Would you rent to a section 8?
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Andrew FidlerBusiness Member
Real Estate Broker · Toledo, OH · Member since 2011 · 384 posts · 434 votes@Sam B. - I have close to 20 sect 8 houses in Toledo...and I only rent section 8.
(My specific niche is owning and renting in poorer neighborhoods, buying foreclosed 3 and 4 br houses for under $20k and renovating them to sect 8 standards. I don't want the common tenant because they can't and don't pay consistently. It's a gun-totin type of area but I'm quite comfortable there and the trouble has never made the mistake of bothering me.
I actually enjoy the sect 8 arrangement because the tenant is being threatened with loss of their voucher by not paying their portion. IF I have a tenant portion of the rent that is unpaid I serve a 3 day and cc their administrator within the program so they know we have had an issue. Typically the tenant runs to "mommy" with big alligator tears and find the money somehow. Water in toledo is actually the larger issue- it must remain in the owned name and with tenants being billed every third month means they never make a partial payment and ignore the $150 bill that comes every three months. THUS I get shut off notices pretty regularly for our houses and forward them to the tenants. Again, the tenants run to the non-profits in the area and cry about how their water is being shut off and they have kids and it magically gets paid.
Entitlement and poverty cycle and my own personal conservative politics aside- the niche needs to be served, the money spends, and any day that the niche changes is the day I will evolve my business model.)
@Jimmy S. - there is a detailed review once you sign that voucher so I suspect the 6 people in a 2 bedroom house will be stopped at that stage. If anything I have to stop 2 br vouchers being submitted for 4 bedroom houses. It sound like you have a damned nice house in a great area...unlike myself you need to consider sect 8 carefully. I like that the woman works, I would have been happy to rent to her...then again I can repair almost any amount of normal wear and tear for $2k in my houses.
Overall sect 8 is a great investment...tenants stay years and years and you have a 3rd party direct depositing to you and making BOTH the landlord and the tenant play by the rules. Still, plan on putting cash into the annual inspection and definitely plan on $20 for lightbulbs and smoke detector batteries. Sect 8 folks exist- they don't improve nor maintain very well. I have taken care of tenant-assigned repairs many times simply because I am fine laying out $50 to collect another $8,400 the next year in rent.
- I actually arranged for one of my guys to drive a tenant to their annual review because they were out of reschedules and I was mailed by sect 8 that they were being kicked off the program if they didn't make a specific meeting. Again- $20 out laid to keep a 3 yr tenant in place...$25,200 had already been paid to me, why not keep the ball in play!!!
All depends on how you want to own and manage, I am fine with a reasonable amount of hand holding...just part of the niche I'm in.
47 Replies
- Real Estate Agent · Southington, CT · Member since 2008 · 5k+ posts · 3k+ votes12yIn the past I have had a lot of trouble collecting the tenants portion of section 8 rent. To the point where if sec 8 doesn't cover 100% of the rent it is very tough for me to consider that tenant. The idea of 5 kids doesn't particularly peak my interest either but to be fair they could be 5 good kids. Who knows. Tough decision. I would probably pass because that's a lot of rent for her to come up with.
- What is non-section 8 demand like in your area?
- Is the Section 8 rent giving you a premium rent payment vs open market?
- Are you receiving a solid ROI @ 1050/mo? What if she stops paying her portion and you're only receiving 850/mo? Still good ROI?
- Neighborhood quality? School district quality?
It sounds like you're in a decent area so your options for non-section 8 tenants may be plentiful.
Five kids is a lot but it could mean reliable, reasonably stress free (steady) checks for a good while. I can't imagine a Mom with five kids would want to move often.
@Andrew Fidler What do you think?
- Savannah, GA · Member since 2014 · 100 posts · 38 votes12y
Yep, ideally it would be great if the tax payers paid for all her rent. I could see 5 kids wreaking havoc. Flushing toys down toilets, throwing things at each other, scissors through windows, etc. I just look back to all the stuff my 3 brothers and I wrecked at our own house. Just think about this... if they damage something, how will you charge someone who can't even pay all their own rent to get it fixed? I recommend passing on this one.
