Does anyone have experience with or know about Section 8 housing and properties? Looking at a MF property and I noticed that some current tenants are section 8 tenants.
Yes Tom, I have a lot of experience with affordable apartment buildings and although a voucher gets a bad rap, many tenants are on the waiting list years trying to get a voucher. Many take care of their units and are happy to have the help.
and also google your city's local housing authority and search for the 2024 Payment Standards. These are the rents you can go by for rent increases or renting to new tenants.
I usually underwrite for more wear and tear in my analysis to cover the bad apples, but luckily the majority of section 8 tenants we've encountered across the country have been grateful to have their unit.
Yes Tom, I have a lot of experience with affordable apartment buildings and although a voucher gets a bad rap, many tenants are on the waiting list years trying to get a voucher. Many take care of their units and are happy to have the help.
and also google your city's local housing authority and search for the 2024 Payment Standards. These are the rents you can go by for rent increases or renting to new tenants.
I usually underwrite for more wear and tear in my analysis to cover the bad apples, but luckily the majority of section 8 tenants we've encountered across the country have been grateful to have their unit.
Does anyone have experience with or know about Section 8 housing and properties? Looking at a MF property and I noticed that some current tenants are section 8 tenants.
Hey Tom,
@Alice V.nailed it. SECT 8 tend to get a lot of negative press. Ultimately, they are an option to help lower income households afford a place to live. We have a lot more "under employed" than "Unemployed" in our country and these folks are stretched very thin. Many of my Sect 8 tenants work hard at 2 jobs to support their households. For multiple reasons, the types of jobs they work don't provide for the rising cost of living.
In our market, there are more SECT 8 vouchers issued than housing units available. Many of the local housing authorities have classes for landlords wishing to provide this type of affordable solution and can answer your questions. They often have good websites with a lot of resources.
During COVID, we experienced very little variance in rents collected due to our voucher acceptance. Other landlords were fighting with eviction moratoriums and non-payment, but we didn't. Most of our voucher tenants are great (a couple of exceptions that we have to deal with). Our rents come in like clockwork and we are able to increase rents annually with the COLA afforded through HUD which makes it a pretty simple business model.
@Alice V.. My property is in Elk Grove CA 95757. I put the house on the market for 2 weeks. I showed to section 8 clients but they think I listed too high. My listing price is for 3 bedrooms voucher but the house is 5 bedrooms. On Zillow, the rent in the area is lower than mine about $500-750. About 93% owner occupied in this zipcode. Do you think housing won’t pay more than Zillow? Thanks!
Make sure you are looking at market rents for rent comps. That's what the housing authority will use in your particular area. If you are matching market rents then you can probably negotiate a little with the housing authority. Give them a call or stop in and try. They have the authority to pay more than FMRs where warranted.
Thanks Alice V. and Joshua Christensen. You have reassured me to consider working with section 8 tenants. I'd be happy to receive additional insights and ideas how to ensure appropriate screening of tenants so I avoid "bad apples" - I know there's nothing foolproof, but I will be glad that I tried to avoid some of the landlord issues. :)
@Alice V.. My property is in Elk Grove CA 95757. I put the house on the market for 2 weeks. I showed to section 8 clients but they think I listed too high. My listing price is for 3 bedrooms voucher but the house is 5 bedrooms. On Zillow, the rent in the area is lower than mine about $500-750. About 93% owner occupied in this zipcode. Do you think housing won’t pay more than Zillow? Thanks!
Hey Lynn, the easiest way to find out is to reach out to housing in your area. Usually they break down their standards by zip code and need for the area. You can also advertise your listings on the SECT8 website with them. That's where a lot of the tenants go to find their housing.
Investor · SF Bay Area · Member since 2024 · 15 posts · 6 votes
2y
Tom, does the property have any LURA restrictions (partial or otherwise)? That, in addition to the number of Section 8 tenants, would affect your underwriting & rent growth. Also, the property has to maintain the housing quality standards to continue receiving payment from the housing authority.
These days, its becoming harder to predict tenants who could become delinquent. In my experience, income criteria, past rental & background checks works 90% of the time.
Real Estate Broker · Fort Lauderdale, FL · Member since 2018 · 196 posts · 191 votes
2y
@Tom Owiti hi I teach a class series for the Miami Association of Realtors on how to better work with housing authorities.
It’s a great option and can be used almost on any property as long as the association bylaws don’t have any restrictions that would prevent this specific tenant from qualifying. Sometimes they have income restrictions that someone using affordable housing programs may not meet. You still want to qualify just the same as Section 8 is just a source of additional income it does not classify a type of person or a type of property , I do multiple Section 8 deals a year. I also manage properties with Section 8 tenants and as long as you manage your properties appropriately it’s great.
Investor · Arroyo Grande, CA · Member since 2014 · 1k+ posts · 1k+ votes
2y
Hey Tom, I have a handful of doors that are rented to S8 tenants.
Overall, I like the program but you need to understand it's not a strategy as much as it is a tool.
There's also more paperwork and processes that go into S8 than you would a cash-paying tenant.
