Section 8: Should You Do It?
Section 8 housing is one of those topics that most people have a general understanding of, but very few know a lot of the specifics. As a real estate investor, it’s an area that should interest you, because millions of Americans use this form of assistance to lease rental properties. Whether or not to become a Section 8 landlord isn’t a decision you should make quickly, though, and there are a number of pros and cons associated with it.
First, let’s define what Section 8 is. Section 8 actually isn’t even the official name. The Housing Choice Voucher Program (aka, Section 8) is a government-funded program that provides qualifying low-income renters with subsidies to obtain housing they otherwise could not afford. It works like this: Qualifying families pay a certain percentage (based on their income) of the rent, and the remainder is covered by the local housing authority. Rents are capped by Fair Market Rent, or FMR, which is set by the government.
So what does this mean for an investor? Well, a couple of things, mainly. 1. The government is paying for the majority of the rent/living expenses for any of your tenants that are on Section 8, so that means regular, uninterrupted payments, which is pretty sweet. And 2. You have a lot more responsibilities as a property owner to ensure you are in compliance with Section 8 standards and regulations.
So let’s talk about these two main points.
#1 - Regular Payments
This is the biggest benefit that comes with Section 8 housing. As the landlord/property owner, you get to enjoy rent checks coming in like clockwork each month, because it’s not your tenants who are paying them - it’s Uncle Sam. And Uncle Sam does not mess around when it comes to money. Now, you may have heard horror stories about “awful” Section 8 tenants who don’t make even the regular payments worth the hassle, and, sadly, many of these probably aren’t exaggerated. However, there are some steps that you can take during the tenant screening process to ensure that your Section 8 renters are high quality ones who will take care of your property and not cause you undue stress.
#2 - More Responsibility
It’s also true that as a Section 8 property owner, you’re going to have to jump through a few more hoops than you would if you were renting to someone who’s not on government-assisted housing. This is because you must obtain certification from HUD (U.S. Department of Housing and Urban Development). The first of the aforementioned hoops is the paperwork. There’s a lot of it, and every form must be completed accurately. No cutting corners here. There are also phone calls to make to housing counselors and possibly others affiliated with the program, and then another pile or two of paperwork. And then there’s the annual inspections that must be done. These inspections are no joke, and the people going over your property with a fine tooth comb will have no problem disqualifying your property if something doesn’t meet their standard. If this happens, it’s right back to Step 1, after you’ve remedied the issue, of course.
These are just a few of the things you’ll see if you start the process to get your property Section 8 certified. So is the hassle worth it? Quite possibly. If you’re an organized, determined, and motivated landlord who can handle the all the bureaucratic stuff associated with it, Section 8 can really pay off. Vacancies are few and far between, and there’s always a pool of eager tenants ready to move in should one occur. And then there’s that whole business with the regular rent checks, the benefit of which cannot be overstated.
If you have what it takes to be a Section 8 landlord, I say go for it. And if the idea of mountains of paperwork and extremely in-depth tenant screening freaks you out, then you’re probably better off sticking to renting the old-fashioned way.