Should I vet a long term renter with subsidized rent?

Question

I am looking at purchasing a 2 bedroom 1 bath older home that currently has a long term renter that has subsidized rent. Is it a could idea and even possible to vet the tenant especially since they have a life time lease?

Thank you BP nation!!

Account Closed · Answer

By the way, @Brian Tisler, if this is a Section 8 tenant, you should check with the housing authority and find out what the "payment standard" is for that size unit.  It's possible you could raise the rents to the maximum "payment standard," but keep this tenant in place - and the tenant's portion of the rent should stay the same.  You might as well get the top rent possible for that unit.  A lot of Section 8 landlords fail to find out the max they can get for their units, and don't realize that the tenant's portion of rent stays the same, but the portion HUD pays will be bigger.

In other words, a Section 8 tenant only ever has to pay about 30% of their income.  The portion of what they pay has nothing to do with the max rent the landlord can get under HUD's payment standards.

So, for instance, let's say the current rent is $500 and the tenant's portion is $200 (roughly 30% of her income).  But, the current max "payment standard" is now $700.  You could increase the rent to $700, and the tenant still only has to pay $200.  HUD picks up the difference.

So, you should check this out, if she's Section 8.  You can talk to the housing authority to find out the max you can charge and how to go about getting it.  It should just involve a new contract with HUD and some paperwork, and maybe a new inspection.  But, it shouldn't be a big deal.

Account Closed · Answer

Yeah, I'm wondering if it's rent control with a Section 8 tenant.  In that case, you can only kick them out "for cause" under the rent control rules.

I hope Brian comes back and updates us to solve the mystery :-)

Account Closed · Answer

There is no such thing as a govt subsidized lease that is for a lifetime.

If your tenant has the right to stay for their entire life, perhaps it is a life estate?

Or is the property under rent control?

But, the only reason to vet a tenant, is so that you can judge what type of tenant they will be.  I don't see any point in doing this once a tenant is in place.  What you need to know is, if they're paying the rent on time or causing problems or damage.  If they aren't paying the rent or are causing damage or problems, you kick them out.

David Krulac · Answer

Section 8 does 1 year leases and won't even do a multiple year lease.  A Section 8 tenant CAN lose their eligibility, by getting more income, change in number of people in household, getting married, moving, or even not filling out their yearly paperwork in a timely manner.

A "Life Estate" is where the tenant can live at the property for life, but the terms usually are that they pay NO RENT!

Seems the two widely different concepts were combined?

Brian Tisler · Answer

Thank you Sue Kelly, that is great to know and something worth looking into. Thanks again for taking the time to reply!

Brian Tisler · Answer

I still need to see the Lease, but doing some research on BP, apparently a lifetime lease means the tenant has the option to stay in the property as long as they want essentially. I'm guessing it only applies to government subsidized renters.

JD Martin · Answer

What do you mean by a "lifetime lease"?

Should I vet a long term renter with subsidized rent?

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