{"id":16494,"date":"2020-08-01T05:00:25","date_gmt":"2020-08-01T11:00:25","guid":{"rendered":"https:\/\/www.biggerpockets.com\/renewsblog\/?p=16494"},"modified":"2023-03-22T03:11:57","modified_gmt":"2023-03-22T09:11:57","slug":"section-8-tenants-pros","status":"publish","type":"post","link":"https:\/\/www.biggerpockets.com\/blog\/section-8-tenants-pros","title":{"rendered":"5 Reasons Why Section 8 Tenants Are the Best Renters"},"content":{"rendered":"\n\n      <iframe loading=\"lazy\" frameborder=\"0\" height=\"200\" scrolling=\"no\" src=\"https:\/\/playlist.megaphone.fm\/?e=BIGPOC9989914488\" width=\"100%\"><\/iframe>  \n\n\n\n<p>Real estate investors have a love\/hate relationship with&nbsp;<a href=\"https:\/\/www.hud.gov\/topics\/housing_choice_voucher_program_section_8\" target=\"_blank\" rel=\"noopener noreferrer\">Section 8 housing<\/a>, the largest rental assistance program for low-income renters. Section 8 tenants receive housing vouchers, which help afford rental costs\u2014and despite the myths, these tenants are fantastic.<\/p>\n<p>The program is managed by the U.S. Department of Housing and Urban Development (HUD), as well as hundreds of regional public housing authorities (PHAs) across the country, who administer the program at the local level.<\/p>\n<h2>Busting Section 8 Myths<\/h2>\n<p>You\u2019ve heard them. We&#8217;ve all heard them. Stereotypes about Section 8 tenants abound. Among the most common warnings:<\/p>\n<ol>\n<li>They won\u2019t care for your property (i.e., they will trash your house)<\/li>\n<li>They\u2019re unstable and won\u2019t pay their portion of the rent<\/li>\n<li>They\u2019ll attract drama and crime.<\/li>\n<\/ol>\n<p>Sure, there will be cases where these hold true (especially if you&nbsp;don\u2019t screen well\u2014more on this later). But most of the time, myths are just that\u2014myths.<\/p>\n<h3>They won\u2019t care for your property<\/h3>\n<p>Bad tenants come in all shapes, sizes, income groups, and professions. Wealthy people <em>and<\/em> college students trash homes. Don&#8217;t kid yourself: Just because somebody has a good job or makes a decent income doesn\u2019t mean they will take care of your house.<\/p>\n<p>One strategy is purposefully not buying in any places commonly perceived as \u201cSection 8 neighborhoods\u201d\u2014i.e. high crime and blighted areas. And the voucher holders you want to attract prefer not to live there, either.<\/p>\n<p>Proper screening is essential for Section 8 success. Consider asking your applicants\u2014<em>all<\/em> your applicants, not just Section 8\u2014if you can visit their current residence. That will tell you all you need to know about how well they maintain their home. And their kids: The majority of voucher participants are families with children. We know that some kids, especially younger ones, can be a bit harder on the property. But that is not always the case, especially if the parents train them appropriately.<\/p>\n<p>Either way, considering Section 8 renters stay for five, 10, 15, or even 20 years, a little extra wear and tear doesn\u2019t necessarily hurt my bottom line because I deal with so little turnover.<\/p>\n<h3>They\u2019re unstable and won\u2019t pay their rent<\/h3>\n<p>It\u2019s tempting to think someone on government assistance is likely to move around a lot. This isn&#8217;t necessarily true. Often, a housing voucher is a tenant&#8217;s golden ticket to a neighborhood free from drugs, gangs, and other negative influences. A gateway to a better quality of life for the entire family. So when they move into one of my houses, they usually stay for many, many years.<\/p>\n<p>If you rent a property to a couple making a combined $200,000 per year income\u2014common in larger, more expensive cities\u2014here\u2019s what\u2019s likely to happen: They\u2019ll stay for one, maybe two, or possibly three years, then leave to buy their own house.<\/p>\n<p>For buy and hold investors, turnover and vacancy is by far the biggest expense\u2014especially if not carefully managed and controlled. When Section 8 tenants stay for a very long time, your turnover and vacancy costs are minimized. Cash flow goes directly to your bottom line.<\/p>\n<p>Plus, they&#8217;re motivated to stay on top of rent. Not doing so might mean that golden-ticket voucher is taken away\u2014spoiling their chance to keep their family in a safe, more prosperous neighborhood.<\/p>\n<h3>They attract drama and crime<\/h3>\n<p>Most people\u2014especially parents\u2014living in underserved, low-income neighborhoods are no different than you or me. They want to put their kids in good schools and live near desirable amenities, such as shops, public transportation, parks and rec centers, just like anyone else.<\/p>\n<p>A large number of Section 8 tenants have absolutely no criminal history or onerous red flags, like evictions, complaints, or housing violations. They just want their family to live in a quality house in a nice area and to rent from a good landlord. This is not rocket science.