- Contractor · Round Rock, TX · Member since 2013 · 767 posts · 389 votes12y
Subsidized rent maybe, 5 kids never.
- Aurora, CO · Member since 2014 · 9 posts · 4 votes12y
No, section 8 people mess your stuff up weather they have kids or not
Originally posted by @Sam B.:
- What is non-section 8 demand like in your area?
- Is the Section 8 rent giving you a premium rent payment vs open market?
- Are you receiving a solid ROI @ 1050/mo? What if she stops paying her portion and you're only receiving 850/mo? Still good ROI?
- Neighborhood quality? School district quality?
It sounds like you're in a decent area so your options for non-section 8 tenants may be plentiful.
Five kids is a lot but it could mean reliable, reasonably stress free (steady) checks for a good while. I can't imagine a Mom with five kids would want to move often.
@Andrew Fidler What do you think?
The city I am in never really deals with section 8 to my knowledge because its very good and good quality of life. Yes if I only get $850 a month I still will make money, "assuming they don't destroy stuff which Im sure they will" school district are best in the state and neighborhood is very very good.
She does work and make $1800 a month but from what the HUD representative told me is that shes on a special program "like section 8" to improve her lifestyle. Get the kids in better school and get out of the ghetto. HUD also said if she does not take care of the property they will pull the voucher. I don't know what to think. I don't think the neighbors will like if I let them in, not to sound racist because im not.
Current tenant now had 3 months up front and good references and they destroyed alot of stuff which really gets me mad.
- Chicago, IL · Member since 2014 · 21 posts · 2 votes12y
I can say its a big risk on your property. Can be alot of damage. From my personal experience I had a section 8 tenant who gave me a hard time. Something about the mentality of some people whole have they rent paid for them. They tend to not care as much as someone who is busting their but to get rent paid. 5 kids is a bit of a stretch, but you will probably be helping her and her family to a better life. Better neighborhood, and schools. But at the end of the day this is Business and not personal.
- Investor · Willow Spring, NC · Member since 2009 · 5k+ posts · 3k+ votes12y
6 people. 1 adult, 5 children. 3 BR. You can't discriminate against familial status, but you may want to ask how 5 children can fit in 2 BR. I'm guessing that the size and arrangement of rooms will accommodate 2 children, not 3. I'd ask the HA what their rules are. Here's the gist of what I've seen elsewhere:
(b) An authority may not rent or lease housing to a tenant that consists of a greater number of rooms than the number the authority considers necessary to provide safe and sanitary housing to the proposed occupants without overcrowding.
I've seen standards like 70 sq.ft. for the first person, 50 sq.ft. for each additional person for occupancy standards. Can't recall where I saw those numbers. So, for example, a house with 10x10 bedrooms should just have one person. 12x12 is okay for two, etc.
Sidebar: I have two really great S-8 tenants. Keep the place clean and well maintained. Two, down from about 9(?) because of sequestration.
- Real Estate Investor · Clive, IA · Member since 2014 · 1 post · 0 votes12y
I do not do section 8 at all. My property manager advised against after years of experience with trouble. They do not have the invest in the property that someone paying full rent and deposit do.
As to damage, it goes with the territory. My worst damage, though, seems to go with people who are supplemented from an outside source. Even the hooker I had to evict left the place in good shape (except for the mark on the bedroom ceiling from her stripper pole). Worst one I have right now is one who is getting VA support.
The number of kids is a definite issue too. They probably will not be along-term tenant as the two BR's is going to become a very quick issue.
I would decline even if it does mean a longer time with vacancy. Use sense not just trying to fill an empty unit. The lost rent might well be the least expense.
- Investor · Chicago, IL · Member since 2012 · 111 posts · 73 votes12y
@Nate M.
@Chris Martin beat me to it. I would be very hesitant to have 1 adult and 5 kids in a 3 bed house. I would expect at the very least they would be getting a 4 bed voucher. I primarily deal with section 8. I don't have a problem with it. It is all about screening your tenants. If you do a good job during the screening process, you shouldn't have much trouble.
I think the bigger issue you need to deal with is 20% reduction in rent. That will cost $2400 a year. In the areas that I have section 8 tenants their rents are inline with what market rents are. I don't know that my business model would work as well if I had to drop rents over $200 per month.
