Section 8 -- Incentives (rebates) to be good, clean tenants?

17 Replies

Hi guys,

I am thinking about purchasing a 4-unit, 1 BR/1BA building.  Two are Section 8 ready.  In order to decrease problems with the property, I am thinking about doing the following things:

1.  Only accepting those with 100% vouchers

2.  Offering a $50 per month gift if they promise to keep a clean place subject to random monthly inspections.  It would be more or less an honor system.

What do you all think?  Please, only respond if you have experience with Section 8.

Thanks,

Steven

Meh. Seems like a waste of $600. Your tenants should behave and be clean because you've screened them well and it is clear through your lease what your cleanliness standards are. If you were really concerned about your unit then you could pay your handyman to visit quarterly, check the air filters, look for leaks, etc. and it would still cost you less than $600 plus you'd have regular eyes on your unit.  A surprise or short notice visit to a promising applicant's current residence is also a great way to see how he lives.  

Are you only going to offer cleanliness incentives only to Section 8 participants or to all of your tenants?  

I'm not sure yet.  2 of the 4 units are Section 8 and the others are not.  This property is selling for $114k.  One is Section 8 and is bringing in $645 a month.  The other 3 are month to month and bringing in $575.  The total in rent is $2370.  Sounds like a good deal, right?

Well, I called a local property management firm and he seems to think that the property in that area will be running me in the red because of historically bad tenants in that area. 

To combat this, I'm thinking about renting all 4 units to Section 8 tenants who have 100% vouchers.  And then to combat potential maintenance issues, I would offer this incentive.

What do you think?

If the neighborhood is so bad you will only get subpar tenants and if you have to take money from the government to rebate to the tenants to get them to stay and treat the property right, then I'd probably advise you to pass on the property.

I appreciate your advice but the cash flow would support a rebate.  I'm trying to decide if it would work.  I'm trying to think outside the box to look for a way to make it work.

I would disagree with giving them an incentive. It sounds like you have a soft spot in your heart right now which I also had at first. The landlord business will toughen you up real quick. 

Respect your tenants and give them what is necessary, noting more nothing less. I too was thinking about doing rent discounts for on-time payments, gift cards, etc. You are already providing them with a place to live and they are paying practically nothing, that in itself is a gift.

If you haven't already, read The Section 8 Bible 1 & 2. The author sounds like an unreasonable jerk but after a little experience with section 8 I wish I had listened to the book from the start.

Soft hearts make for empty pockets. 

Thanks, Alan.

I love to hear straight-shooting straight talk.  I will check these books out and read them. 

Do you prefer Section 8 to non-Section 8?

@Alan B.  ..All units open to Sect 8 , but of course screen each applicant carefully..

Most of my Sect 8 pay a portion..it's not always 100%...Good luck!

Alan, I just bought the two volumes and look forward to reading them.  Thank you immensely.

I don't have any experience with non-section 8. My target market is specifically section 8 rentals. I come from some rough neighborhoods in Detroit and providing quality section 8 housing is my way of giving back.

I work in banking so I usually hate the 1st of the month but when you become a section 8 landlord you tend to love them.

I would worry that only renting to those folks with 100% funding through Section 8 might be a form of income discrimination. Obviously I'm not a lawyer, but I would have trouble making a cogent argument to tell a judge that you aren't willing to take low income people, but you're willing to take high, medium and no income people. Just a thought. 

As for suggestions of incentives, you can use some of the upgrade ideas in the Section 8 Bible as incentives for being good tenants, but I wouldn't make any formal agreement upfront about it. That seems like it would have huge potential to be misunderstood by a tenant who then gets super angry, goes to court, etc.  

Originally posted by @Bradley Bogdan :

I would worry that only renting to those folks with 100% funding through Section 8 might be a form of income discrimination. Obviously I'm not a lawyer, but I would have trouble making a cogent argument to tell a judge that you aren't willing to take low income people, but you're willing to take high, medium and no income people. Just a thought. 

Since when are you not allowed to screen based on income?

I can see why you would want to incentive them to keep your property up.  What will happen when your idea of clean is not on par with their idea? I think they will do just the opposite because of the "expectant entitlement" attitude and training. They will have already spent that gift card and will highly resent not getting it.

When I was a lender it was drilled into my head that you close the loan with making sure the borrower understood the terms and what was expected "train them".  Same thing with tenants.  Train them and kick them out if they do not do what is expected.

Good Luck

The problem with the incentive is that you would have to define your expectations very clearly; everyone has a different idea of clean.  Even my best tenants do not keep the interior and exterior to the level I would expect.  We've decided to add a housekeeping addendum and tell people that if we see issues during inspections that we will crack down on the addendum.  We are trying to avoid hoarders rather than people with different standards.  You will find that in low income properties people either aren't equipped to keep house or truly don't know they are ruining a unit.  Don't fight it, figure out how to deal with your biggest pet peeves (indoor furniture outdoors, for me) and let the rest slide.  I don't think surprise inspections are legal, we have to give 48 hour notice to enter.  Show your generosity with birthday and Christmas gift cards and leniency on rent when they are in a crisis and save the rebate fund for re-carpeting.

I have 15 section 8 tenants. Keep your money and put it in a clean up fund for when the tenants move. 

@Steven Fowler So you are going to pay people $50 each to live in your apartments?  Good deal for them.  When the people get used to getting the $50 per month and then they don't pass one of your inspections, what then?  

What if you decide you do not have the energy to do these inspections anymore?  Most class D landlords I know get burned out pretty quick.  Who is going to do the inspections?  Will you pay someone?

Point is that once you start just giving people $50 for being normal they will start expecting the money and depending on it.  That's a can of worms that will be tough to deal with.

Michael Noto, Real Estate Agent in CT (#RES.0799665)
860-384-7570

Hello,

My name Is Tamica and I was wondering do you have any 2 or 3 bedroom units available, I am currently employed at a medical office been at my job for 14 months now, I am a section 8 voucher holder, I do pay the majority of my rent due to my income, if you have something feel free to contact me. Thank you

I have 100ish SEC 8 leases and hate one bedroom units. At least in my market, a one bedroom voucher holder will qualify for our two bedroom rents.  Most one bedroom voucher holders tend to be elderly people who live alone. They like the second bedroom for sewing rooms, a place for grandkids to visit, etc. I do have a few one bedrooms, but they always take longer to rent, and it seems as tough our turnover is much higher, even with SEC 8 tenants in one bedrooms.  For some reason tenants who choose one bedrooms seem to have alot of drama. 

@Bradley Bogdan - Source of income is not a protected class.  It is totally legal to say you only want to rent to people with a voucher.  Likewise, in most states, it is perfectly legal to say you will not rent to someone with a voucher.  I understand that in some states it is not legal to deny a tenant solely on basis of paying rent with a voucher, but this has nothing to do with fair housing.  It is a local or state ordinance.