Finding renters.... section 8 or no .. Minnesota

14 Replies

Working on getting my SFH in St.Cloud MN up to speed and rented out. seeing if anybody has had good/bad experience with section 8. Been told to avoid it at all cost, and others have told me do it just make sure to get a nice big damage deposit.

House i'll be renting out will be in the the middle/lower income neighborhood, blue color family. 

3 bedroom, 1 bath, fenced in back yard, 1 garage shooting for $1,200 a month (I'll pay water/garbage) 

Plan to manage it myself since this is my only one, and its close by where I live. 

@Patrick C.

I have 2 section 8 houses in SC and I love it.

Tenants take good care of my properties because they don't want to loose their free money.

The Section 8 people inspect my properties annually for free.

The government direct deposits their portion of rent like clockwork every month.

I have 2 long term tenants that are great.

I did screen my tenants like for any other property and turned down 2 people before I accepted one of my tenants.

@Patrick C. I would generally save Section 8 for low-income areas unless of course, you are in Minneapolis which requires you to accept it.  You will need to find out the max voucher amount for a 3 bed in your area.  If it's below $1200 then you really have nothing to consider, unless of course, you want to lower your rent.

I've had Section 8 tenants once, never again. Showed up nicely dressed, nice car, with good credit score (husband), and no criminal record. I asked for a higher security deposit. Long story short, that security deposit covered 1/3 of the damages to the property and appliances. 

I agree with @Pavel Ushakov , we purchased a 4 plex in Mpls with section 8 tenants probably 8 years ago.  We found out quickly that the ones we were working with felt quite entitled to their lifestyle and weren't very responsible.  My partner at the time was a RE agent and worked on the leasing side.  A couple times we were surprised to see that we didn't get a section 8 payment for say unit 3.  He would call up and find out that they didn't renew their paperwork so we weren't paid.  They also let us know that they didn't pay back-pay so we were essentially out the rent.  And good luck collecting money from someone who is getting free housing, food, and a debit card.  

We also had issues with damage to the units, I believe every unit we turned over had holes in the walls and junk left in the unit.  I remember a couple times having to cut furniture apart to get it out the doors.

If you can get more than market rent by accepting Section 8 it may be something to consider but I personally prefer to rent to people who can afford to pay.  In some areas (I hear STC has some rough areas) you may have to accept Section 8 to get tenants also.  I would try to figure that out on the buy side before purchasing.

Last - @Tim Swierczek mentioned Mpls' new ordinance which requires landlords to accept Section 8.  That is correct however I think you could setup your rental criteria so anyone who would receive housing assistance would not qualify.  

I was thinking about it on one single family home I own but have not done it yet. It is currently a 3BR and the voucher allowed for my city (per HUD) is $300/mo higher than I think I would normally be able to get for it. Every time I rent a place in that city, I have people asking about section 8 even though it specifically states no section 8 in my ads. I don't believe my city has many section 8 rentals and it is a desireable area so I may consider it if I were to have a vacancy.

The only reasons I would consider it on this home is because it is not fully updated, I think there may be a shortage of options for people who may want to get into the city, and I think it would be possible to get more in rent this way.

I wouldn't consider it on my properties otherwise as I have not had a problem placing good tenants in the past.  

@Patrick C.

I have one property with a section 8 renter. What is not commonly known is that some section 8 applicants work, but just have an income below what is needed to support their family. My section 8 tenant gets about 25% of her rent paid for by HUD. She is a great tenant.

I screen her just like any other applicant.  The prior landlord, who I know a little bit, told me she was a good tenant, and she had been there over 4 years.  Just check them out.  

I've had extensive experience with sec8.  I don't love it and I try to avoid it, but in many cases that is/was the only way to get a property to perform.  Most of mine were in low income areas, however I did have 1 in Vegas a couple years ago that paid $1300 (which was the market rent) plus $150 for utilities, and it was in a fairly decent area. 

Given the option to get the same money on cash or sec8, I would go for cash.  Less headaches, and cash tenants have always been better to deal with.

@Patrick C.   P.S. Before you go down the sec8 road, you should chat with at least 1 local property manager about their experience with the local sec8 office.  

The rules and regulations are similar across the US, but the actual benefits for a tenant can vary slightly based upon county contributions, non profits, etc... Some sec8 offices / case workers are easy going & cool to work with, others totally suck and are total brain damage.

Also, the landlord / owners take on some decent liability with sec8.  

Not saying it's either good or bad because each situation is unique - but just make sure you know what you're getting in to.

Thanks for all the input. 

I have spoken with different investors, some like section 8, some hate it with it being my first rental, I might try to do this with no section 8. 

I am not going to comment either way on if it is a good program or not.

In Minneapolis it is going to be mandatory in May. Hopefully not followed by rent control in the future.

Does anyone know the limits for a studio, one and 2 bedroom you need to at to be above the threshold? I have asked a lot of commercial brokers already, but no one so far has had a straight forward answer.

This is a generalization, and just what I observed. There are two type of section 8 tenants.

- First type know the value of the housing voucher, and appreciate it. They tend to be responsible & keep the property in good shape as they don’t want to lose the voucher. Some also have side jobs, earning cash income. I have heard about section 8 tenants that put their own time and money into fixing up fence, landscape .... for the landlord. (In San Jose, the market is tight and having a voucher doesn’t guarantee a rental)

- Second type are the entitlement group. You can detect the entitlement attitude when you talk to them. I have had a section 8 tenant complains that it’s unacceptable that the government didn’t allow her 5 years old daughter to have her own bedroom and has to share with her 7 years old sister. (her housing voucher was paying over 3K a month). This group mostly doesn’t work, and is not responsible, so they tent to ask for lower security deposit & have trouble coming up with money to pay their share of rent. Avoid these group.

@Michael Tempel have you checked with the county?  In Ramsey County if the loandord pays utilities the numbers are:

Studio 711

1bed 864

2bed 1089

 There are deductions from these numbers if the landlord does not pay the utilities and there’s a chart on page 14 of this attachment detailing all of the unit charges and utility deductions

A quick search did not pull up Hennepin County’s numbers however I just requested a copy of them from their website PM me your email and I’ll send it to you when I get it.

PS-  we need to go to lunch soon. 

Pavel - Thank you! Great info.

Tim- Anytime, sounds like we both have a lot to catch up on:-)

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