Pros and cons of section 8 tenants: Chicago

19 Replies

Hi Everyone,

I just listed my vacant unit on Zillow and it’s my first time screening tenants. So far 80% of the people who have inquired are section 8 and ask if I accept vouchers. I did some light research and I know there is an inspection you need to pass. I like how you get paid on time every month from the voucher but what are your general thoughts on renting to section 8 tenants ? I’ve heard some take better care of the unit because they don’t want to lose the voucher if there are issues but have also heard the opposite. That because they are receiving a subsidy that they take worse care of the property. Thanks!

Pro's 

 check is good every month

On time for one year or more

Tenant gets kicked off if they mess up

State will take care of unit if tenant doesn't

Con's

Will get taxed on every rent  1099.

tenants are not the easiest to work with,

It may offend you how easy the tenants life is because

of all the assistance they get.

@Michael Johnson technically you don't have an option to not take section 8. Even a lot of tenants don't seem to be aware that in Cook County housing providers cannot turn down an applicant due to them being on section 8. With that being said, there are pros and cons to everything and there are a lot of decent folks on these programs. You have to really be set up to do section 8 from an administrative stand point which I think is one of the main problems most mom and pop owners run into. There is a LOT of paperwork, plus you have the annual inspection to deal with. 

The biggest con I have seen though, is that people can lose their voucher or they can lose a percentage of their voucher. Most tenants on the program pay a percentage of their rents and if their income goes higher or their circumstances change then you can be left with a tenant who doesn't have an easy time paying. 

You should connect with some of the folks on here who do section 8 a lot like @Mark Ainley

@Michael Johnson This is a good question and you do open yourself to a wide variety of opinions here.  CHA (Chicago housing Authority) is tough in itself to do business with.  I will DM you a recent round table that we did that takes you through alot of the ins and outs as it pertains to being a section 8 landlord in Chicago.  A lot of the answer to your question lies in being able to understand and maneuver the program to be most effective.

@John Warren Thank you for your response. I also heard that the inspection (and possible 1-2 RE-inspections can really drag out this process too). I never thought about the section 8 tenant losing their voucher due to higher income and how that will affect their ability to pay. I need to a do a deeper dive of how their voucher $ amount is calculated to better understand this.

@Mark Ainley I will definitely listen to the round table!

I have section 8 tenants that occupy two apartments in one of my buildings, and I find they are some of my best tenants. Not only is CHA paying above market rents, but as others have said the direct deposit arrives 1st of the month, every month, no hassle. The inspection process can be a bit of a nuisance, but as long as you know what to expect going into it, it's not bad. And once you know what the inspectors are looking for, it's easy to get the units prepped to minimize what gets flagged. Gotta also give a shoutout to @Mark Ainley for the his podcast episode 53 on the roundtable discussion. Definitely give it a listen, it provides a ton of value.

@Russell W. Thanks for the response! How do they pay above market rent? Do you just list a higher rent when you post it on a listing platform? Also, how long does the inspection process take in your experience? Love the reliable income paid by the CHA. Would you mind sharing some of the things you've found the inspectors are looking for? 

@Michael Johnson There is A LOT of paperwork involved in getting the unit accepted for a CHA voucher (in fact this is one of the downsides that hasn't been mentioned, but one small error in the paperwork jeopardizes the timeline for getting a tenant to move in) but one area you have to fill in is the "requested rent amount". I always swing for the fences when I fill that in, knowing that even if I fall short it will still (very likely) be approved at a market rate. Oddly enough, they have approved my big ask each time I've brought in a new tenant or requested a rent increase for an existing tenant. 

I can't speak to how long getting the building approved by CHA takes, as mine was already approved when I had purchased it, but the individual unit inspection typically takes less than an hour. Depending on whether or not you pass, the follow up inspection might be a week later depending on how busy their inspectors are. On my most recent inspection I was failed for not having the unit number on the entry door in the common stairwell... yes, they will fail you for something that simple. Now, if I had a #2 sticker laying around I could have slapped it on the door right then and there and they would have been fine with it, but it was a lesson learned for me. Other simple things include grounding/reversed polarity of outlets (you can buy an outlet tester at Home Depot for $5), using foil-faced tape at furnace & water heater flue pipe connections, operable smoke/CO detectors, cracked/chipping/peeling paint if your applicant has children under the age of 6 (I think?), among others. It really just depends on how the inspector is feeling that day, and how many more inspections they have scheduled the rest of the day.

@Michael Johnson - I think like others pointed out above, you just have to be prepared for the extra work and figure out if the higher rent is worth the extra paperwork and inspections.  If you get a system/team in place you'll be fine, I'd just say make sure you are clear on your strategy and stay tight on your tenant screening criteria.

Which neighborhood is the property in?

Hey @Michael Johnson !

