Section 8 — what should I really watch out for?

Question

Hey everyone,

I’ve been digging into a few U.S. markets (Detroit, Buffalo, Midwest/Northeast in general) and keep coming back to Section 8 as part of the strategy.

At the same time, I’m seeing a lot of different narratives online — especially on Instagram (accounts like “section8karim” and similar). They make it look almost too good — strong cash flow, guaranteed rent, minimal headaches… honestly very “juicy” and straightforward.

So I’m trying to separate what’s real from what’s marketing.

For those of you actually doing this day-to-day:

• What are the biggest headaches you’ve run into with Section 8 tenants?
• Are inspections as painful as people say, or manageable once you know the system?
• How’s tenant quality in reality (not stereotypes)?
• Any surprises that hit you after your first deal?
• Does it actually cash flow as well as it looks, or do hidden costs creep in?
• And if you had to start over — would you still do Section 8?

Appreciate any honest feedback — good, bad, or ugly.

Thanks 🙏

Drew Sygit · Answer

Copy & paste info below as soooo many newbies are clueless:(-------------------------------------------------------------------------------------

https://www.biggerpockets.com/forums/52/topics/1164155-rant-section-8-is-not-guaranteed

https://www.biggerpockets.com/forums/48/topics/1159346-best-section-8-markets?highlight_post=6616234&page=1

Section 8 Programs Gurus

https://ericspofford.com/cash-flow-is-king/

Section 8 can be a great government program to work with if you do it right!

In the past, the Department of HUD targeted S8 rents to be at the lower end of a rental market. In 2022, rising rental rates have forced HUD to significantly increase maximum rents as too many S8 voucher holders can’t find rental homes at previous rates.

Positives

• Rent comes directly to landlord, every month!
• Landlord can require tenants to be responsible for separately metered utilities, so can avoid waste.
• Landlord can get annual small increases in rent.

Negatives

Most of us don’t treat something we get for free the same way we treat something we’ve worked hard to obtain.

• S8 applicants claim “broke” and don’t like to pay application fees
• Same goes for security deposits
• S8 tenants, in our experience, tend to cause more property damage than non-S8 tenants. 
- Make sure you get a security deposit and perhaps do a surprise inspection of their current home.
• S8 requires an inspection (mostly health & safety) before approving a lease and then annually thereafter. 
- Not something most landlords taking care of their properties have to worry about.
• There are limits to clauses they allow in your lease. This isn’t really a big deal though.
• Rent payments can be abated over unresolved maintenance issues and tenants failing to abide by S8 requirements.
• Many S8 housing commissions will not hold tenants accountable for damages they cause (tenant is supposed to repair or lose their voucher). Instead S8 requires landlords to repair damages to keep S8 payments. Landlord’s only option to collect funds for damages is to take tenants to court.
• More and more tenants are only having a portion of their rent covered by S8, so landlords need to still screen S8 applicants for portion they must pay.
• Landlord cannot charge S8 tenants a portion of shared utilities – which can lead to the infamous tales of tenant retaliation against landlord by blasting heat on high with open windows during winter.
• S8 caseworker response times can be very slow, as they are usually overworked & underpaid.

Again, overall it’s a pretty good deal for a landlord that does some decent screening.

Exposing Section 8 Housing | Tenants From hell 243 - YouTube

Liberals Blame this Eviction on Landlord Despite the Before & After Footage | Tenants From Hell 241 - YouTube

My first Baltimore buy & hold investment - SOLD (Lessons learned) (biggerpockets.com)

Besides MANY self-labeled "gurus" exaggerating their success, many of them just supply readily available info.

If you're too busy to find the info and are willing to pay for it, no problem as you accept their time vs money solution.

REGARDING S8 GURU ISSUES SPECIFICALLY

Most of them don't share all the facts about how Section 8 actually works.

They claim you can get HIGHER rent from S8 tenants vs private-paying tenants.

Why would the government allow our tax dollars to be spent this way?

The S8 program was never designed to put S8 tenants in Class A rentals! The program was created to give low-income tenants an alternative to living in federal project housing.

S8 sets their rental rates to the LOW-END of market averages, if not slightly below.

What the gurus do NOT tell you is they expect you to get a Class C S8 tenant to rent a Class D property.

That's pretty much the only way you can consistently get higher than market rent via S8.

Also, don't make the mistake of assuming the S8 voucher amount is 100% for rent. S8 standard voucher amounts INCLUDE all utilities. An owner would be foolish to cover all utilities for an S8 tenant. Think of all the horror stories about tenants maxing out the heat with their windows open during the winter, deliberately running water bills up, etc.

