What Real Estate Investors Need to Know About Section 8 Housing

What Real Estate Investors Need to Know About Section 8 Housing

Last week, I started the discussion on why investing in Section 8 Housing can be advantageous–despite what some investors will tell you. This week, I’m going to break down things you need to know before you get into it. This is a little cut and dry, and for that I apologize, but the information is solid! Hope it helps!

  1. Rent is determined by HUD’s Fair Market Rent Index and the local Housing Authority determines if your property’s neighborhood is renting for that amount. Google fair market rents and you’ll be able to find out what a particular area is paying.
  2. Unit must have one bedroom for every two occupants. Now, it can be an apartment, duplex, single family home or mobile home–just make sure there is a room for every two occupants. I personally recommend not buying less than two bedrooms–and I like to be in the three-bedroom range. This is my preference for appreciation and long-term value.
  3. Families are issued a housing voucher that is good for 60 days. This means they need to sign the lease before that time is up. See HUD.GOV or HUD.ORG for more information on vouchers. These vouchers will tell you how many bedrooms the family needs and therefore the rent.
  4. Landlord (you) signs a lease with the tenant and a HAP contract with the Housing Authority. You can’t just sign a lease with the tenant. The good news here is that it is your contract as a landlord. So you can relate to the tenant as a landlord just as you would in any other situation.
  5. Landlord screens tenants like any other tenant. You will need to do a criminal background check to know what you’re dealing with. Do a credit check (pay local mortgage broker to run credit, with tenant’s approval, and charge the tenant). With Section 8 tenants, it’s not as important with other tenants because these people will typically have a much worse credit score. But the government will pay a significant portion of their rent. Now whenever you’re screening a tenant, I recommend that you go see where they live now. This way you can see how they take care of their current place. If you cannot see where they live, don’t approve the application.
  6. Tenant pays no more than 30% of their income–a maximum of something in the area of $200 a month. Housing Authority’s rent portion is mailed 1st working day of each month. You are responsible for collecting the tenant’s portion of rent yourself.
  7. Call or visit the local housing authority and ask them to have your property(s) put on their rental list. Also run local ad in newspaper and put “Section 8 accepted” in ad. And then call Section 8 to notify them that you have an approved tenant and request a property inspection so your tenant can move in.
  8. Inspections are done every 12 months to make sure that they are to HUD standards. Check out HUD’s site for more.
    • Must have separate living, kitchen, bathroom, and 1 bedroom for every 2 people.
    • Living room and bedrooms must have 2 working outlets. Cover plates cannot be cracked or broken.
    • All lights must have covers.
    • All units must have fire alarm or smoke detector in working condition on each level.
    • All windows must be operational and able to be locked and have screens.
    • All steps (interior and exterior) of 4 or more must have a hand rails, possibly on both sides.
    • All crawl space entrances should be covered and exterior vents covered with screens.

If this all sounds intriguing to you, then get started! I am a firm believer in Section 8 Housing. And let me know any questions you have about Section 8.

Do you have any questions about working with tenants? Let me know in the comment section below!

Check back Sunday for more tips on investing!

Billy Epperhart
Billy Epperhart
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