I am just finishing up a rehab for my first property up in Roger's Park! We should definitely connect.

I agree with @A Morgan . Joe Asamoah is such an amazingly informative person when it comes to Section 8 rental investing. He appears on the BiggerPockets podcast show 356. 

One of the many cool tidbits that I learned from that episode is that you can check the rental payment amounts by zip code on the HUD User website https://www.huduser.gov/portal...

Here is the list for rent amounts by zip code for Cook County: https://www.huduser.gov/portal...

Here's the rent payments for the two Roger's Park zip codes:

                         Efficiency           1-bed                  2-bed                 3-bed                 4-bed

60626          $1,060                 $1,200             $1,390                    $1,770                $2,100
60645         $1,000                $1,130               $1,310                $1,660                  $1,980

I look forward to hearing about your progress moving forward!

Best,

Tom Casey | Real Estate Agent

East Lincoln Park & Gold Coast Office

@properties

FYI -I once had a room in a small apartment that was 7 foot by 7 foot.  And they did approve it for a bedroom.

The Section 8 inspector told me that the small room qualified for a bedroom.

I know someone that can put divider walls in big bedrooms fast!!!

LOL!

@David Avery You sly dog, you. Sounds like a win! 

@Tom Casey Thanks for the information. It looks like I'd be maxed out at $1980 for my 4 bedroom. Lets connect, I'd like to learn more about your rehab experience. I intend to update my units over time so it would be great to see how your building turned out! 

Originally posted by @Michael Johnson :

Hi Everyone,

I just listed my vacant unit on Zillow and it’s my first time screening tenants. So far 80% of the people who have inquired are section 8 and ask if I accept vouchers. I did some light research and I know there is an inspection you need to pass. I like how you get paid on time every month from the voucher but what are your general thoughts on renting to section 8 tenants ? I’ve heard some take better care of the unit because they don’t want to lose the voucher if there are issues but have also heard the opposite. That because they are receiving a subsidy that they take worse care of the property. Thanks! 

Here are my thoughts on renting to section 8 tenants- If someone calls and asks if we accept section 8 our response is "You must meet our minimum leasing requirements including income, credit ..."   You'll note my response does not address if we accept section 8. When we advertise for tenants our ad says we accept section 8, but the ad also includes our minimum leasing requirements.  So why do we take this approach- We can't by law in Cook County turn someone down who has a voucher. So we make it clear in writing what our minimum requirements are with or without a voucher. 

Pros of Section 8

  • We have found Section 8 tenants that meet our minimum leasing requirements which are 650 credit & 3 times the rent in income. We've even had Section 8 tenants w/ 700+ credit scores- The checks keep rolling in
  • If a property is in a mobility area Section 8 will pay 13 months rent on a 12-month lease
  • We don't have to reduce our standards to accept a tenant that uses a voucher
  • Not a fan of this for social reasons but because we don't reduce our standards there are many good tenants who stay in the program for a long time and the checks keep rolling in

Cons of Section 8

  1. Section 8 administration is an example of how not to run a business. Unprofessional, slow, condescending. 

  2. Inspections- It's a Pro & A Con- The Pro is it's a good thing to have your building meet the minimum standards. The Con goes back to Section 8 administration is slow. We will not take a unit out of commission not producing cash because we're waiting on Section 8 to complete an inspection.  We put a provision in our agreements that the lease is void if inspections aren't completed by a certain date. 

@Crystal Smith Great information, thank you! I've heard it can take from 30-60 days, depending how many times you fail the inspection, to go from the application to the tenant moving in. To your point, that is all lost income and not to mention you need to pay for any inspection past the 1st one (no clue how much section 8 inspections cost opposed to a normal inspection). I am in a mobility area, so that does help. 

I am showing my place today and Friday. If there are numerous section 8 tenants interested still, I'll have them fill out the application once I confirm they meet the minimum requirements. Do you set the inspection up after you choose a section 8 tenant or do you proactively do it? 

Thanks again for all your great advice/tips!

Originally posted by @Michael Johnson :

@Crystal Smith Great information, thank you! I've heard it can take from 30-60 days, depending how many times you fail the inspection, to go from the application to the tenant moving in. To your point, that is all lost income and not to mention you need to pay for any inspection past the 1st one (no clue how much section 8 inspections cost opposed to a normal inspection). I am in a mobility area, so that does help. 

I am showing my place today and Friday. If there are numerous section 8 tenants interested still, I'll have them fill out the application once I confirm they meet the minimum requirements. Do you set the inspection up after you choose a section 8 tenant or do you proactively do it? 

Thanks again for all your great advice/tips!

We don't have tenants fill out applications until they complete an online pre-screen questionnaire. It looks like an application but it's not & there's no cost to the potential tenant. I recommend you proactively contact Section 8 to have your property inspected so time's not lost if you accept a Section 8 applicant.

 

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