Rental Property Investor · Member since 2022 · 9 posts · 2 votes
Hi All,
I'm in the process of buying a multifamily that has an existing section 8 tenant in place. The unit she lives in is a 3 bed, 2 bath. She has been living there for 21 years paying $1200/month for that ENTIRE time. She has never seen a rent increase in 21 years. Why, I do not know.
Question: The HUD payment schedule for my area says a 3 bed runs (up to?) $2625 per month. At the end of this tenant's current lease can I raise the rent to $2600/month?
You'll have to check with the city that issued the voucher. The policy here in MO, is to get a letter with the tenants signature of approval (that they agree and want to stay with the proposed rent increase) that needs to be submitted to the housing authority, 60 days prior to the lease expiring. They approve or deny your request, if it's market rate, you should get approved. If the tenant doesn't agree, you can try and give a 60 day notice to vacate, but that also must be submitted to the housing authority. It's helpful if you know the tenants case worker.
You can make it easy on yourself and give her a notice to vacate and give her plenty of time to do it like 60 days or so, and just find a new section 8 renter for Market rent.
On the other hand you can start immediately for the rent increase with section 8, explaining that you just purchase the property and that the former landlord didn't keep up with market rents, and in order for you to maintain the property you need it at Market at a minimum. You might have to sign a new lease with the current tenant. So then it's down to deciding if she takes care of the property well enough that you want to leave her there or if you want to remove her, do some rehab, and put a new tenant in at a higher price
$1200/mo 20 years ago? Is this a million dollar property? The average rent 2.0 years ago was probably $300/mo? MAYEB $500? Can you imagine a section 8 voucher 20years ago for $1200/mo? Seems more likely section 8 just kept paying their approved rate every year a little higher. Otherwise simply look up the section 8 rate for a 3 bed 2 bath in your area which must be over $4800/mo now at 7% inflation rate from $1200 over 20 years.
Thanks for the responses! (this was my first post on Bigger Pockets).
So it sounds like it's very possible to raise the rent on a section 8 tenant at the end of the lease, but both the housing authority and the tenant need to agree on the new rent. Otherwise, it's up to the tenant to find a new property to rent if they disagree with the rent increase.
Any issues with Section 8 renters and asking them to vacate? Do they get any special protections beyond just standard/formal notice?