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Renting Properties to Section 8 Tenants: Weighing the Pros & Cons

Posted by wpuser on
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I often find myself in conversations or in forums about the benefits of Section 8 tenants outweighing the negatives of why landlords should consider renting to Section 8 tenants.

Section 8 tenants get a bad reputation as a whole and the stigma deters landlords around the country from even considering them.  Our operation has managed over 300 section 8 tenants in recent years. We have had the best and the worst case scenarios with section 8 tenants but all of the bad situation were self-manufactured or could have been prevented.

Section 8 housing or recently being referred to as the “Housing Choice Voucher Program” is a house where participants in the government program are able to live and receive a section 8 tenantssubsidy towards their rent from 5-100% of the monthly rent & utilities.  This program has been around since the late 1930’s and has changed over the years. From what we heard or saw as multiple high rise concrete buildings in a particular part of t their rentals in a “Mixed own to what it has become today where they really push the private sector of landlords to place them inUse” environment.  More than likely, you have heard of this program.  As far as I am concerned, I hear about it every day but often in a negative context.

Most people involved currently or looking into real estate have heard horror stories about bad renters or nightmare tenants and when the discussion of section 8 comes up, there seems to be more bad stories than good stories.

What many people don’t realize is just like non section 8 tenants (we like to call them market tenants), there are good and bad section 8 tenants too.  A landlord or property manager must screen section 8 applications the same way, they would screen a market tenant making $100,000 per year.  With proper screening, you will be able to root out any bad section 8 tenants with the proper underwriting procedure.

Benefit of Section 8 Tenants

The Section 8 voucher is inheritable – Most people don’t realize this but if a section 8 voucher holder passes away, the benefit is inheritable to their family.  So the families have good reason to ensure they comply with the program and reduce their risk of being kicked out of the program.  This seems crazy but what they want to ensure is if a mother who houses a large family passes away, theentire family doesn’t become homeless or split up.

Turnover/Vacancy – From my experience, section 8 tenants are not transient tenants.  In my career of property management and overseeing roughly 300 different section 8 tenants, I can only remember two tenants that moved out after the initial 12 months lease. Currently, I have many tenants that have been in the same place for 6 plus years. Moving is only often prompted by change in size of voucher where either occupants on their voucher have been added or removed effecting the value.

Rent Payments – We have all heard someone say something along the lines of “Every month my check gets deposited like clockwork on the first of the month!”  This is true and it is a nice feeling that each month a portion or all is in your account on the first.  The ability to plan to pay your properties expenses can be clearly defined if you know money will be there on the first.

Inspections – Prior to a landlord’s home being approved for section 8, the landlord must pass an initial inspection to insure the safety of HUD guidelines are being followed.  This inspection is also completed on an annual basis once the tenant has moved in as well.  It does add time and money to your overall annual expenses but if handled correctly, it gives the landlord an opportunity to prevent future problems by fixing or getting ahead of larger maintenance issues down the road.

Housing Authority – Each city has a different government entity that administersChicago housing authority the section 8 program. Here in Chicago, it is called the Chicago Housing Authority (CHA).  If used properly, a landlord has the ability to utilize the Housing Authority to accomplish what the landlord needs to manage a tenant.

If a tenant has a dog that is unauthorized, a landlord can deliver a 10-day notice to the tenant and then put a copy of that 10 day notice to the Housing Authority.  When it is placed on file, the document stays on file for the life of that tenant on the program. If multiple issues occur, the housing authority will/may bring the tenant in for briefing on their negative issues.

No Sudden Move Outs – With section 8, moving for the tenant is a long process (mainly because it is a government program).  The process involves many steps that often cause a tenant looking to move to take 2-3 months to actually move.  This allows the landlord additional time to plan for any moves outs.

Tenancy Doesn’t Reflect Market or Economic Conditions – With section 8, the local real estate market and economy has little effect on your tenant’s ability to pay or desire to move out.

With any tenant, in any market, in any type of housing class, a property management company must build their systems and procedures around those factors. With Section 8 management, our inspection procedures, collection procedures, and renewal procedures are a little different than what we have for market tenants. There are small adjustments on the management side.

People will always argue that inspection requirements are silly. I do agree that inspection time frames, or the system is bureaucratic but if handled accordingly, there are plenty of benefiting factors that allow a landlord to create a successful business around the program. Landlords or Turnkey investment property owners that have a business model around section 8 tenants love the stigma of section 8 to eliminate competition before they even have any.

Feel free to reach out anytime to discuss section 8 or your experiences.

 

 

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