- Real Estate Investor · Audubon, PA · Member since 2009 · 13k+ posts · 8k+ votes12y
Originally posted by @Chris Martin:
6 people. 1 adult, 5 children. 3 BR. You can't discriminate against familial status, but you may want to ask how 5 children can fit in 2 BR. I'm guessing that the size and arrangement of rooms will accommodate 2 children, not 3. ...
In all seriousness, the living room can be used for sleeping.
- 12yJ. MartinPro MemberRental Property Investor · Oakland, CA · Member since 2011 · 3k+ posts · 2k+ votes
I only have 1 Sec 8 tenant right now, but they pay their small share on time and take good care of the unit. Of course, she is only 1 tenant (maybe +1) in a 1+/1. She never calls me for anything. And is happy to be there. Pays all bills for the SFH.
So different situation. I'm sure this is not everyone's experience. But you can also give them several incentives and protect yourself:
Emphasize that you want to make an exception and accept them, unlike many other landlords would do, because you want to help them out, and believe in them, but also that this is your business - and you can't afford to have someone not hold up their side of the arrangement. Then you can:
1) Try to get as big a deposit as possible - emphasize that you want to give them back the whole thing if/when they move - but they need to take care of the place
2) They will lose their assistance if they damage the residence. Tell them you are happy to accept the payment assistance, but they need to hold up their end and will lose their payment assistance and the house if they don't maintain the condition.
3) That you are happy to let them enjoy the home for an extended period as long as they take care of the condition and pay rent on time. But, that you will have to follow through with eviction if they cannot do that, which will seriously restrict their ability to get a new rental, or live in a decent neighborhood.
4) Get a co-signer!! Most people have some relative, friend, etc. that can co-sign. Of course, a high credit score is good. But if they are someone who lives closeby, especially who owns their own home, I almost like that better.. It gives an exit strategy.. If the co-signer can't/doesn't want to pay, they can take the tenant into their own home to avoid tarnishing their record and the tenant's record. Tell them you want to help their relative/friend/whoever, but due to their circumstances, the tenant needs their support too..And when you say..
"I don't think the neighbors will like if I let them in, not to sound racist because im not."
If the neighbors wouldn't like them to move in because of their RACE - then maybe THEY SHOULD STOP BEING SO RACIST. And you don't have to worry about it, except for giving them the opportunity to meet someone who isn't as well off as them trying to make their life a little better for their children..
- Investor · El Dorado Hills, CA · Member since 2012 · 1k+ posts · 1k+ votes12yIt is unfortunate for the lady but it sounds like you will have much better options by waiting a month. There are always great tenants looking to rent in a good school district. Young affluent families that love being in the city center till their first kid hits preschool age and they start looking at the expense of private schools vs. moving to an area with great public schools. You will get flooded with great applicants shortly do I wouldn't reach for this situation. My heart says to help the lady out but my mind says to hold out for a better tenant.
- Investor · Willow Spring, NC · Member since 2009 · 5k+ posts · 3k+ votes12y
Originally posted by @Steve Babiak:
Originally posted by @Chris Martin:
6 people. 1 adult, 5 children. 3 BR. You can't discriminate against familial status, but you may want to ask how 5 children can fit in 2 BR. I'm guessing that the size and arrangement of rooms will accommodate 2 children, not 3. ...
In all seriousness, the living room can be used for sleeping.
I think this can be true. I believe the LR needs a door that shuts the LR off, there must be a closet (coat closet will technically be sufficient) and an egress window/door, which all LR should have. If the LR opens to another room without a door, you could add one. Personally, I wouldn't do this... but to pass S-8 inspection, and HA overcrowding rules (if they apply for your HA), the LR might be an option.
- 12yJ. MartinPro MemberRental Property Investor · Oakland, CA · Member since 2011 · 3k+ posts · 2k+ votes
@Steve Babiak and @Jimmy S. ,
My mother grew up sharing the bottom of a bunkbed (yes 4 kids in one bunkbed - 2 shared by girls on bottom - 2 shared by boys on top). I don't know until what age..
