Where would you be without Section 8?

That’s my question…

I have yet to look seriously into the pros/cons of renting to Section 8 tenants…simply because I’ve been researching other aspects of REI.

Luckily today I noticed that the guest speaker at my local REI club’s next meeting is going to be the head of the Section 8 Housing in my area.

I’d really like to hear from those that have a pool of tenants that are Section 8…and the pros/cons of including this in your landlording “toolbag”.

In other words, why it is good/bad to open up to this class of tenant.

Thanks for the consideration.

-Mike

The buildings I am working on aquiring in my area will probably get $750 (2bdr) and 900 (3 bdr) a month, section 8 will pay $1065 and $1275 for these same units. Do the math…

PS- Section 8 or not low income is low income, voucher or not you get the same quality tenant and the same screening is required with our without.

BAD
-I’m getting really sick of the inspector that goes through some of my properties. I don’t like people telling me what I have to do with my properties.

GOOD
-The tenant is required to give a 30 day notice or they will be suspended for 3 years.
-If they don’t pay their portion of the rent their benefits will be cut.
-Easier to rent out

Rich is correct. It is critical to screen tenants no matter what.

  1. Call last two landlords
  2. Employment check
  3. Backround check

It’s a little harsh, but I think the “Section 8 Bible” is a must-read for anyone wanting to get into this program as a landlord.

One of my favorite tips from the Bible (paraphrased):

When you’ve bought a rental property and are making your pre-rental assessment, start with the kitchen. The first thing you’ll inspect is the garbage disposal. You’ll be inspecting it to make sure it’s not there. You can count on a disposal to be the cause of four service calls per year, all of which will be because there are things in the disposal that do not belong there. It doesn’t matter if the disposal is brand new; you’re taking it out. Section 8 does not require it, so you’re not providing it.

I think that’s great advice.

I also laugh every time I read about “Carpet in a Can.” Translation: Painted floors. (These guys really hate buying carpet!)

As for calling the current landlord, I almost view that as a waste of time. If the tenant is terrible, you probably won’t get the truth because that landlord will be all too happy to get rid of the tenant.

I like the strategy of “just dropping by” the current residence, unannounced, to “go over the paperwork” once the application has been filled out. Then you can see what’s really going on.

I think that if you are a very strict property manager, Section 8 can work beautifully. At least you know that most of the rent is getting paid on time.

Mike,

The big advantage of Section 8 is that it helps you fill units. That’s it. The tenants are the same and they do the same stupid things (even though it causes them to lose their benefits).

The only disadvantage is the required inspection. It’s about like getting a misquito bite - one of life’s little annoyances but usually nothing serious.

I agree with Paul, less is more with Section 8 or other low income rentals. Carpet is a frill. A garbage disposal or dishwasher would be RIDICULOUS!

Mike

Great points here…

Thanks.

The inspections are more then an annoyance. The inspector in my area spends forever in the property. He crawls around in the attack, walks on the roof, crawls on the floors looking for anything, and thoroughly checks every room. When he’s done he knows more about the property then I do. I have never had a unit pass, it always takes two or three repeat visits to get it passed. Year after we deal with the same crap. I know a lot of people including myself that will strongly disagree with the statement that it is a misquito bite. That is just not an accurate statement for my area.

There are losers that won’t care, but most of the Section 8 tenants I have are always worried about their benenfits. All but one of my Section 8 tenants are single moms with 2-4 kids. They will not make it if their benefits are cut, this is a big deal to them. Section 8 in my area works with landlords to make sure tenants behave or they will lose their benefits. That is a big deal to most tenants.

What you will want to do is check with some local landlords on how they view Section 8. I invest in two states. I’ve found that Section 8 experiences differ by area. I disagree with several of the things propertymanager stated, but what he said may be true for his area, but not for yours.

Add’l great points, Iron Range…Thanks.

Got another queston…

Does Section 8 nowadays offer direct deposit to it’s recipients?

Or do checks only come thru the mail?

The reason why I’m asking is that I know of an investor here, (not one that deals with Section 8), that collects his rents by having a bank account with the same bank as his tenants and he then has his tenant set up direct deposit of monthly rental payment from their account to his.

Initially I plan on collecting rents face to face…but I thought this direct deposit was a good streamlined approach. With Section 8, it would hinge on whether the government agency offers this setup to it’s recipients.

Any thoughts?

Thanks,
-Mike

Section 8 pays by EFT (direct deposit).

Good luck getting your tenant to agree to that, though!

Iron - are you present during the inspection? I’ve heard that this can sometimes help.

That’s why you call the last 2 landlords. The first one has a reason to lie, the second one does not.

Paul,

Thanks for recommending the book.

-Mike

Some of my tenants do direct deposit for their part of the rent. It is up to their employer if they will allow it. They need to speak to their HR dept, then they will send you a small form to sign. It works great, except that there are 52 weeks in a year but only 12 months. So the tenant will over pay if they have the rent paid biweekly. So you will want to have the rent deducted monthly.

The inspector yesterday hammered the tenant with questions. How often does he come over? How often does he call? Is he a good landlord? etc. I have no problems renting out my properties at top dollar rents. So I decided yesterday that I will NOT be doing Section 8 anymore (except for my current tenants).

Around me in most towns Sec8 actually pays a good deal over what I could possibly get in the lower income areas. I will definitely be willing to rent to Sec8 whenever possible due to this. You’re lucky to have the luxury of getting top dollar regardless.

I can also get a little higher rent in my area using Section 8. But not the spread you are getting. I don’t mind Section 8 tenants, or the rent received, and I like that Section 8 seems to be on the landlord’s side. But the inspector in my area is a real treat to deal with. That’s why I think it’s critical for someone to check with local landlords on how the inspectors treat landlords. If I can’t fill a unit I will probably offer Section 8, but for now I don’t have any problems filling units. So for now I’m done with Section 8.

Looking back I would say that if you can rent it out using straight rent then do it, if not only then use Section 8. Or in your case where the rent is much higher with Section 8, then use it. From now on I will only use it as a back up.

Iron Range,

I agree with you that a rogue inspector could make life more difficult. However, there is an ispection checklist that the Section 8 inspector follows. Passing on the first inspection is simply a matter of making sure all of those items are correct. I almost always pass on the first try, because that’s my business and my money. It costs me money in the form of lost rent if the unit doesn’t pass on the first try. Therefore, I go through the checklist to be sure things are right before the inspector gets there. In addition, I bring my “Section 8 bucket” to the inspection. It contains all the common things to fix a busted inspection on the spot. Spare smoke detector and battery, clear tape (for a small window crack), outlet and switch covers, blanks for the electrical panel, touch up paint and brush, small container of vinyl spackle, tube of caulk, etc, etc, etc. If I miss something or the inspector finds something, I can simply pull the fix out of the bucket and take care of it right there on the spot.

In addition, I think that it is important to build a relationship with your local section 8 office and the section 8 inspector. Try a little small talk and get to know the guy. Relationships are KEY in the rental business!

Mike

That might be the smart way, but its not the Iron Range way. :slight_smile:

A couple of my tenants have told me the inspector has a drug problem. Maybe I’ll call some of my family members that are cops and let them know what’s going on. I’ll take care of the problem head on.