed the tenant screened correctly, but that’s one of the risks you take when buying properties with existing tenants.

Just because a tenant is on Section 8 doesn’t automatically make them a good or bad tenant. It’s up to the landlord to screen every applicant correctly and thoroughly and only accept those who meet their minimum standards. If you do decide to accept Section 8 in your rentals, you will need to be sure all applicants meet all your other criteria, including rental references (do they abide by the terms of the lease, do they have good housekeeping habits, are they all-around good tenants?), credit (do they pay their bills?), background (do they obey the law?), and any other criteria you have for your rental.

[This excerpt was taken from The Book on Managing Rental Properties, which gives investors valuable information on everything from screening tenants to managing everyday issues — and everything else you need to know for successful buy and hold investing.]

What are your thoughts on Section 8?

Let me know with a comment!