The Pros and Cons of Going Section 8
Section 8 is not for everyone or every property, but too many landlords have misconceptions about the program.
Section 8 is a government program that pays a portion of the rent for qualifying low-income families. It’s a great program from the low-income tenant’s perspective, but landlords are often unsure of whether they should accept a tenant with a Section 8 voucher. Let’s talk about the factors that should go into your decision making process.
- Annual Inspections — some landlords think of this as a hassle, but we see it as getting a free inspection each year. The repair costs are always a little more than expected in the short term, but having an outside set of eyes on your property to keep it ship-shape almost certainly saves money in the long run. These inspections can also help you get rid of a tenant abusing your property. Because you get a copy of any required repairs from Section 8, you can point out to them that the tenant caused the damages since the last inspection and Section 8 will require the tenant to make the repairs. If they don’t, they have to move and could lose their voucher.
- On-time Payments — Whatever percentage of the rent gets paid by the HUD will arrive on time every single month via direct deposit. There are no tenant excuses, just money in the bank. Of course, the tenant is still responsible for sending in the portion of their rent not covered by Section 8.
- Higher Rental Rates — This may not be true everywhere, but in general — and definitely in Detroit — the rent you can get from a Section 8 tenant often exceeds what you could reasonably get for your typical not-the-best-neighborhood property.
- Low-Cost Marketing — There MichiganHousingLocator website allows you to list your properties for a fee. It gets searched quite a bit, so it’s a great way to get some people looking at your rentals.
- No Compensation for Damages — if a Section 8 tenant damages your property, you can complain to Section 8 and usually get their voucher revoked, but you’re not going to get any money from the government as compensation. Since the tenant is obviously low-income, getting money from them will be a challenge as well, even if you get a judgment against them. Because Section 8 tenants are less financially invested in your property, they also tend to be a little less concerned about proper upkeep.
- Property Condition — Section 8 has some pretty strict rules about the repairs that you have to make in order to get a property/unit approved for their program. Fortunately you can get their guidelines at requirements The requirements aren’t really that bad – unless you have a property with some unusual characteristics that would be prohibitively expensive to correct. Keep in mind that Section 8 will not pay ANY rent until they have inspected your property — so don’t let a tenant move in until they get it done. If you fail your inspection, they wait 30 days for you to make repairs before they’ll inspect again — that’s a month’s rent gone.
- Additional Occupants — Section 8 tenants are statistically more likely than other tenants to allow long-term ‘guests’ like relatives and boy/girl friends to move in after the lease is signed. These extra people usually cause extra wear and tear on your property and aren’t allowed by Section 8. You can report this situation to Section 8, but they may not have the time to investigate and even if they do all they can is warn the tenant to comply or threaten to take away their voucher.
- The Bait and Switch — For some reason, it seems somewhat common for a Section 8 office to change terms, almost always to the landlord’s disfavor, the month after a tenant moves in. They might lower the rent by $50, or they might suddenly shift a couple hundred dollars of the rent payment from themselves to the tenant (who is less likely to pay.)
- Tenant Issues -– It’s been our experience that a higher percentage of Section 8 tenants contact us with problems they expect us to address when they are actually responsible for them. Recent example: a tenant’s ex-boyfriend broke several of her property’s windows and she contacted us to fix them. When we told her how much she needed to pay for the repairs, she argued that since she didn’t break them she shouldn’t have to pay to repair them!
- Stretched Thin — Section 8 staff members are overworked. Minor clerical errors are commonplace — I once kept getting checks for a tenant for six months after they moved out. You have to be strictly on top of your paperwork, and submit any and all changes the moment they occur. If you can get extension numbers or email addresses for a staff member or two, treasure them — the phone system is a beast!
At Royal Rose Property Management we think Section 8 is entirely appropriate for most properties. It really depends on two factors:
- Rental Amount – in the Metro Detroit area Section 8 usually won’t allow rent of more than $850 for a 3 bedroom property. So, if we can get more than that for your property, Section 8 isn’t a viable option. We do have prospects try though. We just got a call last week from a prospect asking if we’d take $650 on a 3 bedroom property with a list price of $799. We immediately suspected they only had a 2 bedroom voucher, which they admitted. They stated their last landlord had rented them a three bedroom property for that amount, so why wouldn’t we?
- Property Condition – if you have an extremely nice property you may want to carefully consider the “Cons” above before accepting a Section 8 tenant. Also, if your property has characteristics that won’t pass Section 8 inspection you’re better off avoiding spinning your wheels with Section 8 applicants.
Note: a property owner can legally put in a rental ad that they DO NOT accept Section 8 tenants. If you choose to do this, just be sure you enforce it for all Section 8 prospects on that property to avoid Fair Housing discrimination issues.