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Should You Rent Your Fredericksburg Home to Section 8 Tenant's?

Dodson PM - Thursday, March 2, 2017
Property Management Blog

A quick Google search on the topic of government subsidized housing voucher programs will yield opinions almost as polarizing as the 2017 presidential election. With that in mind, this post is meant to be as bi-partisan as possible: a simple guide to the pros and cons of navigating the often complex world of housing voucher programs. 

If you’re currently being faced with whether or not to consider a prospective tenant with a federal housing voucher, it’s important to double check your local laws on Landlord responsibility. In most cases, Landlords are not obligated to make their rental properties available to voucher recipients, though some cities, counties, and states may not allow for discrimination based on source of income or affiliation with a voucher program.

Pros of Renting to Section 8 Tenant's

Steady Rental Income (and typically at or above market rates)

→ Generating consistent income to a rental property is every Landlord’s dream, and government subsidized vouchers guarantee just that! Housing voucher programs in which a housing authority pays all (or typically no less than 70%) of the rent directly to the Landlord grant the consistent cash flow needed to keep your investment property performing well. As an added bonus, oftentimes voucher programs will pay above market rent rates for rental properties, definitely a plus!

Longer Tenancy

→ We’ll get to some of the burdens placed on Landlords in the “cons” section, but know that tenants receiving housing vouchers face similar burdens and red tape. Because of this, Section 8 tenants tend to stay in place longer than a traditional tenant base. Any experienced Landlord will echo the importance of keeping tenant turnover low over the long haul of your real estate investment.

Routine Inspections and Accountability (both landlord & tenant)

→ Nearly every housing voucher, especially those through the U.S. Department of Housing and Urban Development (HUD) have basic habitability standards that Landlords and Tenants must abide by. Local housing authorities will have these standards on file and readily available to you as a Landlord to reference and use to evaluate if your rental would qualify for their voucher program. Additionally, periodic inspections by the housing authority will help ensure the longer term condition of your rental, and hopefully, keep your maintenance costs lower over time.

Cons of Renting to Section 8 Tenant's

Longer Time to Wait for a Tenant (and cash flow) to start (red tape!)

→ Whenever Uncle Sam (and his money) is involved, you know there will be a healthy dose of red tape! Housing voucher programs are no different, and require both Landlords and Tenants to be properly vetted before getting up and running. This vetting process can take valuable time and money, so if you can’t afford to risk a longer vacancy while waiting for paperwork to be reviewed, a property inspection performed, etc. then using a voucher program might not be in your best interest. 

Pressures of Rent Control/Cumbersome to Increase Rent Over Time

→ Depending on the voucher your tenant has, you may not be able to achieve 100% guaranteed rent. Additionally, as a tenant’s need and individual case changes, they may receive less and less government assistance. As with the leasing process, the lease renewal process, especially if you aim to increase the rent amount, can be cumbersome to navigate. - property condition and the “nightmare tenant”

→ If you’ve read this far, there’s no doubt that you’ve done other research and heard horror stories about a Section 8 tenant destroying a rental property. Yes, there are truths to these stories, yes, there are exaggerations to these stories, yes, sometimes Landlords get the short end of the stick. An important question to ask yourself, though: is my rental property likely to incur serious damages if I rent to a traditional tenant instead? Look critically at your rental property and neighborhood to determine which option is riskier.

If you do make the choice to lease your rental property with a housing voucher program, take the time to educate yourself on the necessary procedures to follow within your municipality. Understanding the nuances of the particular housing authority you’ll be working with is the best way to set yourself up for success.

Gabe Kachuba Feb. 2017