legal ways to earn more from Section 8

14 Replies

I have a property in indianapolis that I bought from a wholsaler.  The property has been occupied for a number of years by the same good tenant.  The previous landlord/owner was doing a side deal to supplement the amount section 8 is willing to pay.  Come to find out this is not allowed and can be considered fraud.  When IHA gives you a number that is absolutely the maximum amount of rent you can charge.

I was wondering if anyone had any creative and very much legal ideas for bringing in more money from a section 8 tenant.  According to IHA you can not rent out an extra shed or anything that is "real property".  I was thinking maybe rent a lawn mower or the washer dryer?

I look forward to your good ideas, thanks.

Oddly this is what HUD at the federal level has to say, which openly contradicts the IHA:

The PHA determines a payment standard that is the amount generally needed to rent a moderately-priced dwelling unit in the local housing market and that is used to calculate the amount of housing assistance a family will receive. However the payment standard does not limit and does not affect the amount of rent a landlord may charge or the family may pay. A family which receives a housing voucher can select a unit with a rent that is below or above the payment standard. The housing voucher family must pay 30% of its monthly adjusted gross income for rent and utilities, and if the unit rent is greater than the payment standard the family is required to pay the additional amount. By law, whenever a family moves to a new unit where the rent exceeds the payment standard, the family may not pay more than 40 percent of its adjusted monthly income for rent.

Looks like the tenant portion can't exceed 40% of their monthly income. Some of mine are above what, say, HUD will pay for a 2 bedroom, they just cap their help on what's in the books for that area. Got one where their max is $838. I can rent easily for $900 to someone else. I rent to someone else.

I have several HUD and Community Action assisted tenants and I do not mess with the determinations or have side deals. Are you talking about an extra $20 or is their rent $200 below what you could get from the private sector?

If the amount is nominal, I would just keep the good tenant.  No side deals.  If their market is far below market, I may make other arrangements and get a normal tenant.  It's not ethical or legal to receive payments on the side @Ciel Tierra .

I agree with Steve. If IHA finds out the IHA can terminate the contract and blacklist you from any future contracts. Ultimately, they could try to claw back any additional rents collected but I have not seen this kind of aggressiveness from the IHA.

And remember...good tenants are hard to find!

That's only one reason I don't deal with section 8. 

Thanks guys,

I think I am stuck with the amount, which is $85 under what the rent should be.  I could ask her to move out and find a new tenant, but after being there for 6 years, paying on time and not wrecking the place I think I would have to be a fool to do that.  I guess its just going to take a couple years to make my target rent, but man what a bummer!

If there is anyone out there with a secret (but legal) strategy please let me know.

1 month before the lease expire date,the IHA will order an inspection of the property. You can tell the iha you are going to ask the amount of rent you are looking for.They may approve it if you show an example of the rent you are looking for in another similar property. They may talk to the current client and if she does not want to move they will approve it if it is reasonable and with in market range

Good luck  it works most of the time,if you show market rents in the area.

You can ask for a rent increase about once a year with section 8.  But lower turnover will make you more money that higher rent. Be happy you have  a long term tenant. Even at a lower rent, it may be more profitable long term. 

Typically, there are three amounts to look at with the Section 8 "Housing Choice Voucher Program".

1. The contract rent or "Rent to Owner" (This is the unit rent, whether Section 8 or not. You decide what this will be according to your local market and your income goals.)

2. The "Tenant Share of Rent" (This is determined by the Section 8 administrator, typically a Housing Authority. It is based on a review of income and household composition.)

3. The "Housing Authority Subsidy" (This what the HA will pay to the owner as a supplement to the tenant share, to bring it up to the amount of the contract rent.)

Sometimes a Housing Authority will provide utility assistance to a tenant as well. In our area, the HA pays the rent subsidy directly to the owner and may provide utility assistance to the tenant in another manner. The tenant pays their share of the rent directly to the owner.

If you price your unit higher than HUD Fair Market Rents, your unit will most likely not qualify and a Section 8 tenant will need to look elsewhere for housing. The Section 8 program does not allow a tenant to pay extra to a landlord on the side and does not allow a landlord to demand extra from the tenant on the side.

