What are the advantages and disadvantages of section 8 rentals?
Guaranteed, on-time rent payments. What landlord could resist? The fact is, like any strategy, section 8 rentals have both advantages and disadvantages to think about before basing your future on it. Personally, I avoid the strategy, but I know several landlords that make their living from it. I’ve gathered a short pros and cons list together for you, so you can decide for yourself.
Advantages of Section 8 Rentals
You’ve probably already heard about the benefits of section 8 rentals, but in case you haven’t, here they are:
On Time Rent Payments
The Public Housing Authority will subsidize anything above 30% of the tenant’s adjusted monthly income. So, if they make $2000 per month, the tenant will pay a maximum of $600 toward their rent. If you are renting the property for $1000, the Public Housing Authority will pay you $400 every month. Many times, tenants will also have less than $2000 per month of income, making the government subsidized portion even higher.
It’s a landlords dream come true. You don’t have to worry about the government paying late or skipping town. The money arrives on time, every month. Some landlords report that tenants are also less likely to pay late than unsubsidized tenants because they fear losing their section 8 benefits.
Steady Stream of Tenants
Public Housing Authorities have a waiting list of tenants that are hoping to receive a subsidized section 8 rental. If you’re signed up as a provider, you’ll probably receive a steady stream of tenants that are more than happy to occupy your property as soon as possible.
The benefit is you can reduce your vacancy rates and worry less about filling up new properties. You’ll know if there’s demand, so all you have to do is adjust to fill that demand. You’ll also spend less money on marketing, improving your ROI.
Disadvantages of Section 8 Rentals
The disadvantages of section 8 rentals are less well-known. Consider the following problems before jumping into section 8:
Paperwork and Inspection Process
Where renting a house to a normal tenant is as simple as putting a sign in the yard, you have to jump through some hoops for section 8 rentals. Some landlords find it frustrating. You’ll have to notify your local Public Housing Authority of the availability of your property, plus schedule an inspection.
From what I understand, the notification and sign-up process are relatively simple, but the inspection can be a huge headache. One landlord I know has over 30 section 8 rentals and complains about the constant inspections. Not only does an inspector have to check out the house before the tenant moves in, but you have an annual inspection as well.
Sometimes, the inspector is agreeable and will approve your property, but occasionally you’ll run into one that is exceptionally picky. They’ll give you a long list of repairs that need to be done before approval, requiring another inspection and costly delays. The normal time to schedule an appraisal is 10 days, but sometimes it gets pushed back several weeks due to busy inspectors.
Disagreements with the Public Housing Authority
Some landlords also report having disagreements with the Public Housing Authority. For example, based on the inspector’s report, they may deny your property, where you feel it’s in perfect condition. You can always ask for another inspection after completing some repairs, but in the meantime, you’ll have to pay any debt service on the property.
While I understand it’s fairly rare, I’ve also heard stories about the landlord disagreeing with the Public Housing Authority about fair market rent. You may feel your property is worth $1000 per month, but the Public Housing Authority might say it’s only worth $800. You can still rent the property for $1000, but the tenant will have to pay the extra $200, making them less likely to choose your property.