<\/p>\n<p><em><strong>Related: <\/strong><a href=\"https:\/\/www.biggerpockets.com\/blog\/real-estate-investing-avoid-section-8-properties?itm_source=ibl&amp;itm_medium=related&amp;itm_campaign=opt\" target=\"_blank\">7 Reasons NOT to Invest in Section 8 Properties<\/a><\/em><\/p>\n<h2>HUD Promises On-time Payments<\/h2>\n<p>With Section 8 tenants, landlords receive my rents\u2014either in full or a large percentage\u2014via HUD or local PHAs. Payments come on time every single month via direct deposit into your business checking account.<\/p>\n<p>HUD doesn&#8217;t give excuses about late rent. The money is there. In fact, their housing assistance payments have been consistently funded in full for decades and hold <a href=\"https:\/\/www.hud.gov\/program_offices\/public_indian_housing\/programs\/hcv\/dashboard\" target=\"_blank\" rel=\"noopener noreferrer\">billions of dollars<\/a>&nbsp;in reserves.<\/p>\n<p>However, there are important differences between HUD&#8217;s two main fair housing programs.<\/p>\n<h3>Housing choice vouchers<\/h3>\n<p>Housing choice vouchers allow a tenant to live anywhere that accepts vouchers. This makes up the bulk of the Section 8 program. Only households with a monthly income less than 50 percent of the median income for the area in which they reside can apply for the program.<\/p>\n<p>HUD sets and maintains median income values for each region of the country, and the data can be accessed on HUD\u2019s <a href=\"https:\/\/www.huduser.gov\/portal\/datasets\/il.html\" target=\"_blank\" rel=\"noopener\">Office of Policy Development and Research website<\/a>. Vouchers can be used for multiple-unit housing, single-family homes, or townhouses. The median family incomes for each region are used to calculate HUD\u2019s 50 percent income limits for the Section 8 housing choice voucher program.<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-full wp-image-69523\" src=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2015\/01\/section_8_housing_misconceptions.jpg\" alt=\"section_8_housing_misconceptions\" width=\"702\" height=\"336\" title=\"\" srcset=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2015\/01\/section_8_housing_misconceptions.jpg 702w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2015\/01\/section_8_housing_misconceptions-300x144.jpg 300w\" sizes=\"auto, (max-width: 702px) 100vw, 702px\" \/><\/p>\n<h3>Project-based vouchers<\/h3>\n<p>Receiving a housing choice voucher can take between three and six years in some areas. While an applicant waits, they can utilize a project-based voucher (PBV). A PBV is only good for a specific rental unit. Landlords can apply with state or municipal governments to be eligible for the PBV program.<\/p>\n<p>With a project-based voucher, the tenant will pay 30 percent of their household\u2019s gross monthly income, and the public housing authority will cover the rest. (Do not confuse project-based vouchers with \u201chousing projects\u201d and the stigma associated with the phrase. PBVs can be as simple as a duplex!)<\/p>\n<h2>Landlords Receive Protection from Tenants&#8217; Financial Hardships<\/h2>\n<p>If a tenant goes on an unpaid leave of absence from work\u2014say, due to maternity or health issues\u2014HUD covers the payment while they recover. That&#8217;s a great for tenants <em>and<\/em> landlords. After all, you would likely need to evict non-Section 8 tenants dealing with similar circumstances due to non-payment of rent. You&#8217;d be faced with a short-term vacancy.<\/p>\n<p>HUD protects your near-term cash-flow\u2014and the housing assistance payments help tenants through a tough time without disrupting their living arrangements.<\/p>\n<p><em><strong>Related: <\/strong><a href=\"https:\/\/www.biggerpockets.com\/blog\/2013-03-04-section-8?itm_source=ibl&amp;itm_medium=related&amp;itm_campaign=opt\" target=\"_blank\">Are You a Real Estate Pioneer? How to Be a Section 8 Landlord<\/a><\/em><\/p>\n<h2>Section 8 Rents Can Be Higher<\/h2>\n<p>Not only are rent payments guaranteed and stable despite a tenant\u2019s hardship, but HUD is sometimes the best in town when it comes to rental rates. Section 8 tenants pay a fixed percentage of their income, and the government or Section 8 program pays the difference. That means that tenants can apply to more expensive properties than they might otherwise. For example, you may be able to get $1,200 to $1,600 per month in lower-income neighborhoods&nbsp; where the purchase prices are less than $75,000.<\/p>\n<p>In higher-end areas, you would pay at least twice as much for the property\u2014but still get the same amount in rent. Yes, nicer areas appreciate more quickly, but appreciation is icing on the cake anyway.