Finally, not all S8 tenants are created equally (just like any tenant). You need to screen them like you normally would. It's not "guaranteed" rent like most folks tend to think.
@Alice V.. My property is in Elk Grove CA 95757. I put the house on the market for 2 weeks. I showed to section 8 clients but they think I listed too high. My listing price is for 3 bedrooms voucher but the house is 5 bedrooms. On Zillow, the rent in the area is lower than mine about $500-750. About 93% owner occupied in this zipcode. Do you think housing won’t pay more than Zillow? Thanks!
Hey Lynn, the easiest way to find out is to reach out to housing in your area. Usually they break down their standards by zip code and need for the area. You can also advertise your listings on the SECT8 website with them. That's where a lot of the tenants go to find their housing.
@Joshua Christensen I listed on affordablehousing.com. The rent comp from rentcast, Zillow, BP (most are 3-4 beds, none are 5 bed) are much lower than housing standard payment. There are no house in the zip code has 5 bedrooms, so I feel mine is very competitive. I have handful inquiries, most are family of 5-6. I hope I can get it going by next week. I am sure housing will negotiate the rent down.
Lynn, not necessarily. We've had situations where the housing authority did not want to approve the rent or increase we wanted. Stand your ground... If you know you have a desirable 5 bed in an area where there aren't any big units up for rent, then we've seen that the housing authority will pay us premium rent for this unit. Unless you are way off, you should get it. Also keep in mind that housing authorities are always in demand of larger units. 3-4-5 bedrooms are always on their list of needs and they will pay over FMRs for these in many areas.
Investor · Richmond, VA · Member since 2023 · 459 posts · 474 votes
2y
One thing that caused me to avoid section 8 is that in our area rapid rent increases year over year are outpacing "fair market rent" analysis. I am making a few hundred more a month in most of my houses than the fair market rent. My properties are B-/C+, nothing special.
Section 8 would be more helpful if rents are trending flat or down, but in a rapidly rising rent market section 8 will reduce your cash flow.
Real Estate Agent · Columbus OH · Member since 2018 · 1k+ posts · 1k+ votes
2y
I've placed many tenants in section 8 or voucher programs here in central OH. There is some more paperwork and hand holding with the housing authority, but like anything else if you vet applicants well, and get comfortable with the additional paperwork it can be a great tool to have.
Cincinnati, OH · Member since 2020 · 4k+ posts · 3k+ votes
2y
@Tom Owiti, at one point I had about 6-7 Section 8 tenants in my SFRs. It was fine. I was buying in Class C areas coming out of financial crisis. I no longer have any section 8 tenants (and sold most of my rentals anyways).
For me, I stopped doing section 8 because: CMHA (Cincinnati metro housing authority) was not willing to pay asking rents, but the bigger issue was the annual reinspections. To get a tenant, CMHA did an inspection. I had to put up fences along drive under garages that had never been there, fix window springs that wouldn't hold up a window, etc. I am not complaining about that, to be clear, but they were repairs that a market rate tenant would not have required.
The bigger issue was every year, the unit would get reinspected. Things like cracked outlet covers or chipped paint were my responsibility to fix. The thing is, the paint wasn't chipped when I rented the unit to tenant and the outlet cover wasn't cracked. This was tenant damage during their tenancy. And as the years went on, the lists of fixes got more and more expensive.
In 2010, I felt like I was getting about $50 to $75/mo more in rent from section 8 than I could have gotten from market tenants, and the annual inspection fixes were costing $200-500/yr. The headache was worth it. By 2017/2018, when I had my last section 8 tenant, I felt I was getting about $100 LESS per month than I could have from market tenant AND my annual reinspections were costing me about $1,000-$1,500 in repairs.
I mention all this to simply be careful. The tenants, when screened, were generally great. There were some that would want showings that I would not rent to, but overall the ones I chose to sign leases with, while a little rough on property, were overall good tenants and people.
Developer · Charleston, SC · Member since 2015 · 100 posts · 91 votes
2y
#1 biggest thing to find out is who subsidizes the tenants. That's huge. If it's a local organization, they typically act as the case worker for the tenant to get assistance. The owner generally has a few documents (change of owner and payee) to complete and then an annual inspection. Not bad. If it's HUD directly, it's much more involved and you have to be the ongoing case worker for your tenants. Can be awful.
@Alice V. or @Joshua Christensen when looking to finance a MF property that has tenants with vouchers, since the rents coming in on time. Can this be beneficial in the eyes of the lender and help secure the loan?
@Alice V. or @Joshua Christensen when looking to finance a MF property that has tenants with vouchers, since the rents coming in on time. Can this be beneficial in the eyes of the lender and help secure the loan?
As a rule this will help for a conforming loan. When I have secured loans in the past the bank has only looked at leases in place when we were close on DTI.
#1 biggest thing to find out is who subsidizes the tenants. That's huge. If it's a local organization, they typically act as the case worker for the tenant to get assistance. The owner generally has a few documents (change of owner and payee) to complete and then an annual inspection. Not bad. If it's HUD directly, it's much more involved and you have to be the ongoing case worker for your tenants. Can be awful.