I tried Section 8 in Phoenix but it was a typical government nightmare. They are administered locally so things may be different there. I had heard that the government will subsidize above market rents which seemed to make up for the hoops you have to jump through. I checked their rate sheets and it showed that my size/bedrooms home would indeed bring better than market rent.
The government has to approve the lease and inspect the property, but you are allowed to screen tenants as normal, and I would do thorough background checks! I could not believe some of the human debris showing up to look at the house.
I have heard the horror stories about Section 8 tenants destroying property, and the flipside that the vouchers are difficult to get and a recipient would lose their voucher for an eviction, so they take care of the house. But also consider that many Section 8 tenants work little to none, some haven't worked in years, and they will be home all day every day causing a lot more wear on a home than someone at work forty plus hours a week.
I finally found a decent person who actually had a job, seemed fairly responsible, and was trying to get off of the government feedbag. I waited for weeks while going through the process, and at the last minute, they sent me a low-ball rent approval amount that was below market. I told them to pound sand. This wasted weeks of the prime rental season and cost me vacancy expense. Never again.
Jeremy, is your property in a condition where you can not rent it to anyone else or sell it to anyone else? If not, why do you want to help these people? You're here to make money, not give charity and create a head-ache. The lease option or rent to own model is excellent if you have a property that wouldn't necessarily qualify for a typical mortgage.
The only benefit to a lease option, really, is that you can charge them rent plus additional for the principal balance, force them to pay the taxes, and take care of the property. Lease option holders generally do take better care of the property, and of course you get a larger down payment and hopefully if you have a 5-7 year balloon, you can sell the house at an inflated price or they move out and you start over.
You're also locking yourself into a single rent rate for 7 years. I guess for anyone here to properly assist you and give you advice, we'd need to know what your intentions are. Are you really just trying to help them build credit? What are the chances that after they build credit, they buy your house or find a better one now that they have more options?