I am buying an eight unit complex. It only has three units rented, drastically under market I might add. Two of the tenants are section eight. All of the tenants have been there for 16+ years. All of the tenants take very good care of the place. 

My question is whether I have to allow new tenants to be section eight. I'm bound to these two contracts already in place, but don't necessarily want to have to do more unless I decide to down the road.

You can't legally deny someone because they are "section 8" prospects..you can, however, deny a tenant for other speculations, such as bad credit report, poor rental history etc..

I don't see why you wouldn't want to rent to section 8 prospects though? If you already have two tenants, that means your rental unit has been approved..your tenants are screened (since they have to be screen through the housing authority) and you get to promote your rental place for free? Most Section-8 friendly rentals get rented quicker than non..and it's just a little extra paper work for you, plus the random inspections..which scrutinise the tenant more than the landlord in my opinion..

@Aaron Davis

 My personal experience is that non section 8 tenants don't play well with section 8 tenants.

Frank

One of the simplest ways to avoid section 8 tenants is to look up your FMR (Fair Market Rent) and charge rent that is above it. If they cannot afford their portion of the rent, they cannot qualify. They usually know their own limit. For your sake, I hope you're getting an amazing deal on an empty 8-plex.

Thanks for the input. It is a really good deal and has plenty of potential for growth and I should have it cashflowing in a very short time.

@Aaron Davis

I'm sure you know your business better than we do, but the question is why is there only 3 of the 8 units currently occupied?  Is there something wrong w/ the owner or the property? I see too many times where investors treat bad properties like many women treat bad men.  They can "fix" them.

Good luck

BTW, I LOVE Section 8.  I know the rent is going to be paid and if they do something wrong, they loose their voucher which is more valuable to them than it is to anyone.

No you're not bound to accept new Sec 8 tenants, neither are you bound to keep the ones you have once their lease is up. Sec 8 is a voluntary program and you absolutely can refuse to accept it in all but a few states. Those states have "income source" as a protected class and as far as I know are only the west coast (CA, OR, WA) and the new england area (MA, CT, VT, NJ ect) 

@Uriel Sanchez  In most states you are not required to accept Sec 8, and as such if you choose not to you could deny processing an applicant that is using a voucher.

The property has had por management for quite a while now. The owner is out of town and he got burned by the third party (they took off with rent, records, etc.) he tried using as management. He's owned it since '76 and used to manage it himself when he lived here.

@Aaron Davis

I just put a bid in on a Section 8 property.  It is a 5 unit apartment but only 4 are currently Sec 8 Certified.  I have been told by the Sec 8 rep in my area that once a section 8 propertiy is purchased the new owner does not have to apply for section certification, thereby making it impossible for that new owner to accept section 8 funds.

Are you going to apply and keep the program for your complex?