Investors: Should You Rent to Section 8 Program Tenants
Investors, whether capitol growth investors or cash flow investors, are always asking should you rent or not rent to Section 8 program tenants. The nature of the question tells me there is probably much miss-understood about the Section 8 program. First of all, investors need to know what the Section 8 program is. Of course I need to do some generalizing as each county and or state may have some differences.
Section 8 is basically a government sponsored program that helps subsidize the rents of lower income families (that’s it). In a nutshell, a low income family has to meet certain criteria to be qualified to enter into the program. Once they are accepted, they get a voucher or a certificate that allows them to receive benefits of financial aid.
As a landlord, your property must be entered into the Section 8 program as a property that meets Section 8 guidelines and passes a Section 8 program inspection. As an investor, having a Section 8 approved property can be an asset as it will then be considered safe and habitable.
Section 8 inspections are looking for health and welfare type of concerns. Things like ground fault receptacles in your kitchens and baths, properties with no peeling paint or mold issues. Landlords have to rent the property within the pre-determined price range of Section 8 (note: these are typically generous guidelines and occasionally higher than the public will pay for "regular" rents).
These inspections are a plus for investors and landlords to have, as they insure a safe environment for your tenants and absentee landlords may or may not have a good understanding of their properties ongoing conditions. These annual inspections help to insure your property managers are keeping things current.
So the bigger question is, "do I make my property available to Section 8 programs?" Tenants are tenants, Section 8 or not. There are good tenants and not so good tenants, which is determined by your application and background process.
Who should utilize the Section 8 program?
Periodic inspections. Landlords who enjoy having periodic inspection to make sure their properties are up to date and that their tenants are being monitored as qualified recipients of financial aid.
Primary focus of investment is cash flow. Landlords who have properties that are in higher density of tenants to owner occupied property. These properties tend to be long term rentals with a primary focus on cash flow.
Who may opt to not rent to section 8 programs?
Capital growth investors. The capital growth investor typically buys properties that are in high concentration areas of owner occupied housing. The tenants to these properties are often considered as a future buyer. You will want any future buyer to be a financially qualified borrower.