Section 8 Landlords

[Justin Chew]

Hey Everyone.  I am looking to buy an investment property in Houston and rent to section 8 tenants. I have the pay schedule from the Houston Housing Authority and am looking to rent in A or B tier zip codes.   Wanted to know how much of that would landlords actually receive.  What percentage of the pay schedule should I use in my analysis of a property? 

[Greg Scott]

Are you talking revenue or net income?

One of the benefits of Section 8 is that you can pretty much guarantee you will collect the rent, although not always on a timely basis.  For example, there may be a delay in collecting the first payment.  Also, if there is an annual inspection violation (frequent enough) your rent may be turned off for a month or two until the violation can be resolved and then the payments resumed in their system.

One of the downsides of Section 8 is the higher costs to manage them, resulting in you keeping a lower percent of the rent than a typical renter.  As noted above, if you failed an inspection, the landlord is responsible for fixing the issue.  The violation could be as simple as the smoke detector was removed or it could be a bedroom door has been ripped off its hinges.  Even if it was in perfect shape when the resident moved in, as a Section 8 landlord you get to fix these on your dime.  In my experience, Section 8 residents are generally harder on a property than others so you will likely have higher turn costs between residents.