Renting to Section 8 Tenants in Las Vegas
Lake Elsinore, CA · Member since 2014 · 26 posts · 16 votes
My property manager advised me to consider renting to Section 8 tenants. This is my first property in Las Vegas and I am still learning the peculiarities of this market, being an out of state investor.
I have heard mixed feedback about renting to Section 8 tenants. So I welcome insightful and constructive feedback from my fellow BP'ers. For example, what are some of the proven Dos and Donts when renting to a Section 8 tenant?
Thanks,
Donovan
I totally disagree with the provided advice.
We don't rent section 8 because of the games the inspectors play. I will provide one example: Annual HUD inspection was completed and a list of repair items was required. We sent the handyman over to complete the repairs within 72 hours. Tenant caused every single repair item. Tenant denied access and rescheduled. At reschedule date no one was home. It was rescheduled again and he was able to complete 95% of the items. He scheduled a return after a HomeDepot run and no one was home. Finally he got in and fixed the remaining items as time ran out for reinspection. The inspector came back to reinspect and failed the unit over a cracked switch plate cover in the bathroom. The penalty was a $497.00 rental abatement. For a $0.25 item. The owner had spent about $575 to meet the repair list.
There is absolutely no reason in this market to subject yourself to the hassles and propensity for property damage. If you get a higher rental rate, it's usually offset by the cost of returning the property back to habitat condition. There are plenty of qualified tenants for any property type in Vegas right now.
Best wishes.
Hi Donovan, I'm a newbie as well from Southern California (and looking at vegas too). I recently finished "Make More Money Investing In Multi Units" by Gregory D. Ware which I think is pretty good (high level but still has some insightful stuff). It was unexpectedly about working with a section 8 tenant base, which peaked my curiosity on the topic - you might want to give it a read. So I also brought up section 8 in the last LA BP meet up, as well as to a few other experienced investors, and for those who do rent to Section 8, they say the key is to really screen your tenants. Be a little more proactive in that aspect, don't just leave it to your property manager. It sounds basic, but that is the one key piece of advice I keep getting over and over. Hope this helps! -Michelle
Hi Donovan, I'm a newbie as well from Southern California (and looking at vegas too). I recently finished "Make More Money Investing In Multi Units" by Gregory D. Ware which I think is pretty good (high level but still has some insightful stuff). It was unexpectedly about working with a section 8 tenant base, which peaked my curiosity on the topic - you might want to give it a read. So I also brought up section 8 in the last LA BP meet up, as well as to a few other experienced investors, and for those who do rent to Section 8, they say the key is to really screen your tenants. Be a little more proactive in that aspect, don't just leave it to your property manager. It sounds basic, but that is the one key piece of advice I keep getting over and over. Hope this helps! -Michelle
Hi Michelle - Thanks for the great bits of information. I will definitely add Gregory D. Ware's book to my Kindle bookshelf. My PM said the money is guaranteed, but I stipulated that the background check had to be favorable, but not necessarily impeccable. So I do plan on doing my due diligence on each prospective tenant, especially since I live out of state.
The only unsolicited advise I would give you as an out of state investor is to make sure that you build a trusted team of people (contractor/handyman, RE agent, PM, etc.) that will relentlessly advocate on your behalf.
Good luck with your investment foray into the Vegas market.
Donovan
Thanks @Donovan Plummer! Also, I made a typo the author's last name is Warr (thanks, autocorrect!).
Completely agreed about needing a strong team - honing in on markets currently, but as I will definitely have to go out of state, a great team is paramount. Thanks and good luck to you, keep us posted!
I totally disagree with the provided advice.
We don't rent section 8 because of the games the inspectors play. I will provide one example: Annual HUD inspection was completed and a list of repair items was required. We sent the handyman over to complete the repairs within 72 hours. Tenant caused every single repair item. Tenant denied access and rescheduled. At reschedule date no one was home. It was rescheduled again and he was able to complete 95% of the items. He scheduled a return after a HomeDepot run and no one was home. Finally he got in and fixed the remaining items as time ran out for reinspection. The inspector came back to reinspect and failed the unit over a cracked switch plate cover in the bathroom. The penalty was a $497.00 rental abatement. For a $0.25 item. The owner had spent about $575 to meet the repair list.
There is absolutely no reason in this market to subject yourself to the hassles and propensity for property damage. If you get a higher rental rate, it's usually offset by the cost of returning the property back to habitat condition. There are plenty of qualified tenants for any property type in Vegas right now.
Best wishes.
I totally agree with @Tiger M.. The rental market is hot right now. The only reason to consider Section 8 would be a crappy property. If you have a decent property in a decent location, there is no reason not to get the best tenants.
Thanks guys I really appreciate the constructive feedback. The property is a B/C class property. So I expect to get a decent tenant. There has been a lot of interest, even though my PM only started advertising late last week. I have already told him to pass on section 8 properties for now. Tiger's anecdote about the HUD inspection fiasco really killed any idea I had about renting to section 8. As a new investor, the last thing I want is to deal with the bureaucracy of another government agency.
