By JLP | March 12, 2008
I closed on the property in early February and found out 2 weeks later that Tenant B – who had occupied her half of the duplex for over 20 years – had moved out. Long story. So I found myself immediately dealing with a vacant unit – a situation I didn’t think I’d have to deal with for at least 9 months.
My benevolent realtor offered to give me all kinds of information on how to rehab the property cheaply and market it to tenants. In the course of our discussions, he recommended utilizing Section 8 housing programs. I’d never considered it, but it occurred to me that the only two other real estate investors I know in my state also participate in Section 8.
Section 8 is a housing subsidy program for people who don’t make very much – or any – money (I’m sure there’s a PC term for them, but you get the idea). They generally have unstable income as well, and no credit or bad credit. Essentially the local government agrees to pay some portion of their rent (usually well over half) directly to the landlord. The tenant is responsible for the security deposit and any other portion of the rent.
According to my realtor (also an investor), this program is great for landlords because generally the government will pay you more than market rent to compensate you for taking on higher risk tenants. In addition, you have the peace of mind of knowing that the majority of the rent will be paid on time each month (at least if you have confidence in your local government). Plus he said those tenants usually stay put since it’s such a hassle for them to move, reducing expensive turnover costs. You get to screen them, require a deposit, and evict them if necessary just like any other tenant.
The downsides include dealing with government inspections, having to fill out extra paperwork, and attending a one-time seminar on the program – plus dealing with a high risk tenant, of course.
My first reaction was something like “oh, I don’t really believe in those types of programs.” He looked at me with a blank face. “This has nothing to do with your political convictions.” He said it was about getting a good, stable rent and managing risk and making a profit. I changed the subject.
I didn’t really consider the idea again until I actually had a potential tenant call and ask if I accept vouchers. Turns out she’s a section 8 member (or whatever you call it), and she assured me the paperwork is minimal and that all I’d have to do was fill out the packet she brought me, submit to an inspection, and attend a brief seminar. the local housing authority website says it only takes 15-30 days from the time the tenant gives you the paperwork until you receive your first government issued rent check.
In order to be fair, I told the lady she was welcome to fill out an application – I don’t want to get in trouble with Fair Housing laws by denying her the right to even apply (though I suspect I have the right to refuse section 8 tenants – if not I would probably sue for that right simply as a matter of principal). I never heard from her again, though.
So what do you think about Section 8? Are you opposed to the whole idea on a moral/political basis? Do you think it’s a great program that we need in this country? Regardless of your view, would you participate as a landlord?
More from Meg at The World of Wealth