Is Section 8 rent based on the number of bedrooms and not the size of the family? If a tenant has an 18 year-old child that moves out, does the overall rent go down?
Thanks for your input!
Leonard
There are two parts to section 8. First is what the family qualifies for based on their family size and income and secondly is what the property qualifies for based on size and location comparatables. Both of these could go up or down.
JA
So I have a property that is 3/2 1200 sf and is currently rented for $857. If a child turns 18 and moves out, the rent is still $857, but the tenant’s share just increases (and thus the state’s share decreases).
That is the way I understand it. Correct me if I’m wrong.
Leonard
Another way Section 8 pays less is that they decide the rent they pay you is too high and lower it retroactively. It doesn’t matter if the family size changes or not.
Oops, havn’t posted in over a year and just realized my signature was a no no. It has been corrected. Sorry
Leonard,
Yes, the rents can go down if a child reaches 18 and moves out. Let’s say a family consisted of a mother, a male child, and a female child. That will normally qualify them for a 3 bedroom house and therefore will trigger the 3 bedroom payment standard. If one of the children reach 18 and move out, the family will no longer qualify for the 3 bedroom, and the 2 bedroom payment standard will come into effect. Since the 2 bedroom payment standard is lower than the 3 bedroom standard, the rent authorized will usually go down. If the payment standard is lowered, you can not charge them the difference “under the table”. That’s a very good way to get in big trouble.
Good Luck,
Mike
Mike,
That is what I was afraid of! I am cotemplating an offer for a 3/2 single family that is currently rented for $857 and has an ARV of $98k, but it probably will not work if the 18 year-old moves out. I know based on the 2% rule that I shouldn’t offer more than 42,850, but was thinking offering 60,000 that I would still be ok with the $857 coming in. If that number were to drop, I would not want the deal. The house is 7 years old and needs only a little carpet and interior paint. Maybe I will let this one sit a while and see if I could get it in the 50’s.
Not only does the payment go down but if the family now only qualifys for a 2 bedroom then most of the time Sec 8 will have them move to a two bedroom.
Find out what Sec 8 pays max for a three bedroom in your target area.
The current lease is up April 1, 2008. the current tenant wants to stay and is paying $857. I can petition the state for a 5% increase. The maximum rent for a 3Br is $916. I would prefer that she stay since she has been there for almost 7 years and seems to be a “quality” tenant. This is a tough one because I know good long-term tenants are hard to find, but I think the best thing is to offer $57-$58k and see what happens.
I would NEVER buy a house because a certain tenant is in there. You should only buy a rental because the market rents (including Section 8 rents) are enough to generate an adequate cash flow. Tenants are fickle and can move without notice. So, basing your purchase on the idea that a given tenant is in the property and that she gets $857 from Section 8 is not a good strategy. Is she the only Section 8 tenant in town that is authorized for 3 bedrooms? Do non-section 8 tenants rent 3 bedrooms? Determine the market rents and base your decision on that.
Mike
Mike,
I agree with you 100%. I am not purchasing based on the current tenant, it would just be nice if she stayed. I know I cannot bank on that. The current market for 3 BR in this area is $825-$850 and section 8 slightly higher. That and the ARV are what I am basing my offer on.
Thanks for everyone’s insight
Leonard
My understanding is (in my area atleast) is it is a one year lease/contract and is renewable evey year.
So if you sign a lease in Jan - nothing changes with how much section 8 pays until the next january.