Donovan: )
@Donovan Plummer Just price it right. Make it clean. Renters will come.
I grew up in section 8 housing and from my experiences, I can tell you that even though its for-sure money, and the government pays for most (if not all) of the rent, it also means that it will be a more manage-intensive property. It's in human nature to not care as much for something that they pay little on as opposed to an expensive rental space. I can't tell you how often the neighbor complained about property issues. However, you can tell a lot from potential renters when you meet them and bring them over to see the property. Get a feel for them, see how they park, where they park (if on your curb or respectfully across the street), etiquette, mannerism, the way they speak, how behaved their children are (This is a big one, often a reflection of their parents behavior), you can also see their credit which is a big factor, look at the way they address you. Usually you'll get a good gut instinct when section 8 tenants. Some can be really nice and some can get pretty high maintenance and always remember to uphold your fair housing obligations.
Happy investing!
Section 8 rent is guaranteed, although most landlords do not take it. Your PM is lazy and cannot get a market based tenant. He/she wants to get a fast commission.
Accept a Section 8 tenant, only if they have a 650 credit score or better, the same as you would in a market based tenant. That score is about average for a renter.
I would not toally discount @Michelle Watt's advice. While it may not be the best decision for you in the Las Vegas area, you never know what the future may bring and where your next property may be located.
You may find yourself with a property in an area that would be more suitable for section 8. Your initial question was not whether or not to rent to section 8 in Las Vegas. Your question was - what are some of the does and don'ts of Section 8. She did help to answer that.
With that being said, I would also suggest that you calculate the rent so that the tenants have to pay a portion of the rent so they have some "skin in the game". In some states, it is difficult to evict tenants and failure to pay rent may be the only way to do so. Give yourself a leg up, if it should come to an eviction.....just saying.
Missy
@Missy H.- thanks for bringing this to my attention, I hadn't been keeping track of this thread! And you are spot on with explaining where I was coming from. Thank you!
@Tiger M. and @Phillip Dwyer - perhaps I should've been more clear, I wasn't speaking about dealing with Section 8 in Vegas in particular, just Section 8 in general since he asked. Will leave the market expertise to you guys, was just relaying the advice of some experienced investors I know who have had success with Section 8. Completely for general discussion.
Hope that clears it up, thanks guys!
@Donovan Plummer I disagree with a lot of what some of the others are saying negatively about Section 8 tenants. I have Section 8 and Non Section 8 tenants in properties not in the hood. Some people act as if Non Section 8 tenants will never skip out, never tear up your property, never be late on rent, etc. We all know that is not true. You should be screening both tenants types with a high level of scrutiny. Yes, you will have to look deeper into the details on your Section 8 tenant because their profile will likely be different. For one, their credit is usually not great. You have to dig into why it is not great. One of my Section 8 tenants had bad credit. We (I directed my PM) looked into it deeper. The issues were from a couple of years ago. She had some medical issues. When things get tight, medical bills are usually the last to get paid. The car note was paid on time and the rent was paid on time (per both previous landlords). In addition to getting input from the landlords on how they maintained the respective properties, we also checked out the home they were living in to see the conditions. Income (with voucher), employment, background investigation, landlord references, etc. all checked out so we were good to go. Tenant is currently going into year 3 with no signs of moving. We are usually in the house twice a year plus Section 8 does an inspection. There inspection is nothing to be afraid of. I just had one, minor repair stuff I could foresee. The bureaucracy stuff is really overblown too once you get them on-boarded
Don't let them have lawn care responsibilities, ha ha ha ha. As part of the lease agreement, get it done and bill them back for it. Get in your property a couple of times a year and see what is going on. Call it a maintenance inspection or whatever. Be firm but fair, follow fair housing regs, treat them like the human beings they are. Interesting, you see these are all things that should apply to Non Section 8 tenants.
Sounds like a rough time for you, but I feel like I could add something here:
The leases you have tenants sign (regardless of property class) need to have 24 hr notice entry. There's no reason that a handyman would have to leave the property because the tenant isn't there. That's a lease issue, not a tenant or HCV issue. And by that I mean you start the clock when you call the tenant, and you keep a record of call times, with notes or screenshots if you need to do so. HCV tenants have an amazing ability to change their numbers all the time ... and the burden to provide that number to you is on them.
Also, I feel like you need to be more clear about what rent abatement means. Generally speaking, it means that the payment is delayed, not permanently withheld. The owner got the $497 later than he expected it, not never. I've had all sorts of wild issues, but I've never lost a penny of any money that was abated.
Also, if the cracked switch plate wasn't on the original failure list, they can't fail you for it after the fact. You need to keep a tighter leash on your inspectors. It almost sounds like you didn't have representation at the inspection, you just let HUD send their guy over to run wild in the unit.