I also have a lot of tenants in lower-income areas like Rich mond CA and Oakland, and they are just working-class folks who want a clean, nice place to live with no leaks, preferably where they can be proud to bring their friends or family over. If you lay down what you're willing to offer, what their responsibilities and expectations are, and treat people kindly and fairly, but firmly - I think you can be successful in a lot of different tenant situations..
But mitigate that risk with all the things I mentioned above. You'd be surprised what co-signers and deposits people can come up with sometimes when its meaningful for this change in their life.. You'll have to make the decision yourself, but just my 2 cents..
- Investor · Vancouver, WA · Member since 2013 · 3k+ posts · 4k+ votes12y
Yes.... we rent to Section 8 tenants, but they must meet our minimum criteria to rent, just as anyone else. Our units will generate the same income regardless if the rent is being paid in full by S-8, partially by S-8, or in full by the tenant. Our units will sustain damages or not depending on the quality of tenant we select, the terms of our rental agreement, how well the tenant understands the terms, how often we inspect and how swiftly we enforce the terms of our rental agreement if the tenant does not abide by the rules.
Our longest term S-8 tenant has rented the same apartment since June 1988. The unit rents for the same amount as other units. The tenant pays her portion of rent on time and takes good care of the place. She is also a good, kind person and raised her child in the same apartment from infancy to adulthood.
When I think about your situation, I would be concerned about the size of the unit with that many people. A 1500 sq ft house... that's small, but sufficient for some families. Bathrooms? 1BA I would guess; correct me if I'm wrong. Bedrooms: 3BR... Common scenario: adults in one BR, girl children in one BR and boy children in one BR. Infants often sleep in the same room as parents until they grow older. Age of the children matter in how the house is used and where they sleep, but can't be a factor in tenant selection. Yard and play areas... fenced? close to a busy road? If the property is well designed for this type of family make-up, then the chances of the tenant staying long term is good. Long tenancies can be the most profitable.
In any case. You will want to have a sufficient security deposit and charge for damages as you go, don't wait for move out to do this. Even those on a tight budget can usually handle paying for damages along the way and are motivated to do so in order to stay in the property. Harden your property to reduce the potential for damage. Be aware that children naturally make noise, so have in place guidelines the family must follow to maintain the neighbors' peaceful enjoyment of their homes.
You have the opportunity to meet a real need for a family in your community. The family will have some community supports to help them along. Establish a good relationship with their S-8 case manager. The children will have a safe place to live and access to a good education. The quality of your rental agreement and your attention to good landlording will be a factor in this family's education and future success. Landlords have an important role.
- Real Estate Agent · Virginia Beach, VA · Member since 2012 · 2k+ posts · 1k+ votes12y
Some issues I've found with Section 8 versus hand-picking well-qualified tenants:
most annoying one, although not major, is they don't have much if any expendable income so they will never buy a can of ant spray or Resolve or mulch the yard or any other maintenance that requires any additional small expense, at least in my experience, so prepare to do it all, filters, light bulbs, etc.
If Section 8 stops paying rent, it seems they just stop paying their portion and you still need to get the tenant out.
When govt shut down, we were informed that Oct rent portions were paid but if it continued, we would not receive Nov. Didn't happen, but gave me serious pause about Section 8.
If something minor goes wrong at the annual inspection, it is a huge deal where they threaten to stop paying rent, even if it does not effect habitability. For instance, they failed me once for tenant running cable wires through the house to have additional TVs, and it was a trip hazard. They said tenant must correct problem within 28 days or they stop payments. If tenant didn't comply, I'd be out the rent. Tenant blocked window with a shelf, so I could be denied rent.
So too many things out of my control that can affect my bottom line. I have one Section 8 tenant (handicapped child I don't want to force to move), but when they are done, never again.
- Investor · Fort Washington, MD · Member since 2014 · 1k+ posts · 1k+ votes12y
I've done section 8 often. It has it's ups and downs. However, if you have zero experience in dealing with this, it can be quite shocking/devastating for you. This does not sound like a good candidate but you never know. The key to section 8 is extensive screening and understand how to control the situation.
