Hello, Im debating on going Section 8 or not. I have a duplex that I am the owner occupant of currently. One side is rented out just fine, but Im thinking about putting the other side on Section 8. Ive been investing for afew years now so I heard the good, the bad, and the ugly about going Section 8. It was brought to my attention recently to considerate it as an option. Id love to hear from people who have or are using Section 8 for renting to tenants. Let me know what you like and dislike about it. Does it make sense for my situation?
@Mitch Price I am currently looking at acquiring a property that will be Section 8 so I have started doing a bunch of research. I had lunch with a guy that has a Section 8 property and when I asked him what his thoughts were on it he said "I love it! Guaranteed money". Basically I look at it this way if the property is in a C or D class area where you won't be able to get full market rent or higher then it makes sense to go Section 8. If you are in a A or B neighborhood where demand out paces supply and you can get above market rent then section 8 doesn't make sense.
@Mitch Price congrats on the house hack! Welcome to the classic debate over section 8. I think it's important to frame "Section 8" as a program and not a person or type of person. People can suck whether they are Section 8 voucher holders or not. A good and equitable screening process will help you select a quality tenant regardless of their payment situation.
Now for the program...please know that my experience with Section 8 is specific to our local Housing Authority and your experience may be different. Here's what you may expect:
1) An inspection by the housing authority. They'll come through and ensure the unit is suitable and will likely give you a list of things to improve and/or repair
2) Delay. Between the time your prospective tenant turns their voucher in and when the inspector can get out to your unit and another delay after you've fixed the items they recommended.
3) The maximum allowable rent to be lower than the prospect's voucher amount. The housing authority uses a formula that includes the market, utilities, your individual appliance type, etc. I'd make sure that you leave room between your desired rent amount and which voucher totals you consider. IE if your desired rent is $1000/month, you might only consider vouchers that are for at least $1300/month because some of that voucher will be applied toward utilities.
4) Guaranteed rent payment from the government at premium rental rates
5) A grateful and respectful tenant who will treat you and your unit like their own.
@Tyler Gibson thanks for the response. Great points. My neighborhood is I'd say a "C" neighborhood. And current market rate is $860. So it does make sense for me to look into it. Where specifically is a good place for research?
@HarveyYerginIV Thanks for the info.
1. Yes I was aware of the inspection. I'm having work done on the side now. (New toilets, vanities, kitchen cabinets, and shower/tub) So would it be best to schedule inspection after work or now so I can relay needed info to contractor?
2. How much of a delay are we talking? Afew days, weeks, months??? Or does that just depend on me?
3. In regards to the screening process do I personally get to screen the tenants that are eligiable?
4. My market rent is $860 so I should ask for say $1260?
@Mitch Price I just finished going through this whole process with a new tenant who is on Section 8. Your first step will be to list the property to the Section 8 community. You can do this at https://www.socialserve.com/login/ or https://www.gosection8.com/. Use the Go Section 8 website to also check the rent estimator so you can see what rent is going for in your neighborhood. It's a pretty nice feature.
When I listed my property on these websites, I had prospective tenants calling me within minutes. So to answer your question, it's your job to screen the tenants (Housing Authority encourages you to do this). I sent all the prospective tenants a rental application and told them the application cost for background check (don't do a credit check, as they won't have good credit). I then told all of then what time I would be at the property, and of all the applicants that called, only one showed up at the property. Make sure the tenant has their voucher and the Request for Tenancy Approval (RFTA) papers, which you complete as the landlord. You have to turn that packet in, along with an unsigned copy of the lease agreement to the housing authority. This process took about 1 week for approval, and after that is when the Housing Authority will reach out to you to schedule the inspection. It took a few days for the inspector to come out to the property, and he was in and out in 30 minutes. They are mainly looking for health and safety issues, and there should be a checklist on your cities housing authority website. I did have to fix a few items and text pictures to the inspector, but he passed me that same day. The tenant was then able to move in that same day and start collecting rent. I will say I'm still waiting to get my first rent payment from the actual Housing Authority, and they said that new applications can take up to 60 days to get processed. So you could be waiting a little while to get the pro-rated rent from the Housing Authority, but the tenant still has to pay you on time.
From the time I first listed the property until the tenant moved in and paid rent and the security deposit was 2 weeks.
Do a complete detailed screening (just like for everyone else) and do a current home inspection so you can see how the housekeeping really is. Do that for every prospective tenant.
@John Lamb thanks for the information! I will do just that!!!!
@Marc Winter will do!
Only makes sense if you can’t get market rate tenants in that location or if sec 8 pays more than market rate.
My local Section 8 office pays less than market. I had a Section 8 tenant O.D. Before her death her rent was $450 a month and when I attempted higher rent I was denied any higher because, according to the housing authority inspector, "$450 is the going rent in that neighborhood for a one bedroom."
And so after the tenant's death I rehabbed the unit and now get $590 a month.
I currently have one Section 8 tenant left. Section 8 covers most of her rent (she's only responsible for $168 of her $638 rent).
Guess what? She's behind in rent. Last week I had a 5-day notice posted on her door and tomorrow I'm beginning the eviction process.
I'm currently owed $362 in back rent and a late fee. Add the filing fee, attorney costs and damage (there's some damage I had noted in the apartment while I was there for a plumbing repair - I took photos and got a quote from my handyman) and she's going to owe over $1000 and have an eviction on her record; and worse yet she will lose her voucher if I am not paid the judgement amount.
This illustrates that Section 8 is not necessarily 'guaranteed money'.
I'm not saying don't do it - there are some good Section 8 tenants out there but as you likely know there are many bad ones also. You can always give it a try and see how it goes.
Section 8 renters are lower income residents. With proper screening, you can find a variety of different people within this program. Since you have the other side of the duplex, you probably want a quiet tenant.
The tenant themselves are the most important whether they are section 8 or not. You get good and bad tenants.