What is Section 8?
Government Housing Assistance programs were started amid the Great Depression, which was a period of extraordinary hardship in the United States. The poor were in desperate need of affordable housing, so in the 1960’s-70’s, the administration started projects to build the creation of low-wage housing and also help families pay rent. In 1974, Congress began the Section 8 program to give rent help to low-wage families. Ordinarily the tenants pay around 30% of their wage towards the rent. This is financed by government reserves, which is a program regulated by the HUD, the Department of Housing and Urban Development.
The fundamental Section 8 program includes a Voucher Program, which can be either “extend based”; where it can only be used in a particular building, or the voucher can be “tenant-based”; where the tenant is allowed to pick a unit in a private building, but it is not restricted to particular buildings. If you want to rent to Section 8 tenants, you need to enlist as a Section 8 Landlord, which puts you on a list that potential tenants can use to get in touch with you. At that point, after qualifying the tenant, you give them a tour of the property, and the Section 8 tenant will set up a review with the Section 8 office so that your unit, can be inspected. Once your property passes the inspection, you will agree on the rent with the Section 8 office and sign the lease so that the tenant can move in. This is the essential synopsis of the section 8 process.So if the tenant’s rent is $1,000, then the tenant will typically be in charge of paying $200. Section 8 will pay the rest of the $800, which as far as I can tell, is a truly decent arrangement.
Section 8 Advantages
1. On Time and Convenient Payments.
You will get your rents specifically from the HUD each and every month as a check or direct deposit.
2. Security From Tenant Financial Hardships
I had a tenant named Marcy who disappeared on me for a considerable length of time I was never certain where she went, however in the event that she wasn’t on Section 8, she no doubt would have been removed because of non-installment of rent. Rather, on the grounds that HUD pays 100% of her rent, I didn’t need to stress since HUD was paying me 100% of her rent each and every month. Section 8 shielded me and Marcy from her financial hardships by paying her rent.
3. Free Access to a Large Amount of Potential Tenants
There is a long verified wait list of Section 8 tenants accessible online you can use to discover potential tenants in your city. You can also list your property on these sites and let the tenants get in touch with you. Two sites that I have effectively utilized throughout the years are GoSection8.com and WeTakeSection8.com. Both of these sites are extraordinary places to list your Section 8 properties, and for a little fee, you can even view tenant profiles. You can also pay a small expense for a premium posting which will get more attention on your property when tenants are searching. Look at these sites as an incredible and free approach to get to the vast pool of confirmed potential tenants.
4. Higher Rental Rates
The rent you can get from a Section 8 tenant surpasses what you could get with a regular rental that is not in the best neighborhood.
5. Short Vacancies
Most urban areas have a long list of Section 8 members with vouches, who are looking for housing. Filling a vacancy is an entirely fast process once your property has been inspected and approved for Section 8.
Section 8 Disadvantages
1. Government Bureaucracy
One of the greatest disadvantages of Section 8 is managing the administration’s controls and formality. Government organizations are one reason it is expensive to qualify and keep up a property for Section 8 housing. HUD is also frequently understaffed which brings about moderate and once in a while untrustworthy administrations. I have encountered incredible administration, unremarkable administration, and ghastly administration, from the HUD department, so you can not be sure which you will get.
2. Deferral of Payments.
The whole Section 8 process can be long which brings about a postponement in getting a tenant into your property. At that point, after the tenant moves in, it can take up to 60 days to get your first rent installment. The main upside that is in 60 days, you will get twofold the installment, since it’s been two months. You will get paid, however it can take a while.
3. Strict Inspections
Properties meeting all requirements for Section 8 housing must pass strict reviews, which can frequently make it less of a hassle to simply rent properties to private paying tenants. Now and then, it can be a long process just to move beyond the greater part of the inspections.
4. Reprobate Tenants
Despite the fact that the lion’s share of Section 8 rent is paid for by the administration, the tenant is still responsible for paying a bit of the month to month rent. In the event that a tenant doesn’t pay their part of the rent, you can experience the Section 8 eviction process which can be long and costly.
