5 good reasons to rent your investment properties to Section 8 tenants
I bought my first rental property seven years ago. When I was unable to get it rented those first couple of months, I started to panic and then my property manager asked if I’d consider renting to a tenant that participated in a government-subsidized program such as Section 8.
Section 8 (aka the Housing Choice Voucher Program) is a type of Federal assistance provided by HUD that helps provide subsidized housing for low-income families and individuals.
My first tenant ended up being a Section 8 tenant and lived in the property with her daughter and disabled grandson for nearly five years. She was never late paying her portion of the rent and of course, the government was never late paying its portion (which happened to be two-thirds of the total). I never had one complaint the entire time she lived there. The single family home was a new construction, so the only issue was minor repairs that were needed throughout the five years.
During that time, I purchased two more properties. These rentals had tenants that were not Section 8 and as the economy worsened over the past few years, I’ve had a challenge keeping these rented with people who could afford them.
One guy just abandoned the property when he still had at least four months left on his lease. Every time a tenant moves out I spend money making the place rent-ready. It’s amazing what some of these people can do to a house in just one year (some less). Plus, an empty rental property is costly in terms of lost rent.
That first property has another Section 8 tenant – she’s been there almost a year. Again, no problems! I just rented a second property to a Section 8 tenant. I’m convinced this is the way to go for long term, solid renters for five reasons:
1. Expand your pool of tenants.
There seems to be a large supply of people in these programs that are looking for good housing. My property manager lists the property as a Section 8 qualified rental and the tenant finds me. Typically, this happens quicker than if I had to advertise to find a tenant paying on their own.
2. Reduce risk of financial loss from non payment of rent.
With Section 8 tenants, a good portion of the rent is taken care of by the government. So even if the tenant can’t pay their portion, you are guaranteed the amount from the government.
You might think this would happen quite a bit… where the tenant can’t come up with their portion of the rent. It’s never happened to me. Why? Remember, it’s a voucher program and if the tenant doesn’t pay their portion to the landlord, they risk losing their voucher. They don’t want to lose the voucher! So in my experience, they always pay. By the way, all of these people have been employed. They’re likely on assistance because they have a low-paying job and young children dependent on them.
3. Attract longer term tenants with fewer evictions.
My first tenant stayed for five years. Unfortunately, she passed away while living there otherwise; she likely would have stayed five more. Moving is expensive. They stay longer than other tenants. Also, I’ve never had to evict a Section 8 tenant.
4. Offer the pride of living in a single-family home.
Section 8 tenants find their own place and use the voucher to pay. The homes are not part of a public housing development which means the neighborhood is typically safer and provides access to better schools.
5. Feel good about offering decent, safe and clean housing.
As a landlord, I’m part of system that seems to do some good. That’s not a bad business venture to be a part of.
One of the disadvantages is that the government will decide the “fair market” rate for your rental property so you cannot set the rent. This amount has always been in the range of what I would charge if I had set the amount myself.
So if you have rental properties, you might want to consider Section 8 tenants. I’ve come up with five good reasons that subsidized tenants are a good bet – especially in the current economy! If you’re a landlord, let me know if your experience has been different or similar.
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