Pros and Cons of Taking Section 8 Tenants

First, what is Section 8 housing? Section 8 is a government program that was started back in 1937 by the “Houston Act”. This program is managed by the U.S. Dept. of Housing and Urban Development (HUD).

There are a variety of different programs within Section 8 that serve over 3 million low-income households. The most popular and easiest for a landlord to get involved with is the voucher program. This program will pay either a portion of the tenant’s rent or all of the tenant’s rent depending on the tenant’s individual financial situation. Things that are taken into consideration are: deductions for dependents, disabilities and other medical expenses. If the tenant is unemployed or has several children, they may be eligible for the entire rent to be covered by Section 8. The highest percentage of programs have tenants that pay 30% of their AGI (adjusted income) for rent and Section 8 pays the rest.

If you polled landlords that took Section 8 tenants, you would get one extreme or the other. They love the program or hate it. Here are the pros and cons:

Pros:

• Full payment or partial rent (depending on how much the tenant pays) will be received on-time each month.

• Depending on the building and area, rents can be higher than without Section 8. This is pre-set by the local agency.

• Units ranging from 1 to 3 bedrooms can qualify.

• They will remove tenants from the program for not following the rules.

• There is little to no marketing cost.

• Consistent base of tenants.

• Cons:

  There are government regulations that are involved – such as: safety inspections before move in and ongoing inspections at least annually. The agency will give the landlord a list of items that must be fixed before move-in and it’s non-negotiable.

• The program is understaffed so getting answers isn’t always easy or quick.

• There is often a long wait time for the first check to arrive, but once you are in the system the checks arrive like clockwork.

• Quality of the tenants can be a concern.

• Tenants have been known to be rough on the property. You will not get any money from Section 8 if a tenant damages your property. Section 8 will revoke the voucher.

So once again the question is, “Should I be a Section 8 landlord, or not?” Well, if you are disciplined, I think it can be a great way to conduct your business. What do I mean by disciplined? Well, you need to properly screen your tenants, just as you would any other tenant; pull credit, do background checks and call previous landlords, etc. One big red flag for me is when the tenant doesn’t want you to call their current landlord.

Also, a little known fact about the program is that individuals can apply their monthly voucher toward the purchase of a home. In fact, over $17 billion (that’s right, Billion with a B) goes toward purchases each year according to ncsha.org. What does this mean to a landlord? If you were interested in selling your property with owner carried financing, your Section 8 tenant might be a good fit.

Learn to Trade Now