It felt like I was walking into a cave. A dark, messy, smelly cave. I looked around at the walls of my Section 8 rental and saw black, only black. The tenants had decided to add some “color” to the décor. But seriously, who paints walls black? And poop? Who leaves dog poop all over the floor? And trash? How can a family of four leave two, not one, but two dumpsters worth of trash? I started calculating the cost of priming and repainting, carpet cleaning and trash removal. How could a newly renovated property go from rent ready to needing 4K of repairs in only a matter of months? At 4K, this Section 8 rental holds the record for my most expensive turn.
While renting under Section 8 has advantages as I mentioned in my last blog (see other blog), below are a few challenges.
Download Your FREE copy of ‘How to Rent Your House!
Renting your house is a great way to enter the world of real estate investing, but most first-timers (understandably) have a lot of questions. Fortunately, the experts at BiggerPockets have put together a complimentary guide on ‘How to Rent Your House’. All the skills, tools, and confidence you need to successfully rent your house are just a mouse-click away.
Disadvantages of Section 8 Rentals
1 – No Recourse for Damages
Besides the initial deposit, landlords find it tough to get money from a tenant who damages a property. If a Section 8 tenant trashes your unit, you can email documentation to the Section 8 office. I’ve been able to get destructive tenants to lose their vouchers, but I haven’t been able to get any monetary compensation.
2 – Extra Repairs
Section 8 has fairly strict rules about repairs that are needed to get a home approved. Before you market your property as a Section 8 rental, get a copy of the requirements so you know what to address beforehand. When the inspector comes out, try having a handy man around to make instant repairs. Many minor issues can be addressed on the spot and you can avoid delays in passing your inspection. Failing the initial inspection and needing a re-inspection takes a lot of time and keeps your property vacant longer.
3 – Wear and Tear
A Section 8 tenant doesn’t pay a mortgage or even all of their rent, so they are not invested in your property. Consequently, you might find that some Section 8 tenants aren’t as concerned about keeping up a property.
4 – Guest House
Also, be aware of long-term “guests”. That family of three on the lease might offer floor space to a boyfriend, cousin, parent and niece. The extra people mean extra wear and tear. You can report families for added tenants but you have to make the judgment call.
5 – Section 8’s Version of Bait and Switch
The Section 8 office might state they will pay $798 per month rent for your property. But after your tenant moves in, you might suddenly be notified that the rent amount has been lowered by $50.
6 – Section 8’s Second Version of Bait and Switch
Section 8 might initially agree to pay $770 of the $798 rent and the tenant will pay $28. Later, you might get a letter changing the allocation. Section 8 might now pay $500 and the tenant pays $298. In my experience, these changes happen most often during the month after a tenant moves in.
7 – Yearly Inspections
The Section 8 office will inspect your property at least once a year. You will get a sheet with the repairs you need to make and the tenant needs to make. I sort of like this because you get to look closely at your property but the inspections repairs can add up.
8 – Accounting Issues
Section 8 staff members are stretched thin. Once, after a Section 8 tenant moved out, I kept getting checks. I called and mailed the Section 8 office but the checks kept coming. I ended up getting 6 extra checks. Granted, unwanted checks are better than no checks but unwanted checks add to the monthly dose of paperwork. Be on top of your paperwork for Section 8. Submit any address or property management changes as soon as you can. Try to get some extension numbers for staff members because it can be tough to get through on the phone.
9 – System Issues
In one of my investment areas, embezzling occurred at the Section 8 office. Try getting an answer from anybody there that month. Files were seized and the office sort of shut down for a bit. One unfortunate outcome was that rents went down. I believe this type of scenario is rare, but investors need to recognize they have no control over Section 8.
Section 8 is a government organization where the rules can change at any time. With Section 8, you have to roll with the punches and realize you can maneuver Section 8 a bit but you can’t control it.
Photo: chrstphre ? campbell