Section 8 housing

15 Replies

Just wondering what the general consensus is on Section 8 properties from those who are already involved with them?  Do you recommend using a management company?

That is all on you @Kathy Pinho I personally do it. It is a process. I wouldn't do it in a good area but for cheaper properties you will get higher rent if you go on your cities section 8 website by zipcode. 

If you aren't good at seeing though people, I would suggest not doing it. If you can't afford 3 months for section 8 to approve your property via inspection and receive a rental agreement, I wouldn't do it. In my city S8 tenants stay much longer than 1 year (according to the website) Something like 80% stay longer than a year and around %20 actually stay longer than 5 years or so. Tenants treat property the same as anyone else, you just have to find the right people.

Management company... No lol. I do not recommend (at least larger) management companies. They operate like a machine and don't put the right person in. First in first out strategy. My suggestion is that you go to management companies that specialize in your area and act like you are a renter (dressing appropriately)... Doing this, I found that they do not care for their properties in control of and charge as if they were... This is my experience and yours in your market may be different. 

I would not recommend a management company for section 8. Do it yourself if you want to actually have applicants properly screened. 

PMs could care less what sort of tenants are placed in a class C property especially if it is section 8. As long as they have a heart beat and can sign an X they are in.

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Thanks for your input.  The property I am looking at is already designated Section 8, although it seems that some tenants are "State" Section 8  and some are "County".  I didn't realize that a difference existed.

Kathy

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With over 40+ years of investing in Northern Calif, and 200+ units at  my high point, renting to Section 8 tenants has been very profitable to me. At any time, 30-50% of my rental homes were Section 8.  I buy groups (5-15) of older, ugly (at purchase time) on a SINGLE PARCEL.  These may be small houses, duplexes, conversions, etc. 80-90% of the time they are seller financed and about 10% down (about the same dollars you would put down on a single family home in the suburbs.

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In my town it would take a couple,both working full time, to pay for my $800 2 bedroom rental. A screened (by me) Section 8 tenant may only pay $50-$400 for their share. HUD pays the rest on the 1st of the month deposited to your account.

I have very few evictions with section 8 because if evicted they could lose their voucher and then where would they go.

There is a simple yearly inspection for basic safety items.  You need to maintain this stuff anyway.

Final note:  YOU screen and choose the tenant.........NOT SECTION 8.

Keep learning about Section 8.  It will be well worth your time.

By the way here is how you find the fair market rents Section 8 will pay for all units, from studio to 5 bedrooms, for every county in the US.  https://www.huduser.gov/portal/datasets/fmr/fmrs/F...

Good luck.

Fixer Jay DeCima

one more thing.

In Calif., I  only rent to Section 8 tenants that already have an approved voucher IN MY COUNTY ONLY.  After approval, I fill in Sec. 8 paperwork and tenant takes to Sec. 8.  Section 8 schedules an inspection in 10-14 days.  

On the date of the inspection, and assume it is approved (I already know what they need), deal is approved, tenant moves in, giving me deposit and their portion of rent.  Section 8 pays from the inspection approval date and I get first check from them is about 3-4 weeks, direct deposited to my bank.

Good luck.

Fixer Jay DeCima

Hi Kathy,

I currently own one SFR that is a section 8 property.. Even though I have only owned it for two years now a plus is more than 50% of the rent is paid by the rental assistance housing authority. Rent has always been paid on time. I will continue to buy section 8 homes because this business model works in the area I am currently investing in.

Originally posted by @Kathy Pinho :

Just wondering what the general consensus is on Section 8 properties from those who are already involved with them?  Do you recommend using a management company?

When you rent to Section 8 (HUD voucher) tenants, you can require the same criteria and security deposit as any other tenant.

The difference, is that: Con - you will have to deal with more inspections and rules and have more restrictions on when/how you can evict a tenant.  Pro: tenants may stay longer, or you can get a decent rent in a not-so-decent neighborhood.

Dealing with the housing authority and HUD will always be a bigger pain than if you didn't accept Section 8. And, the housing authority can withhold funds if you haven't passed an inspection, etc.

Basically - if you don't have to accept Section 8, then don't.  If you do - then screen the tenants well and require a decent amount of deposit.  The tenants must come up with the deposit money on their own - it's not subsidized.

But, your criteria is up to you (as long as it is legal - non-discriminatory). HUD does not require landlords to accept any particular Section 8 tenants. So, screen well, and your Section 8 tenants should be just as good as non-Section 8 tenants, as far as risk and damage, etc.

Be sure to read and understand your HUD housing authority contract, if you do go with Section 8, because there are some differences, such as having to give tenants 90 days notice to terminate their first year, if I remember correctly. Things can be different than normal state law regulations.

@Sue K. Interestingly enough and perhaps this may be of interest... There are non-profits that will pay the whole security deposit. They require the tenant go through a finance workshop and require an approved lease with section 8. At least in Pennsylvania, you can charge up to 2x the rent amount for a security deposit.

Originally posted by @Joshua H. :

@Sue Kelly Interestingly enough and perhaps this may be of interest... There are non-profits that will pay the whole security deposit. They require the tenant go through a finance workshop and require an approved lease with section 8. At least in Pennsylvania, you can charge up to 2x the rent amount for a security deposit.

 Wow!  Does the tenant have to give the deposit back to the nonprofit at end of lease?   

@Sue K. No I do not believe that they do. Though there is a condition that you are not allowed to hold the security deposit against them if they do not pay rent... But I'm sure there are probably things to charge off in that instance. 

America :)

Originally posted by @Joshua H. :

@Sue Kelly No I do not believe that they do. Though there is a condition that you are not allowed to hold the security deposit against them if they do not pay rent... But I'm sure there are probably things to charge off in that instance. 

America :)

 Do you mean you couldn't use the security deposit for any back rent they owed?  Confused.

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@Sue K. Yes, for the non profit that I have worked with will grant you the deposit as long as you don't hold the deposit against unpaid rent. So it is for against wear and tear, painting, repair, administration costs, re-carpeting, etc. 

Originally posted by @Joshua H. :

@Sue Kelly Yes, for the non profit that I have worked with will grant you the deposit as long as you don't hold the deposit against unpaid rent. So it is for against wear and tear, painting, repair, administration costs, re-carpeting, etc. 

 Interesting.  Thanks for the info.

I have found more benefits to renting section 8 than cons.  Note these opinions are specific to my C class rentals.  Here are some benefits:

1. Rent direct deposited in my account on the 1st.

2. Longer term tenants.  If you provide a quality home, they will stay as long as they have their voucher.

3.  Free thorough annual inspections.  The housing authority inspects your units annually to make sure it meets their standards.  This may be a small pain if you have to fix a couple items, but it's actually a benefit because they make sure your investment is being properly maintained.

4.  You have a ton of leverage with your tenants.  They CAN NOT lose that voucher!  If they are not taking care of your property or living up to their lease you can lean on their case manager to get them straightened out.

5. Depending on the area you can get higher rent than non section 8.

6. Much easier to find a qualified tenant. 

My main complaint with some section 8 tenants is they are generally a little more needy with things like changing light bulbs, batteries in smoke detectors, changing filters, and other small maintenance items. 

If you are renting section 8 locally I wouldn't recommend paying a management company.  It's easy to find qualified tenants, you don't have to collect rent, and you'll most likely only get a few calls a year.  Pay yourself the 10% :)