Richard F. · Answer

@Sergei Plehhanov, Don't
let anyone tell you the "rent is guaranteed". FACT: Some
Gov shutdowns will stop payments; Tenants are usually responsible for
some portion of the total rent, but often will not pay. If you
complain to the Caseworker about the missing payments, they may pull the Tenant off the program,
but NOT remove them from the premises or reimburse you for lost rent, damages, court
costs, etc.; Depending on the Inspector, and whether or not you/your
Rep attends required inspections, Tenants will often NOT be held
responsible for actual damages they have caused, AND, rent payment
from S8 may stop until YOU complete the repairs.

Review the HAP Contract and the Tenancy Addendum to see if you
agree with the terms YOU are held to.

You/your
PM need solid processes to ensure you pass inspection first time and
at every annual, or there will be delays which vary depending on the
local Housing Office staffing. You do not collect any rent until
inspections pass.

Here is an Inspection
Form for the Housing Voucher Program, WITH the inspection Standards.

And here
are various common related forms including the actual Housing
Assistance Payment Contract, Tenancy Addendum and others. You still
need your own Rental Agreement, which would need to be approved by
Housing, and would be attached to their Contract.

You can look up current Section 8 Fair Market Rents here.

Richard F. · Answer

This is well covered if you search for "Section 8". Short version, like all aspects of Residential Rentals, you need to develop solid systems and processes for every major element of the Business, and stick to those processes. Results will be either good, or bad, depending primarily on those solid processes, especially the screening process. This is the most important task of any.

Jeff M Collinsworth · Answer

@Sergei Plehhanov, my experience with Section 8 is somewhat limited, but I’ll share what I’ve seen so far.

When I’m tenant hunting, I’m open to Section 8, but the biggest challenge I’ve run into is the timeline. Tenants are usually motivated, but the process itself can be pretty slow between approvals and inspections.

In both cases where I went down that path, I kept marketing for direct tenants at the same time. Section 8 ended up being more of a backup option if I couldn’t place someone quickly.

I’d be really interested to hear how others are handling it as well. My sense is it probably varies quite a bit depending on the city and how efficient the local housing authority is.

Mendy J. · Answer

Actually I love section 8 tenants because it's technically rent guaranteed 2 main issues to be on top is.

1. Tenants often playing games with paying their portion because it's anyway little money...

2.being on top of inspection deadlines

Mendy J. · Answer

The point here of Section 8 and all other government programs are not necessarily that they give you higher rent. You will get the rent. You ask if it's within the fair market rent. Most of the times fair market rent is higher than the actual market rent.

additionally there is no such a rule with Section 8 that you have to cover the utilities and it must be included in the rent. I really don't know from where you take this information but that's absolutely not true. Maybe just in your market the city has rules like that, but I doubt it

but again, I do agree that it has negatives like everything has positives and negatives, but the idea that most of your rent is covered and basically guaranteed is a strong benefit that reduces the main risks of rental property investing.

Me personally I would only accept and look for a Section 8 tenant in class C or B markets class a market markets I would Definitely not consider program tenants

Richard F. · Answer

The Gov paid portion will stop IF there is a full gov shutdown as happens far too frequently; also IF the Caseworker removes the Tenant from the program either as result of you filing an eviction or other significant breech of terms notice such as additional unauthorized people living there, or drug violations, child protective service issues, etc.; or IF you fail an interim inspection and do not get the failed items corrected and re-inspected within their timeline.The Tenant portion of the rent is always at risk of not being paid, and the Tenants usually know that it is not worth it to you, to file for eviction, due to what I stated in prior paragraph. Furthermore, the idea that the Tenants are fearful of losing their voucher is very weak, because they already know the system and the fact that they can pack their bags and go to the next city, or even just to a county Title IX program and get a new voucher and other free assistance. The gov does not remove/evict Tenants for any reason, to my knowledge, other than from their own housing units. For all other Owners,they leave it to the property Owner to file and go through the process and pay for the expense and all the repairs (which is never collectible from Tenants with no assets or significant employment). So that really offsets many months of that "guaranteed" rent. Additionally, in my experience, of some 30 years and 100's of S8 units, most, not all, but most of these Tenants are harder on a unit than average, properly screened, working families paying market rents. I do realize that NY, Cali, and certain other areas are more "Tenant friendly" than others, and, much as LL/Tenant laws from one jurisdiction to another, there are differences based on locale. That is why I always stress to the newbs to check local law. But I will not sugarcoat the reality of any response to their inquiries.One more item, the post that followed the one I am quoting, you did not understand about "covering the utilities" in @Drew Sygits post, I believe. His comment was regarding "shared" utilities, meaning, a PM calculated amount that is billed to the Tenant, vs. actual separate meters for each unit.

Mendy J. · Answer

@Richard F. I'm trying to understand what can be more guaranteed than subsidized rent from the government programs. I'm actually talking after having a lot of experience with over 10 programs in the capital region of New York section 8 is just part of it. They are all fantastic

Sergei Plehhanov · Answer

@Richard F. Thank you so much! It is greatly appreciated.

Section 8 — what should I really watch out for?

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