The Problems With Renting Out Section 8 Apartment Units
Section 8 housing also known as Section 8 of the Housing Act of 1937 is when low-income families receive help to pay a private landlord up to 30% to 40% of the rent. The money is paid directly to the landlord and not the renter. According to some reports, the two states with the most Section 8 housing in Washington D.C., and New York City.
My story as a landlord begins as your typical landlord’s story but it takes a twist when I started renting out to Section 8 beneficiaries. As many know the majority of Section 8 beneficiaries are low-income people and like some people do these certain folks ruined my apartment when they left. I went to go see the condition they left it in and it felt like I was walking into a cave. A dark, messy, smelly cave. I looked around at the walls of my Section 8 rental and saw black the only black.
The tenants had decided to add some “color” to the décor. But seriously, who paints walls black? And poop? Who leaves dog poop all over the floor? And trash? How can a family of four leave two, not one, but two dumpsters’ worth of trash? I started calculating the cost of priming and repainting, carpet cleaning, and trash removal. How could a newly renovated property go from rent-ready to needing 4K of repairs in only a matter of months? At 4K, this Section 8 rental holds the record for my most expensive turn. These are 10 disadvantages of Section 8 rentals in California.
1. No Recourse for Damages
Besides the initial deposit, landlords find it tough to get money from a tenant who damages the property. If a Section 8 tenant trashes your unit, you can email documentation to the housing office. I’ve been able to get destructive tenants to lose their vouchers, but I haven’t been able to get any monetary compensation.
2. Extra Repairs
Section 8 has fairly strict rules about repairs that are needed to get a home approved. Before you market your property as a housing rental, get a copy of the requirements so you know what to address beforehand. When the inspector comes out, try having a handyman around to make instant repairs. Many minor issues can be addressed on the spot and you can avoid delays in passing your inspection. Failing the initial inspection and needing a re-inspection takes a lot of time and keeps your property vacant longer.
3. Wear and Tear
A Section 8 tenant doesn’t pay a mortgage or even all of their rent, so they are not invested in your property. Consequently, you might find that some rental assistance tenants aren’t as concerned about keeping up a property.
4. Guest House
Also, be aware of long-term “guests”. That family of three on the lease might offer floor space to a boyfriend, cousin, parent, and niece. The extra people mean extra wear and tear. You can report families for added tenants but you have to make the judgment call.
5. Earned Income Disallowance
The Section 8 office might state they will pay $798 per month in rent for your property. But after your tenant moves in, you might suddenly be notified that the rent amount has been lowered by $50.
6. Family Obligations
In my experience, these changes happen most often during the month after a tenant moves in.
7. Yearly Inspections
The Section 8 office will inspect your property at least once a year. You will get a sheet with the repairs you need to make and the tenant needs to make. I sort of like this because you get to look closely at your property but the inspections and repairs can add up.
8. Accounting Issues
Section 8 staff members are stretched thin. Once, after a rental assistance tenant moved out, I kept getting checks. I called and mailed the Section 8 office but the checks kept coming. I ended up getting 6 extra checks. Granted, unwanted checks are better than no checks but unwanted checks add to the monthly dose of paperwork. Be on top of your paperwork for housing. Submit any address or property management changes as soon as you can. Try to get some extension numbers for staff members because it can be tough to get through on the phone.
9. System Issues
One unfortunate outcome was that rents went down. I believe this type of scenario is rare, but investors need to recognize they have no control over Section 8.
10. Rental Assistance
Section 8 is a government organization where the rules can change at any time. With Section 8, you have to roll with the punches and realize you can maneuver rental assistance a bit but you can’t control it.