Section 8? Never again.

5 Replies

My first rental property had an existing section 8 tenant when I bought it. I was naïve and attracted to the 'guaranteed' rent. I'd rate the tenant a 2/5, as she didn't completely destroy the property and paid rent eventually. I finally got fed up with her after about three years and evicted her over nonpayment of rent. The crappiness of the tenant aside, this is why I would not do section 8 again:

The tenant doesn't have enough money to cover the rent on their own, which means they will not be spending a single dollar on keeping up the property. She let a small roach problem become hundreds if not thousands of roaches, and did not let me know about it. You will have no leverage over the tenant if (when) things go bad, as they really have nothing to lose. Even an eviction will not necessarily hamper the tenant's ability to receive housing assistance. While working on the water heater, I noticed a letter from the section 8 housing authority showing that she owed the previous landlord over $11,000 and had stolen the fridge from the property. The tenant simply changed her first name after this and was able to receive section 8 again.

Dealing with our housing authority is a PITA. They never answer the phone, any time of day. They often take over a week to respond to emails. They will ding you on annual inspections for safety issues, which I think is reasonable. However, they will also ding you on petty things like not having screens in every window (who does?). If you do not fix everything to their liking, you will receive no money from them until you do (and the missed payments will be lost).

Want to increase your rent at the end of the lease? It's not nearly so simple as writing a new lease. You have to apply to the housing authority, listing multiple reasons why your rent increase is justified. But that's not the worst of it. You must get the TENANT (who has no money) to agree to the increase in rent. Good luck.

Basically, if  you deal with section 8 where I'm from, you forfeit much of the control you have over your own property.

I know there are people out there who make good profits in section 8, but I just can't imagine why they would put up with the hassle and risk if they didn't have to. I hope my experience has been valuable to someone.

It sounds to me that the main problem you had was principally with the tenant herself not being a good one. Most of those issues can be improved with the right prior screening, of course she went out of the way to erase bad things about her, but getting the past landlord's info before would've helped.

I see the inspection of the property as plus. It's a free yearly inspection to help me improve my property. And I don't see why the tenant would not agree to a raise of the rent if a) they are not the ones paying it b) you can not renew their lease if they don't accept it.

Just my 2 cents. 

@Ross Bernard you hit most of the issues on the head in your original post, from what I can see.

Unless the state I’m in explicitly says I can’t accept section 8, I too would prefer to avoid it for most the reasons you just mentioned.

I try to avoid dealing with government entities as little as I need to and section 8 is no different.

Guarantee rent is fine but you know what’s better? Tenants who pay their rent on time every month in full on their own. Let’s say rent is 1000, and section 8 covers 900. The tenant may or may not ever pay that extra 100. Do you really want to chase down tenants for a hundred bucks every month?

I wouldn’t.

Originally posted by @Ross Bernard :

My first rental property had an existing section 8 tenant when I bought it. I was naïve and attracted to the 'guaranteed' rent. I'd rate the tenant a 2/5, as she didn't completely destroy the property and paid rent eventually. I finally got fed up with her after about three years and evicted her over nonpayment of rent. The crappiness of the tenant aside, this is why I would not do section 8 again:

The tenant doesn't have enough money to cover the rent on their own, which means they will not be spending a single dollar on keeping up the property. She let a small roach problem become hundreds if not thousands of roaches, and did not let me know about it. You will have no leverage over the tenant if (when) things go bad, as they really have nothing to lose. Even an eviction will not necessarily hamper the tenant's ability to receive housing assistance. While working on the water heater, I noticed a letter from the section 8 housing authority showing that she owed the previous landlord over $11,000 and had stolen the fridge from the property. The tenant simply changed her first name after this and was able to receive section 8 again.

Dealing with our housing authority is a PITA. They never answer the phone, any time of day. They often take over a week to respond to emails. They will ding you on annual inspections for safety issues, which I think is reasonable. However, they will also ding you on petty things like not having screens in every window (who does?). If you do not fix everything to their liking, you will receive no money from them until you do (and the missed payments will be lost).

Want to increase your rent at the end of the lease? It's not nearly so simple as writing a new lease. You have to apply to the housing authority, listing multiple reasons why your rent increase is justified. But that's not the worst of it. You must get the TENANT (who has no money) to agree to the increase in rent. Good luck.

Basically, if  you deal with section 8 where I'm from, you forfeit much of the control you have over your own property.

I know there are people out there who make good profits in section 8, but I just can't imagine why they would put up with the hassle and risk if they didn't have to. I hope my experience has been valuable to someone.

Yup that is spot on to the experiences we have out here in Cleveland. I tell investors all the time that there are benefits to utilizing the section 8 program but they will come with additional cons which you have highlighted at length. 

For me I think the pros can outweigh the cons if the properties are in very low income areas. If you have D-Class properties pretty much all of the tenants are going to be savages so the guaranteed rent which is typically above market rate goes a long way. If you have B-Class properties getting a reasonable, responsible and sophisticated cash paying tenant is a lot easier thus making the cons of section 8 not worth it.

Originally posted by @Daniel Suarez :

It sounds to me that the main problem you had was principally with the tenant herself not being a good one. Most of those issues can be improved with the right prior screening, of course she went out of the way to erase bad things about her, but getting the past landlord's info before would've helped. 

I see the inspection of the property as plus. It's a free yearly inspection to help me improve my property. And I don't see why the tenant would not agree to a raise of the rent if a) they are not the ones paying it b) you can not renew their lease if they don't accept it.

Just my 2 cents. 

I should have clarified, our housing authority requires that the tenant pay the extra amount if a rent increase is requested. That is why it is nearly impossible to raise rent on section 8 here without kicking out the current tenant.