Accept Section 8 Post Government Shutdown?

Question

So I have 2 Section 8 units in Georgia.  With the government shutdown, they didn't pay me the full amount in November. When the shut down ended, they did pay me the remaining amount but they haven't paid at all in December and don't know when they will get funding released.  My question is about a new vacancy I have.  My PM is pushing me to accept a new Section 8 tenant but I am reluctant because they probably won't pay me this month, I have to pay first months rent to my PM, and with the government being so unstable right now, I don't know if they will pay me soon or if the administration gets mad and just pulls it or something who knows?! Looking for a seasoned investors opinion on this as I am only  a year or so in. Thank you!

Jules Aton · Answer

I’m guessing this isn’t a class A or B neighborhood or you wouldn’t have been doing Section 8 to begin with so that is probably the best bet going forward despite govt hiccups?

Michele Fischer · Answer

You are getting some good advice.

I assume you are in an area where you can refuse Section 8 if you aren't interested.

I would guess that if Section 8 is de-funded, it would be gradual, and both voucher holders and landlords would get some warning and time to adjust.

You should get your contracted rent, but who knows when.  Which still feels like a better bet than maybe not getting rent from a non-section 8 tenant.

I would focus on diversifying.  Don't get too many of your properties in any one tenant type if you can legally and ethically try to spread your risk around.

Marc Winter · Answer

If the federal government pulls the plug on Section 8 funding completely, then missing rent will not be the biggest problem — think chaos in the streets!  Gobmints are loath to cut subsidies--elimination of this subsidy is unthinkable to those in office.

Maintain a larger-than-average reserve account to cover occasional payment delays.  Think in terms of 'delays', not defaults.

Remember to increase the rent on Section 8 leases every year.  In many areas, if the raise you propose is over what the administrators believe is the market rate, they normally negotiate with the landlord.

Good luck.

Stuart Udis · Answer

Depending on where your property is located you have to be careful because some states and municipalities on a more local level have adopted source of income discrimination legislation. As Jules noted, what would the tenant profile look like if you were to elect not to lease to someone with a Section 8 voucher? If there are no viable candidates you can get comfortable with, it’s probably worth examining the underlying real estate, because the property itself may be challenged. That may be fixable if the issue is simply that the property’s condition or specifications don’t meet tenant needs. Alternatively, if the location is such that there are no viable tenants you’d feel comfortable with regardless of the property’s physical characteristics, then you’re essentially limited to the strategy you’ve been using.

Arman Ahmed · Answer

@Michele Velazquez

With Section 8, the key is balancing guaranteed rent with cash flow risk. Many investors mitigate delays by keeping a buffer in reserves and mixing in market-rate tenants to avoid relying solely on government payments. The Midwest has a lot of opportunities here, with strong cash-flow properties and stable markets where Section 8 and market-rate tenants can both perform well, giving you more flexibility and security as you grow your portfolio.