Often times Section 8 landlords are hesitant to report a tenant who is late on their rent installments, since it could prompt a long bureaucratic procedure to have the tenant removed. At that point once the tenant is evicted, you have to experience the whole Section 8 Process again to locate another tenant. Landlords manage both private and Section 8 reprobate tenants, and the Section 8 evictions are certainly costlier because of the bureaucratic controls.
5. No Compensation for Damages
In the event that a Section 8 tenant damages your property, you can grumble to Section 8 and generally get their voucher repudiated, yet you’re not going to get any cash from the administration for repairs. . There is no agreement saying that they will make up for any damages the tenants may cause. Since the tenant is clearly low-wage, getting any cash from them will be a test also, even if you take them to court. For the most part since Section 8 tenants are struggling financially they will not put many resources into your property, they can also be less worried about appropriate upkeep.
Section 8 Investing Tips
1. Get rid of all ceiling fans, screen doors, garbage disposals, and storage areas.
Having these things won’t get you higher rents, yet they will cost you in maintenance. They are not necessities, and Section 8 does not mind whether you have them or not, so I would simply eliminate them.
2. Do Monthly or Quarterly Inspections
Vist the property frequently to guarantee it properly cared for. I particularly search for water leaks because even just a running toilet can cost you $75 a month, and a trickling faucet or showerhead can cost you $20 month. This can turn into a gigantic cost throughout the years.
3. Train the Tenant
Train your tenant, don’t give them a chance to train you. Section 8 tenants are somewhat similar to youngsters. You should give structure and implement the standards, or you will wind up with unpleasant encounters. Continuously be proficient and don’t get candidly involved or fall into any psychological distractions. You are the parent and they are the youngsters, so you should give them rules to abide by.
4. Section 8 Rents
You can discover what the Section 8 rental rate is in your city by googling, “Equitable rents,” and after that your city. Choose the HUD connection and it will demonstrate to you what Section 8 will pay for one-room, two-room and three-room properties. You can basically compare it against the market rents in your city.
5. Know When to Not Rent in Section 8
In the event that your property is in a decent area, all around remodeled, and could for the most part be rented out rapidly, with higher rent then a Section 8 tenant, don’t rent to Section 8. If your property is in an incredible neighborhood and in awesome condition, you’re most likely going to draw in a superior tenant who can pay a higher sum than what Section 8 can pay.
Step by step instructions to Attract and Choose the Best Section 8 Tenants and Avoid the Worst Ones
My best tenant was a Section 8 tenant. She was a single mother of four young ladies. She was totally awesome, spotless, kept the property fit as a fiddle, constantly paid on time, and was all around an exceptionally mindful individual.
My worst tenant was also a Section 8 tenant. Obviously, I gained nothing from the best tenant, however I took in an entire lesson from the worst tenant.
What I Learned
I figured out how to screen through potential in order for them to meet all requirements for my rental properties. I have taken in a considerable amount of time throughout the years to build up a system that I think is the best you will discover. It is a point-based framework that eliminates all feeling. On the off chance that the tenant has a decent story yet doesn’t have enough points, they get denied. In the event that they come highly recommended yet don’t have enough points , they are denied. If they have enough points they are approved, and if not, they are denied. In one building, our eviction rates have gone down 70% in one year by simply changing to this straightforward point framework. I can’t share the complete system in this blog but you can look at the Video on YouTube.
I give the potential tenant a certain amount of points for being a long-term renter, and subtract a specific number of points if they have ever been evicted or had landlord issues in the past.
A potential tenant must make three times what their rent is. So if the Section 8 property rent is $1,000, Section 8 will pay $$800 and the tenant is in charge of $200 a month. This implies the tenant must make $600 a month to meet all requirements for a point in my framework. On the off chance that they don’t make three times what the rent is they get – 3 points.
Credit and Debt Ratio
Next we take a gander at their credit and range it from great credit the distance down to great. reasonable, poor, terrible, and even no credit; with every level getting a different measure of focuses. The obligation part depends on their obligation to credit proportion.
In the wake of inspecting each of these three sections, I count up the point sand what they score decides if they are approved or not. On the off chance that they are a little underneath the required point number, I will require double the security deposit in order to approve them. In the event that they are underneath two points they won’t be approved. This is an all around refined framework that is anything but difficult to utilize and makes it simple for property administrators and renting operators to settle on a speedy choice, without utilizing any feeling.