What are your thoughts on Section 8 Housing?

Question

I’m thinking of getting into Section 8 Housing.  I’m taking the local class in order to be a section 8 landlord in Philadelphia and I’m curious what if any thoughts everyone has on the subject.  I’ve heard good and bad things (as with most things).  Any help on the pros/cons would be great.

Alexander Felice · Answer

I have about half my portfolio as section 8. I consider it to be under appreciated.

look, it's EASY to look down on the poor, the disenfranchised, and the heavily subsidized, but it's not always warranted.

First, section 8 will pay, for damn certain. So you reduce risk in this area heavily

second, you still get to choose your tenants like you normally would. Section 8 doesn't force you to take tenants and you can say no to the ones you don't like. If they mistreat the property or don't pay, you can still evict them. In fact if they are egregious they can sometime have their voucher revoked. So they still have skin in the game.

Third, people are people no matter where you go. There are good ones, there are bad ones, and then there are the other 85% who are just average. They want to do the right thing, and they will try reasonably hard to do so. People with negative economic situations are not inherently worse human beings by default.

Fourth, in my area section 8 pays a high average market rate. Sometimes higher than I can get without.

So to recap, I get to pick my tenants the same way, they are guaranteed to pay, they many times pay a higher total, and you get to give someone a nice home that otherwise may have limited options. Call me a daydreamer but this doesn't sound so bad.

All that said, it's not a strategy I would build a whole portfolio around but having a few has been beneficial for me. The "horror" stories I've heard do not correlate with my experience whatsoever, but as with anything in real estate not all markets are the same. YMMV

Patti Robertson · Answer

@Jesse Karr - If you don’t already have your own list of entities who will provide rent assistance to people to avoid homelessness, ask your Housing Authority if they have one.  If they perpetually owe you money and have a creeping balance, I suggest taking them to court and getting a judgment, and cc’ing SEC 8. This gives you two advantages.  1) Charities are more likly to help a tenant catch up if they are at risk of being evicted.  We’ve had cases where a tenant has requested we file the eviction paperwork because an entity would only help them if that were done.  As long as we get a promissory note or payment from the entity, we cancel the eviction.  2) If SEC 8 is aware a recipient holder owes you money, they won’t be able to move without your permission.  This is a good position to be in if you have a tenant who is a good at housekeeping, but bad with their finances.

Remember, SEC 8 only requires that they use 1/3 of their income for utilities and rent.  If they are open to help, I will ask them to bring in their income and bills and review their budget with them. Usually it is a matter of a tenant setting the heat to 78% in the winter or 65% in the summer and jacking up their electric bill. Sometimes it is outrageous cell phone plans. The one thing that will really screw up a SEC 8 tenant’s ability to pay that is hard to help is garnishments.  You can check your court filings to see if there have been any new garnishments since you screened them.  SEC 8 does not make an adjustment to income based on a garnishment.  If the judgment amount is high, and the tenant plans to keep working to pay it, it is hard to help them. They will never be able to stay caught up. Most often in this situation a tenant will reduce their hours to get under the minimum garnishments allowance,  job hop, or quite completely.  We turn down any SEC 8 applicants who have creditors that are likly to garnish for this reason.

Patti Robertson · Answer

I prefer it for low income neighborhoods. It’s too hard to find non-SEC 8 people with dependable income of 3 times the rent outside of SEC 8 in some areas.

Justin R. · Answer

@Ryan Harsche everyone has their niche, and anyone can succeed within. With that being said, I've predominantly invested in strong class B Tennant pools . The section 8 tenants that I have had in the past have made me question why I veered off course.

Most (Not all, as I'm being vague) have been entitled, needy, and shown no pride in the property.

Damien J Michalosky · Answer

@Ryan Harsche What is the local class you are taking? I would like to look into this for my multifamily in Clifton, NJ.

Jesse Karr · Answer

My first rental property has been a sec 8 property. The tenants are struggling to come up with their part of the rent however they have kept in touch and planned payments with me and the voucher has more than covered all the expenses. I think sec 8 is a great way to go and you are giving families in need a nice place to live. Just make sure all your numbers work.

Jeremy England · Answer

My first rental was section 8.  I had a good experience and the rent got paid.  But, when they inspect your home, you may have to put some items that you normally would not.  My example is the inspector wanted a rail installed in the back steps.  It was only 2 or 3 steps and it didn't cost that much but it was just one more item on a list of items i already paid for on the rehab.

The other danger of section 8 is the tenant might lose their voucher for whatever reason.

Ryan Harsche · Answer

@Damien J Michalosky this class is specifically for Philadelphia Housing Authority.  So I’m not sure what would cover Clifton,

What are your thoughts on Section 8 Housing?

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