Based on your experience, what are the Advantages/Disadvantages of investing into California properties with Section 8 tenants?
I had one experience with a section 8 tenant. Since he did not work at a regular job he had plenty of time to have parties in the apartment all hours of the night and day. It was a common event for them to order pizza, drink tequila and throw up out the upstairs window. He soon had a room mate. I ended up kicking them out after losing my other tenants. Two months after; I read a news story the new roommate had stabbed his girlfriend and left her in a suitcase for the next landlord to find some weeks later...
In our experience, they are just like any other tenant class. Meet them screen them and make a decision. Some will be good some may be bad but that’s part of the residential rental business
I have about 500 section 8 tenants. I love them. Guaranteed rent baby!
I am OK with section 8 because just like market rent tenants, I prescreen them and I provide the best housing they can find so I attract the best section 8 tenants.
Sometimes, landlords struggle with section 8 because they don't screen tenants and they are cheap. Even though section 8 is government subsidized housing for the lower income population, it does not mean that as the owner, that you provide them crappy apartments. If you don't renovate and update the units as per section 8 requirements, you won't pass section 8 inspection and if your units are marginal, it will attract the not so good tenants.
I like section 8 tenants too! My recommendation for others would be to utilize S8 tenants where the asset location requires them...DON’T utilize S8 in higher quality assets.
I have some buildings that are mixed, some S8 and some financially responsible tenants. Other buildings are exclusively financially responsible tenants. Mixing is OK just know you’re location and asset class.
People who don’t know the section 8 system don’t really know the requirements. In my area, S8 inspectors and fairly reasonable and we adhere to ALL requirements, it’s not that hard.
Like Michael said, you screen (credit/background) S8 tenants just as you would a finically responsible tenant. In my area, there is a long waiting list on Section 8 vouchers, tenants generally don’t want to lose their voucher status so they adhere to the program rules....not all but a lot do!
Your experience with section 8 will vary depending on the state/local housing authority in your area. I've had two tenants in the program who have both been excellent, elderly folks on fixed incomes. My state's housing authority is easy to work with and the inspections are nothing to worry about unless you're a slumlord. Keep in mind that the money is not guaranteed in the event of a prolonged government shutdown, and you may not evict a tenant for the housing authority's failure to pay.
Have had good luck. The tenants know that they will lose their benefits if they screw up. The local housing authority seems to want to help keep good tenants in our units so we are willing to keep making them available. If we evict, the tenants leave gracefully they can move to another section 8 funded property, if they cause problems they loose their voucher. The approval of the unit process with the housing authority doesn’t happen fast here, and can result in prolonged vacancy the first time you convert to sec 8. They are government employees, they don’t move quick like the rest of us.
We have a wonderful family that is section 8 living in ours. Unfortunately, there is due diligence on the front end to get your house ready to even qualify to be able to rent out for section 8, but I've felt for the most part the investors within our local market have a good experience with section 8 tenants. Talk to as many people in that local market about qualifying your renters.
@Shawn Choi We have a section 8 tenant and she's been great! Maintains the property and pays her share of the rent on-time. And of-course the govt never misses a payment. I echo what most members above said; proper tenant screening is key! The only hard part in my opinion was getting the unit eligible to rent out to section 8...lots of back and forth with the gov't but luckily I had a family member/agent who was familiar with the process. Also, from what I have heard/read most section 8 tenants tend to stay in the same location for a long period of time so less turnover etc.
I had a question for you tho @Michael Ealy ... how do you go about increasing rents on your section 8 tenants if the property is renting below comps in the area if the gov't has already agreed to pay a certain amount of the initial rent?
Had a very good experience with my Section 8 tenants. This was in Virginia, but since it's a federal program, the lessons should transfer.
As others have said. The guaranteed rent is very nice. The scarcity of Section 8 vouchers has also made them desirable enough to ensure good behavior. Even though we sold the property this summer (because we liked the sales numbers), I would happily do it again.
I have 6 section 8 tenants. We screened them and they are all very good tenants. They alway pay rent on time so they will not loose their voucher.
I find it easy to increase rents every year since my tenants usually pays very little if any party of the increase.
@Michael Ealy - AMEN to everything you said!!!
@Shawn Choi - I love SEC 8 too. 85 of our leases are voucher holders. It's my preferred tenant in a low income neighborhood. All low income tenants, SEC 8 or not, are higher maintenance than higher income tenants. There is a TON of info and advice on BP about the program. Just search for it and you will have days of reading material. My fingers got tired typing my experience over and over, so I put it in a blog. Here's a link if you want to check it out.
Every year, you get a chance to ask for a rent increase from section 8.
@Manny Awasom To add onto what @Michael Ealy said, it is pretty unusual for a Housing Authority to pay less than market rents as an overall budget. If they are paying less in your case, assuming you asked for a higher rent, either the tenant has a voucher with a bedroom size less than the number of bedrooms in your house, or the tenant didn't have enough income at the time you submitted the RFTA. So often tenants call to see a property when they are "between jobs". A tenant with no income will not get approved for market rent in my area. I require a SEC 8 tenant have at least one months rent in verifiable, dependable income. Same goes when you are submitting a request for a rent increase. Before you submit your rent increase request, find out what your tenant's income is. If the tenant just had a baby and is home on maternity leave, for example, wait until after she goes back to work to submit your request. I always submit rent comps with my increase requests, so I know I will always pass the reasonableness test for my rent amount. Choosing a tenant with enough income will ensure you will also pass the affordability test.
Unless you have management used to dealing with section 8 and knowing how to pick a good tenant, it has higher than average chances of being problimatic. But you knew that already. An abbuter had a section 8 tenant and they were a disaster causing tenants to leave from other properties.
@Michael Ealy Ok I see. I was not sure if I had to go through the tenant or the housing authority... but that makes sense. Thank you!
@Patti Robertson Thank you for the clarification and for that information! The current rent is not so much below market rents but rents in the area have been increasing each year so in anticipation for next year (if i was to increase rent on the unit), wanted to be sure of the process. But I like that strategy and approach. Will definitely keep that in mind. Thank you again.
@Shawn Choi just like ALL tenants its about screening . I have done 100s of sec 8 and other govt programs, again screen them properly .