Lastly, if the tenant does $500 worth of damage to the unit in a year and you have no means or basis for eviction, you again need to revisit your lease.
HCV tenants are hard to deal with, and HUD inspectors and counselors are hard to deal with, but good systems and good process make quick work of these issues, which happen every 12 months on a schedule that you are aware of and know in advance.
Having said all that, I would not put a HCV tenant in a B/C unit. I think if your rent is such that an HCV tenant can afford to live there, it's not B/C ... so if it is B/C, tell you property manager to get someone in there, or to hit the road.
I rent nearly exclusively to HCV recipients, and I can tell you plainly, I do everything I can to make their units as D+/C- as possible, but they are D units in D neighborhoods. I'm in each of my units once a month at minimum and they know when they sign a lease with me that I know what tenant-caused damage looks like, and they'll be responsible for the repair bill when they break something ... window, door, toilet, faucet, switch plate, whatever.
@Jeremy Pace All your advice is spot on and I agree with you. Your obviously versed with the system and are doing a great job. I am happy to hear there are some folks that are having a positive experience.
Its not a lease issue for entry, it's a Nevada Revised Statutes issue. They require an official posting of a 24 hour entry notice, so the handy man that has a scheduled appointment and a no show from the tenant then does have to leave and cannot enter unless its on fire or waters coming out from under the door. We are unable to call and leave a message to start entry notice as you stated in NV. Must be nice being able to in PA.
The rent abatement was not paid, ever, even after repair. It was past the 30 days. The inspections were only completed with a representative present. The handyman did in fact miss the switch plate cover and he should have replaced it. The point is the how the inspector handled it. He was promised the repair would be completed asap but was refused any concession.
This is another non lease issue. The basis for a constructive eviction in NV over property condition is subject to an opinion of a person in a black robe on a bench. Some Judges don't care what the law states or whats in the lease or how many time stamped photos you present, they do what they want in Justice court. Its their court. The chances are this would have been deemed, ordinary wear and tear and denied a eviction. It is a sad fact of the NV justice system. We have some really great judges that follow the law and lease and some that just won't. I could share war stories about legitimate move out charges waived by Judges that would fill a book, but I'll spare you.
You mentioned,"HCV tenants are hard to deal with, and HUD inspectors and counselors are hard to deal with". Why go through the trouble if you don't have to? Life too short.
Our clients make the ultimately make decision on their properties anyway. I just read the post to Donovan above. The difference may simply be that we don't handle C & D properties any more. Thank God. Its nice not having mace at the reception desk. Still haven't found a way to screen for bad personality either.
Peace
Trivia Question: does that handyman still work for you?
I've had to resort to recording interactions with most inspectors and counselors. On more than one occasion I've been told outright lies =( I also routinely send inspectors emails with super high resolution photos of repairs that are complete, to make sure there's a trail of breadcrumbs to follow later if I have an issue.
One more question about Nevada Revised Statutes.
Scenario ...
Day 1: Noon - Go to property, post notice
Day 2: Go to property, tenant is not there, has to leave
When can he come back? Or does he just keep repeating the cycle ad infinitum?
To address this type of issue in the future, could you possibly impose a fine when the tenant makes no contact and does not have substantive proof of absence?
@Jeremy Pace LOL, actually he does still do work for us, he is an independent. There is a system of learning called trial by fire. He is much wiser and learned a great deal through this. it was the smallest mistake one could make in life. I read an article this morning that said most of us commit 4 felonies per day due to the judicial burden. Wasn't the end of the world.
Tenants are charged per the lease for no shows. If they refuse to pay, back to the judge issues from the previous post.
We don't really have no show issues. If we needed in and we have a tenant with known issues, we post, wait 24 and enter. We weren't tipped off this was going to be an access issue. I haven't had to post a 24 hour notice in probably 5 years. We have the best tenant base on the planet and love 98% of our tenants. Usually the 2% hates us because we enforce the lease and they move (and post they all post on yelp). We only do 3-4 evictions per year out of 500 homes.
How many properties are you doing this on? Maybe you should write,"Sec 8 for dummies".
I'm glad to hear your drifting out of the slumlord life, that's better than me. I'm a salesperson, and I work for a broker that specializes in property management. He probably does 5-10 buy/sell deals a year, but he has more than 400 rentals that he manages, and I'm trying to learn that.
I own nine units, and I've never had less than seven HCV tenants at any given time. Even the non-HCV tenants are on every form of government assistance that you can imagine (the blessings of D neighborhoods, let me tell you).
3-4 evictions per year in 500 is HOT. That's a great stat, you should put that on your business cards. I do about one per year. I really try to be understanding and fair, but it's not always meant to be.
I should definitely do more blogging about it, that's not a bad suggestion.
Section 8 is not such a bad thing, yes it has flaws just like non section 8, and as far as the tenants, tenants mess up non section 8 just as section 8, the key is screen your tenants, just because we on section 8 doesn't mean we're just mess ups, section 8 is needed for low income ppl and elders,