Section 8 is a program that allows private landlords the opportunity to rent properties at fair market rates to qualified low-income, elderly, and disabled tenants by providing a rental subsidy to the landlord. This allows these tenants the ability to afford decent and safe housing outside of the public housing system, which are often located in rougher or high-crime neighborhoods. By using the Section 8 Housing Choice Voucher Program, these tenants receive a housing voucher that they can use for any privately owned apartment, townhouse, or house that has qualified for the Section 8 program.
The Section 8 program can benefit both landlords and tenants. Tenants can rent properties in safe areas that they would not have been able to afford without this assistance, and get to use their remaining income to pay for other necessities. Landlords have more tenants to choose from and therefore may have an easier time renting out their properties. Landlords use their own lease agreement and the same screening criteria as any other applicant.
There are many advantages to the program that are attractive to property owners. One of the biggest advantages of owning Section 8 property investments is the receipt of stable and guaranteed rental income from the government. The program also allows owners to reassess the rental rate on an annual basis and increase the rent. This means that over time you could charge more rent with Section 8 tenants than with other private pay tenants.
The program also imposes an obligation on the tenant to take care of the property which protects your investment. You also have access to a large pool of prospective tenants to choose from. This has an advantage in areas with a smaller pool of private pay tenants and with properties that are difficult to rent. Also, Section 8 tenants tend to be longer-term tenants than private pay tenants. This creates a lower vacancy rate and results in higher profits.
Conversely, there are many disadvantages to the program. Properties that qualify for Section 8 housing must also pass strict but simple inspections, which often make it easier for you to rent properties to private pay tenants. And the rehab of a Section 8 property can be more expensive due to the strict standards demanded by the program. This makes the Section 8 program somewhat unappealing for some investors.
Tenants in the program may cause more wear and tear to a property than a private pay tenant due to the fact that, because their rent is subsidized or free, they might feel less invested in the property which could result in some irresponsible and careless behavior that could increase wear, tear, and damage more. And if a tenant damages a property, there is no recourse to recoup the cost for the repairs. You have to pay for the repairs out of your own pocket unless there was a deposit collected at the time the lease was executed.
So is Section 8 worth it for you to consider? You would have to weigh the advantages and disadvantages against the outcome you want to achieve over the long term. If your property is in a good location and you have done a great job with the rehab, you’ll probably make more money renting it to private individuals. But you may want to take advantages of some of the negatives of Section 8 housing program that warrant higher rents so you can turn them into higher profits.
Personally, we have most of our properties leased to Section 8 tenants. We love getting paid every month without fail and at the same time helping a needing family live in beautiful home.