<\/p>\n<p>HUD and local public housing authorities calculate a fair market rent (FMR) for each geographic area of the United States, which determines the maximum rent a landlord can charge to the Section 8 tenant. FMRs include the cost of basic utilities like heating\/air and electric, regardless of whether the tenant or the landlord pays those expenses. FMRs also take into account family size and rental unit size.<\/p>\n<p>Here&#8217;s an example: If a Section 8 tenant makes $2,000 per month, they will only pay about 40 percent of their income for rent\u2014about $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 will pay $9,200. The tenant pays $800 in both scenarios.<\/p>\n<p>You can look up the FMRs in your area through HUD\u2019s <a href=\"https:\/\/www.huduser.gov\/portal\/datasets\/fmr\/fmrs\/FY2020_code\/select_Geography.odn\" target=\"_blank\" rel=\"noopener noreferrer\">documentation system<\/a>.<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"alignnone wp-image-68611 size-main-slider\" src=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2014\/12\/fair2-702x336.png\" alt=\"\" width=\"702\" height=\"336\" title=\"\"><\/p>\n<h2>Section 8 Marketing Is Free or Low-Cost<\/h2>\n<p>On <a href=\"http:\/\/www.gosection8.com\/\" target=\"_blank\" rel=\"noopener noreferrer\">GoSection8.com<\/a>, you can list properties and review tenant profiles. For a small fee, property owners can create a premium listing.<\/p>\n<p>Yes, some low-income applicants don&#8217;t have internet access. However, HUD also provides paper listings in the local PHA offices for those without internet access.<\/p>\n<h2>Long Section 8 Waiting Lists = Short Vacancies<\/h2>\n<p>Perhaps not every city has a mile-long list of Section 8 participants with vouchers seeking housing, but many do. There are also famously long waiting lists of low-income families seeking to become eligible for a housing voucher.<\/p>\n<p>Filling a vacancy is a pretty quick process once your property is inspected and approved for the program by HUD Real Estate Assessment Center (REAC) employees.<\/p>\n<p>With careful screening, landlord references, and respect for your tenants\u2014as well as pride in your property\u2014you will vastly reduce the probability of experiencing your own Section 8 horror story.<\/p>\n<p>Keep in mind that public housing authority social workers also conduct thorough screening of all waiting list candidates. And it doesn\u2019t stop there\u2014if you have an issue with a tenant or family member, you have extra recourse outside of eviction. In addition, you can contact the social workers directly to mediate any issues with a tenant who&#8217;s stepping outside of the lease agreement.<\/p>\n<p><em><strong>Related: <\/strong><a href=\"https:\/\/www.biggerpockets.com\/blog\/background-check-debate?itm_source=ibl&amp;itm_medium=related&amp;itm_campaign=opt\" target=\"_blank\">How to Run a Tenant Background Check<\/a><\/em><\/p>\n<p><a href=\"https:\/\/www.biggerpockets.com\/webinars?utm_source=newsletter\" target=\"_blank\"><img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-full wp-image-91217\" src=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2017\/08\/blog_ads-01.jpg\" alt=\"\" width=\"700\" height=\"85\" title=\"\" srcset=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2017\/08\/blog_ads-01.jpg 700w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2017\/08\/blog_ads-01-300x36.jpg 300w\" sizes=\"auto, (max-width: 700px) 100vw, 700px\" \/><\/a><\/p>\n<p><em>Would you consider renting to Section 8 tenants? Why or why not?<\/em><\/p>\n<p><strong>Weigh in with a comment!<\/strong><\/p>","protected":false},"excerpt":{"rendered":"<p>Maybe you&#8217;ve heard horror stories about Section 8 tenants. But the pros definitely outweigh the cons. Why? We bust the myths here. Learn more about how Section 8 helps landlords.<\/p>\n","protected":false},"author":522,"featured_media":114657,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[5183,7119],"tags":[576,190,3324,7042,569],"class_list":["post-16494","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-landlording","category-biggerpockets-daily","tag-hud","tag-landlord","tag-section-8","tag-seo-optimization","tag-tenant"],"acf":[],"comment_count":0,"_links":{"self":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/16494","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/users\/522"}],"replies":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/comments?post=16494"}],"version-history":[{"count":0,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/16494\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media\/114657"}],"wp:attachment":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media?parent=16494"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/categories?post=16494"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/tags?post=16494"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}