Section 8 VS the alternative.

5 Replies

We are closing on our first two rental properties next week and we are preparing to screen potential renters.  The previous owner has the properties ready to rent for section 8.  He actually has a renter lined up for both homes but at below market rent.  He was going to rent Property 1 for 500 and Property 2 for 625.

(Property 1:  Market = 600-650  Property 2: Market 750-800)

His explanation was that it is paid 100% by the government and direct deposited into your account.  So he was alright with the much lower rent.  IMO I would rather find some good renters that will pay the market rate.  The extra 100-150 per month on each property adds up!  

Is the benefit of guaranteed rent paid by section 8 worth the money lost??  

Nope, I would never trade a guarantee for a 20-25% discount off market prices!  If you screen your tenants thoroughly and do all the right things regarding property management and maintenance, you will end up thousands of dollars ahead each year by renting at market prices.

@Jake Hottenrott    That is what I thought as well.  100 dollars is 1200 extra per year.  That alone would be more than enough to go without section 8.  We have renters interested in paying 150 more for property 1 and 125 more for property 2.  That would be 3300 per year we would loose out on with the section 8 tenants.  I just wanted to make sure I was not missing something..  The previous owner was really trying to sell me on the benefit of section 8.  I think he just spent a lot of time working on getting them ready for section 8.

If you screen thoroughly and properly, you'll most likely have a good tenant anyways who pays and doesn't destroy the place. However, I suppose it varies, but I have one Section 8 tenant and she pays a small portion of the rent, and the rest is covered. I'm getting more for that apartment than it would get at market rates.

We have one potential renter who qualifies for section 8.  She works so she qualifies for only 300 in section 8 assistance and would have to pay the remaining rent of 450.  She has three small kids. 

@Ryan Billingsley   if you already have other qualified tenants willing to pay more for the units I would go with them. One advantage you have is that if the units qualify for section 8 then you always have that to fall back on but I personally would not use that as plan A.

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