Hello BP peoples!
First, I am a relatively new multi family investor. I have a duplex that’s on the market to rent and I keep getting asked if I accept Section 8 vouchers. This makes me realize that I don’t know enough to answer that question one way or the other.
So I’m turning to you all! Please share your experiences with Section 8. Good or bad! Is it reliable income that’s government backed? Is it 100% of the rent? Should the tenant screening process the same even with section 8?
Thank you all in advance! This is a great community full of helpful insights!!
@Justin Wingfield I own a few properties with Section 8 tenants and have had a good experience. It is reliable income. Like anything else, there's always risk. I personally only consider properties with some type of subsidized housing component currently because the possibility of a second lockdown makes me nervous about properties with market rate tenants.
There are instances where the subsidy programs will cover 100% of the tenant's rate, but that'll vary based upon the program and the tenant's individual situation because most programs typically assess a tenant's financials and living situation before determining how much of the rent they'll subsidize. Your tenant screening process should be exactly the same for every tenant so that you don't run the risk of violating fair housing laws and you'll also want to enforce a strict screening process in general.
I've had both good and bad experiences (like all tenants). For me, they seem to be just like any other B-/C+ tenant in my area so I use Section 8. It all really comes down to the tenant and screening them. There are great people on Section 8 and there are horrible tenants on Section 8. Screening is the key.
@Justin Wingfield I believe you’ll find that Section8 answers vary dramatically by market. You also need to consider the question from two perspectives: the bureaucratic process & the tenants. You are basically trading off “guaranteed” rent for increased bureaucracy.
In general accepting a S8 voucher means you are accepting the S8 process which includes government inspections (the tenant does occupy until you pass the inspection). This inspection process and the inspectors are part of the local housing authority. Some are better (or worse than others). It can also include or require mandatory re-inspections (even if the tenant is the same). The process also governs the maximum rent & rent increases.
From a tenant perspective we have not had any nightmare tenants (knock on wood). In general there is more demand for vouchers than vouchers and it can take years for a tenant to get a voucher. If they are evicted they’re kicked out of the program. So once a person qualifies they tend to behave.
We do S8 in Birmingham, AL as out of state investors. Prior to Covid inspections were within 2 - 4 weeks of finding a qualified tenant with a voucher. Currently its a crap shoot... the last one took almost 8 weeks. We’ve never had a clean first time inspection - the inspectors always want to find something. We’re at the point where we purposefully leave nit-picky items like a cupboard not latching properly or a sink stopper not working so they flag those items and don’t have to look to hard. But in Birmingham the same inspector doesn’t necessarily do the re-inspection, so we have had new punch list items pop up on the re-inspection. Despite this, we continue to plan to add S8 properties to the portfolio especially while we’re in the middle of Covid moratoriums.
First off, treat someone with a Sec 8 voucher like any other applicant when it comes to screening (good practice for Fair Housing). In Portland, you cannot screen out someone for a voucher and treat it like any income.
In general, I don't see much difference in Sec 8 holders, they may be a little rougher (especially if there's a lot of kids), but that prob represents most of the Sec 8 vouchers.
We stay away from section 8. We own and operate almost 900 units in Los Angeles County and have been investing in multi-family for over 60 years. If we acquire a building that includes some section 8 tenants, we always get them out. The extra headache is never worth the "guaranteed rent". The less government involvement in my business the better. I dont need extra bureaucratic red tape in my life.
I always love this question because it gets such varied responses. I love Section 8, it's all I do.
I can't disagree with anything anyone has said here. There are 5 main reasons I like Section 8:
1. Guaranteed Rent - even if the tenants pay a portion of their rent, and most of mine do, I don't have to chase it because if the tenant gets evicted, they can lose their voucher. I am currently owed $0 in rent from my Section 8 portfolio.
2. Higher Rents - in some of my areas, I get slightly higher rents that I would from market tenants. Not always and I never count on it. The rents are supposed to be comparable to market rents up to the Fair Market Rent amount but here, our HAs use different comp systems than I do so sometimes they come back with amounts that I wouldn't expect.
3. Long tenancies - generally, Section 8 tenants will stay longer because the processes to move are difficult.
4. Extra layer of accountability - the tenants have to follow your lease and if they break it and/or get evicted, they put their voucher at risk. So pick good tenants and they will follow the rules.
5. Supply & Demand - the demand for quality S8 housing is very high and the supply is nowhere near enough (also a reason people stay put). So I've found that if I have one of the nicest properties in the area, I get a ton of interest (not uncommon for me to get 30 showings in a weekend and 10 applications). That allows me to be very picky about who I pick to rent.
Good luck, let me know if I can help further!
In CO the laws just changed and we are not allowed to turn down section 8 vouchers because it's now considered discrimination on type of income. With that said, we've had good luck with section 8 tenants. They are always very kind and thankful. As others have said, it comes down to your screening process just like any other applicant. The government pays on time every month and the inspections aren't bad. And as long as the property owner takes good care of the property, there is nothing to worry about.
If you search BP for SEC 8 you will find hundreds of thousands of posts. The topic comes up ALOT. My poor fingers got tired of typing the same thing over and over, so I put my tips and tricks in a blog post. Here’s a link if you want to check it out.
@Jennifer Donley Thank you for that comment. I grew up in Section 8 housing and we were a great family...our landlord, no so much. Some people don't want to take care of their property so they shy away from Section 8... My mother did 8 years in that apartment. That was good, guaranteed money for a long time.