I live in an area with a ton of foreclosures hitting the market. Does anyone have any experience working with section 8? I’ve heard you can charge normal rents for the neighborhood but i’m concerned with the rumors of having to repair the units after every tenant leaves. Is this the norm or can you still interview and check credit for applicants?
I don’t want to get in a situation where my hands are tied for fear of discrimination accusations.
Thanks Ya’ll.
I have section 8 tenants. You can do all your checks with them and deny them if you wish. in my experience section 8 hasnt been that bad in their requests for things to be done for the tenant to move in. Its usually common sense stuff.
Thanks for the quick reply! Can you recommend any programs or financing options for a young guy with little capital? I went to a grant writing workshop but it turned out to be a sales pitch for the $1200 sign up fee.
A few options for financing.
It is easier to get owner occuppied financing. So you may want to consider starting with a duplex and living in one unit.
See if the seller will carry 20% of the price with seller financing. That will make getting the loan through easier.
Buy a lower priced property, it will be easier to qualify for a loan.
Talk to a loan officer, if they can’t get you approved then move right on to a different loan officer until someone gets it done.
With section 8, you have to repair the unit BEFORE the tenant moves in. If they leave and you rent it to someone else not on section 8, then you don’t have to repair it. There’s no post tenant inspection. Also section 8 inspects the house EVERY year and it’s usually a different inspector. So something that was fine last year is not fine this year. The flip side is that they’re usually good with the rents.
Also owner occupied is the best way to go. You can get 100% financing with owner occupied, but difficult with non owner occupied. Usually they only finance 90-95%. Usually pretty much anyone will approve you, the only problem is the interest rate that you’re going to be hit with. Also keep a good fico score. Go to myfico.com to find out how it really works.
As for discrimination, you only get in trouble if you do so for a protected class. That’s race, color, national origin, religion, sex, familial status (children), age, sexual orientation, and disability. This is all in the federal fair housing laws which you should brush up on.
You can discriminate for other reasons like being clean, neat, responsible, good credit etc. You can also put them through the regular screening process. If you don’t want to accept section 8, you just have a requirement that their income has to be at least 30-35% of the rent. By default, people who are on section 8 don’t meet this requirement. For some reaons in our local papers, saying no section 8 is considered discrimintory so that’s not allowed, yet if you use the above screening criteria, it’s allowed. Government, go figure…
There is nothing to be affraid of with Section 8. It’s just a program used to help people who qualify for housing assistence, single parents, etc. What you need to be affraid of is bad tenants. So background checks, calling the last 2 landlords and income verifications are critical with all tenant applications.
Does Section 8 pay for all of the rent or just a portion of it?
The tenant goes into Section 8 once a year and they evaluate all there finances and decide how much Section 8 will pay. The tenant usually pays 30% of their income.
Example:
If the tenant make $1,000 a month then they would pay $300 a month and Section 8 would pay the rest of the rent. So two checks every month, one from the tenant and one from Section 8.
Ah, two checks. And HUD determines the total rent amount based on the area, number of BR’s, etc.?
Other than “some” of the rent being guaranteed by the government, are there any advantages to consider when deciding whether or not to get set-up for Section 8?
Are evictions more difficult with Section 8?
What about damages? Is a normal damage deposit obtained from the tennant? Does HUD reimburse any of the repair cost?
Is late rent handled any differently?
To HUD or not to HUD…
Thanks.
Section 8 sets maxium rent charges dependent on city, bedrooms, number of children, etc. But the max is decent and there is no advantage to you or the tenant for not charging the max rent allowed.
Evictions are not harder. Section 8 actually will put pressure on the tenant by suspending their benefits if they don’t pay their portion.
Damages are handled just like any other tenant, take the deposit
“To HUD or not to HUD” is a good question, I don’t see why not. The most important thing is not “To HUD or not to HUD”, but actually to make sure you always be careful who you let into your place.
Suspend their benefits?! Do you mean that HUD might hold back the government’s share of the rent from the Landlord?
Yes, they will send a letter to the tenant and let them know if they do not pay their portion of the rent, their benefits will be suspended. When they pay then you call Section 8 and let them know they have paid and their benefits will be re-established.
If the tenant is a real loser they may not care, but for the most part they don’t want their benefits suspended. If they pay $300 and section 8 pays $500 then it would not be good for them to be evicted and then have to pay the next landlord the full $800.
OK, so the landlord contacts HUD to make them aware that the tenant is late with the rent?
HUD might then suspend or threaten to suspend benefits? It doesn’t seem fair that the landlord is also punished by HUD’s portion being withheld from him too.
Anyway, if the tenant makes good, all that is owed to the landlord from HUD is also paid?
Thanks.
Yes, I have received back rent owed a few times. Either because of a failed inspection or tenant being late on rent.
Thanks for the info Iron Range,
I’m trying to learn all that I can before taking the plunge into REI. Just thought I’d consider Section 8 also.
It might be a good thing for me in my area, since the value to rent ratios aren’t all that great. So far, I’ve been considering median priced homes. Sounds like the HUD route might help me be able to charge rents that would provide adequate cash flow if I were to go with lower valued homes.
Thanks again.
Section 8 rents are a little higher than normal rent, but not much higher. What I’ve found is the most important thing is good tenants, whether it’s Section 8 or straight renters only let good people in your properties.