Section 8 Tenants – the Good, the Bad, and the Ugly

Posted on: September 15, 2009

Categories: Profit, Things To Consider

Author: buyfixandprofit

What is Section 8?

The Housing Choice Voucher Program, more commonly know as Section 8, is a federal housing program administered by the department of housing and urban development (HUD) which provides assistance to low income renters and in some cases homeowners.  This assistance comes in the form of rental subsidies paid directly to the landlord.  For real estate investors and rehabbers, the key point here is that section 8 pays 100% of the tenant’s rent in some cases.  100% guaranteed rent in low income neighborhoods provides for some awesome monthly cash flows.  With that said, get ready for more frequent maintenance and repairs being needed at the property.

Section 8 does not pay for any damage caused by the tenants nor will they help in collecting the rent.  Their sole responsibility is to administer the section 8 program, not act as a property manager.  If the tenant stops paying rent, you still have to follow the same eviction process as you would with a regular market rate tenant.

Will Section 8 Tenants Wreck My House?

paint your apt normal color 217x300 Section 8 Tenants – the Good, the Bad, and the UglyIt depends on the neighborhood and how well you screen the tenant.  If you take the time to view the tenant’s previous residence, than you can avoid many of the bad apples that will disrespect your rental.  Tenants with 100% housing assistance payment (HAP) vouchers are generally grateful for their vouchers which provide them the ability to obtain nicer rental housing than they would be able to obtain otherwise.  But remember that whenever you give someone something for free it will not be as fully appreciated as if it was obtained through hard work.  Every tenant is different, but in general, tenants with 100% vouchers do not take care of their home as well as others.  The key is to work with the tenant to minimize these occurrences and focus on the tenant staying for the long term in order to avoid constant turnover costs.

So Why Would an Investor Want a Section 8 Tenant with a 100% Voucher?

It’s all about the cash flow.  In order to achieve good positive cash flow with little to no money down, you will most likely be buying, fixing, flipping, and/or renting in rougher neighborhoods where it can be more difficult to collect the monthly rent.  For this reason, many investors refuse to rent to non-section 8 tenants and will hold out many months if necessary to find a tenant with a 100% section 8 voucher.  Collecting rents is the most difficult and frustrating part of being a landlord.  This is especially true when you have little money to start with, which in turn makes it is very difficult to keep up with the monthly mortgage payment when there is no rent coming in.  So as long as the rent is being consistently paid every month on time, dealing with the repairs will be tolerable.  Make sure to find a reputable handyman that can handle these miscellaneous repairs at reasonable prices prior to getting tenants.

Rehab Rental Properties for Durability Not Luxury

Keep the rehab construction choices simple and durable.  Make the rental property capable of taking some abuse, but don’t let it look ugly.  Do not install plush carpets; instead opt for hardwood, tile, or heavy duty vinyl squares.  Don’t expect the tenant to keep the carpet clean when most of us cannot keep out own carpets clean, especially with kids.  Paint concrete basement floors and walls a dark neutral color such as brown or gray using a quality concrete paint.  This makes cleaning the basement easier along with making it appear more inviting to use as extra livable space.  See the construction tips articles for more guidance on rehab choices.

 Section 8 Tenants – the Good, the Bad, and the Ugly
pixel Section 8 Tenants – the Good, the Bad, and the Ugly

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