- Investor · Portland, OR · Member since 2011 · 132 posts · 41 votes12y
I totally agree with @J. Martin s comments.
- Clinton, MD · Member since 2014 · 13 posts · 4 votes12yDid that it was the worst! One adult and I handicapped child! The adult wrecked my condo! It cost too much repairs.. And had trouble collecting her portion! Thumbs down! The City is always on tenants side, it took 6 months to get them out!! Nate' S. WASH. DC
- Investor · Willow Spring, NC · Member since 2009 · 5k+ posts · 3k+ votes12y
Per my earlier comment: "I've seen standards like 70 sq.ft. for the first person, 50 sq.ft. for each additional person for occupancy standards. Can't recall where I saw those numbers...."
You can look up municipal requirements at then under Code Library, select your state, then your city/municipality. For a city in my area:
In every dwelling unit and in every rooming unit, every room occupied for sleeping purposes by one occupant shall contain at least 70 square feet of floor area; and every room occupied for sleeping purposes by more than one occupant shall contain at least 50 square feet of floor area for each occupant 12 years of age and over and at least 35 square feet of floor area for each occupant under 12 years of age.
No way.
I would never do section 8.
I wouldn't want to have to deal with section 8 rules and non-sense if I didn't have to. I would rather rent to hard-working responsible people who have something to lose and won't be as likely to trash my place.
The tenant pool has less to lose, in general-- less wages to garnish and often weaker credit/rental histories. The mentality of some section 8 tenants is just a disgrace too-- do nothing, let everyone else pay, cause problems. Obviously some section 8 rentals are by sweet old ladies who take good care of their place and are polite and clean, but I've also seen inner-city section 8 where that's not the case.
Also, what's your maximum occupancy per bedroom? Some cities let you limit the total number of people per bedroom-- fire hazards, etc. I doubt 6 people in 3 bedrooms is over occupancy in most cities, but you could check. I wouldn't, for example, let 10 people live in a 3 bedroom house-- my city lets me limit it like this. Regardless, I wouldn't rent to section 8 anyway. No way. Not unless my property was a "lower income property" in the ghetto or low-class area.
Originally posted by @Gino Gynero:
I can say its a big risk on your property. Can be alot of damage. From my personal experience I had a section 8 tenant who gave me a hard time. Something about the mentality of some people whole have they rent paid for them. They tend to not care as much as someone who is busting their but to get rent paid. 5 kids is a bit of a stretch, but you will probably be helping her and her family to a better life. Better neighborhood, and schools. But at the end of the day this is Business and not personal.I've seen that mentality too, unfortunately. It's that sort of "entitlement mentality" and outright laziness and lack of personal responsibility that gives welfare entitlement programs like section 8 a bad name. There are some hard-working people temporarily getting section 8 as a hand-up, not hand-out. Unfortunately that seems to be the minority of the recipients that I've seen in my area. Too much of an entitlement attitude in my area-- why work and have a job if society will pay your rent/food/etc.?
We inherited two section 8 tenants in a building we purchased. They are both older, retired women and we have never had any issues. We have to have the city housing authority inspect the units annually (no cost to us). Aside from that, I can't think of any issues. I think 5 kids is a bigger issue, section 8 or no section 8. We are not seeking out section 8 but I would take a little old lady with guaranteed rent over a lot of other tenants.
- Investor · San Francisco, CA · Member since 2008 · 83 posts · 50 votes12y
@Jimmy S. I have rented to section 8 ... we commanded higher rents, which was the upside, but my property manager did a LOT OF WORK to collect the tenant portion, which, in some cases, was as little as $50. For this reason, I don't rent to section 8 on the properties I manage personally ... Don't have the time to chase people down. While this may not be everyone's experience with S8, it was mine.
That said, I just listened to an podcast on section 8 which helped me look at S8 in a different light:
http://www.kevinbupp.com/ep-21-section-8-rentals-a...
As a disclaimer, I don't know Kevin Bupp beyond listening to a few of his podcasts. Like me, he focuses on commercial (but this episode is SFH focused). Overall, I think he does a good job carrying the conversation ... I'd recommend his podcast as a good complement to the BP podcasts.
Hope this helps.
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