Why Section 8 is more than just "guaranteed rent"

[Mario Benavidez]

Hey BP fam,

Section 8 gets a lot of mixed reviews, but if you screen voucher tenants just as strictly as market-rate ones, it’s a massive cash-flow stabilizer.

Here is why leaning into the voucher program is a solid strategy:

• Recession-Proof Income: The housing authority direct-deposits their portion of the rent every single month, no matter what the economy is doing.
• High Retention: Voucher holders tend to stay much longer because moving is a hassle and finding good landlords can be tough. Less turnover equals a much better ROI.
• Proactive Maintenance: Annual inspections get a bad rap, but they actually force you to stay on top of minor repairs before they turn into massive, expensive disasters.
• Competitive Rents: Depending on your zip code, HUD's Fair Market Rents can actually meet or beat local market rates.

It takes some patience with the initial paperwork, but it’s a great way to build a resilient portfolio.

For the Section 8 landlords here: What’s the biggest lesson you learned with your first voucher tenant?

[James Mc Ree]

@Mario Benavidez I think your assessment of Section 8 tenants and the program is very optimistic. It is a good program, but I would describe it as less rosy than your words. I've had mixed experiences over 13 years with multiple S8 tenancies.

Screening is great for all tenancies. The challenge with S8 is the prospects all come with checkered backgrounds, often some criminal, low credit, pending collections, bankruptcies, low paying jobs, no savings, etc. They are never strong applicants or they wouldn't be in S8.

On the profitable side, consistent rent payment from the government is a nice plus. I have very much appreciated that. I think of it as my government tax dollars coming back to me. Holding the spectre of the tenants losing their voucher over them can be helpful, but keep in mind you already have a problem with them if it gets to that point.

Wear and tear, and damage, is often heavier with S8 tenants. Charge them for damage, you say? You have the security deposit and all the blood you can squeeze from an old turnip. These folks are poor. They have no savings. Sue them, someone might say. Sure, you get attorney, court costs, and a judgement you can't enforce. They will add it to their list. Of course, this is for the problem tenants. Screening certainly helps avoid them, but some still get through.

The tenants are always 1 day ahead of broke. It's paycheck to paycheck every month and sometimes others win the bill pay lottery. Lost job. The kid is sick. The other kid is sick. I'm sick. The car broke down. Someone died (again). Child support is late. I'm not getting enough hours at work. My husband left....and so did my boyfriend! We're helping someone out (and not paying me!) There can be an endless list of excuses for why they are late. I feel like I've had good S8 tenants, but a couple bad ones can consume a lot of your time and drive up your stress.

S8 offices can declare rent cannot be raised on the property and you get no increase year-over-year. This seems to be S8 office specific as I've had one office tell me increases are frozen while another from the next town over does increases.

Beware of government shutdowns, not that you can plan for them. Your government paycheck ends when HUD runs out of money. That didn't affect me, but the S8 offices had the countdown running for when they are out of money. It would have affected me if the latest shutdown ran another month. It's "almost" guaranteed payments. This becomes a much bigger issue for landlords who are heavily dependent on S8.

Just some experiences from the real playing field... To be fair, these issues can happen with traditional tenants as well. S8 tenants are just more vulnerable to disruptions.