Originally posted by @Ciel Tierra :

Thanks guys,

I think I am stuck with the amount, which is $85 under what the rent should be.  I could ask her to move out and find a new tenant, but after being there for 6 years, paying on time and not wrecking the place I think I would have to be a fool to do that.  I guess its just going to take a couple years to make my target rent, but man what a bummer!

If there is anyone out there with a secret (but legal) strategy please let me know.

 You DO realize how bad this makes you sound, don't you?...

@Ciel Tierra , it sounds like you're looking for a way to charge more rent without the IHA or HUD finding out. That's probably not a good tactic, unless you never want to work with them again - which is definitely a strategy that one could take.

I agree with @Ned Carey , that you should be happy with your long term tenant, but there is a way to legally  get more rent, by improving the property. We added a washer and dryer to one of our buildings and the govt gave us additional rent for it. 

If the amount of rent you can get from a market tenant is significantly higher than your section 8 tenant, it might behoove you to make it a market rental and work with your tenant to move. This is not the easiest, and my guess is that you'll lose more money by moving them out than you will through getting additional rent.

Thanks guys

I really am looking for a legit solution that the IHA might not be happy with but wouldnt be able to say anything about.  I really don't want to do anything that would get me kicked out of the program, or worse have the tenant loose her voucher.  I think the resounding answer is that there is no way to do that.

@Brent Coombs -  I should have said "I would have to be a fool and a jerk"  She is a good tenant and a nice woman with three kids.  Asking her to leave is not an option.  The issue is that I bought a property that was falsely advertised and now I am watching my wonderful numbers slide into more dismal territory.  It is a business after all that we all run here.

@Ned Carey I like your perspective that good long term tenants bring in more money even if they pay less per month and next year I can request an increase.  Hopefully she will be there another ten years.  

Thanks guys

I work in the Minnesota and Arizona markets and in both of these markets I have seen that Section 8 is usually willing to pay more than what I want for market rent, it's the tenant that negotiates it down so they don't have to pay as much.

But I haven't had any Section 8 applicants in a long time...

Originally posted by @Brent Coombs :
Originally posted by @Ciel Tierra:

Thanks guys,

I think I am stuck with the amount, which is $85 under what the rent should be.  I could ask her to move out and find a new tenant, but after being there for 6 years, paying on time and not wrecking the place I think I would have to be a fool to do that.  I guess its just going to take a couple years to make my target rent, but man what a bummer!

If there is anyone out there with a secret (but legal) strategy please let me know.

 You DO realize how bad this makes you sound, don't you?...

 Business is business. This equates to $25k over 25 years. Its your house and your strategy so it depends on how you want to gamble, renew lease start over etc.  For me I'd ride the pony til it died so to speak but the whole reason to rent is gains not charity, so if you want to gain then do what is necessary to gain.... If you have 4 rentals like this you just increased 100k over 25 years...... etc.... Tenants shouldn't expect you to come and make them breakfast, pick up their clothes, drive them to work etc., so why or how can anyone say you sound bad for expecting/wishing/wanting/yearning to make what the house should be bringing in...???

@Benjamin Mueller , I agree, business is business. Ironically, many clever investors legally get HIGHER than market Rent from Section 8 Tenants - providing that "when IHA gives you a number", that number IS higher than generally paid by non-Section 8. Happens in quite a few areas, but @Ciel Tierra says that he "bought a property that was falsely advertised". (If that is provable, shouldn't he have some recourse)? I am still wondering, in this low-interest environment, why he is "watching (his) wonderful numbers slide into more dismal territory"?

But surely you can admit, it SOUNDS bad when he is asking for ways to "legally" squeeze more money out of poor people than the IHA allows?...

Originally posted by @Brent Coombs :

@Benjamin Mueller, I agree, business is business. Ironically, many clever investors legally get HIGHER than market Rent from Section 8 Tenants - providing that "when IHA gives you a number", that number IS higher than generally paid by non-Section 8. Happens in quite a few areas, but @Ciel Tierra says that he "bought a property that was falsely advertised". (If that is provable, shouldn't he have some recourse)? I am still wondering, in this low-interest environment, why he is "watching (his) wonderful numbers slide into more dismal territory"?

But surely you can admit, it SOUNDS bad when he is asking for ways to "legally" squeeze more money out of poor people than the IHA allows?...

 O definitely I can admit that and reading over my post it didn't come out right... I should have re read it lol..

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