Section 8 out of state rentals

[Karim Elahi]

Hello, I’m trying to start my rental portfolio but I’m from NYC and house prices are quite here so scaling here without a good amount of cash in a short time would be difficult. However I’m considering out of state rentals, specially section 8 rentals. I have below questions I was hoping you folks can shed some light on it. 

1. Out of state section 8 rental, is it possible ? What difficulties can run into?
2. If you did complete this momentous accomplishment can you provide some guidance?
3. Ideally I want to do it in NYC, have you done any here? How’s your experience?

[Michael Smythe]

Be sure you understand all the pros and cons of S8 - it is NOT a miracle cure!

We speak with many investors that are under the FALSE impression that S8 pays more than "market" rent. 
---THINK about this logically: why would a government agency like HUD (controls S8) that had its budget cut by Trump, authorize paying higher than market rents using taxpayer money?

The reality is that S8 doesn't typically care where their tenants rent within their geographic territory allowed. So, a S8 tenant could use their voucher to rent a Class D property with lower than average rents for an area. Why would a S8 tenant rent a Class D property/neighborhood when their voucher could get them into a Class C property in a safer Class C neighborhood? Only if there's a housing shortage in the area or they are given some type of incentive.

You also should understand the risk of S8 vouchers that only cover part of the tenant's rent. A decent percentage of S8 tenants will fall behind on their portion of rent + utilities, forcing the landlord to accept they will only get partial rent or evict the S8 tenant.

Lastly, in our experience, a higher percentage of S8 tenants "live harder" in their homes than nonS8 tenants, thus causing more damages.

We manage over 100 S8 leases and don't have a problem working with S8 tenants, but we do have a better than average screening process ALL applicants (S8 & nonS8) must go through.