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Michel Lautensack's Blog

By Del Val Realty & Property Mgmt | Broker in Malvern, PA

Section 8 – Good or Bad Program?


You may be a brand new investor or a seasoned investor looking for new ways of increasing your income.  Some of the real estate guru's have made big money selling real estate investing courses touting the benefits of government programs, specifically Section 8 housing, and how – if you do it right – you can make money hand over fist.  Others take a more cautionary approach, essentially arguing just the opposite.  With two opposing views, who's right, who's wrong, and what's the difference?

 

First of all, there are a couple of benefits to the Section 8 housing program.  If you rent to Section 8 tenants, you know you're going to get your rent money.  As a general rule, it's going to come in like clock work.  You'll have your money each and every month, conveniently deposited into the bank account of your choice.  If the first falls on a weekend or a holiday, you'll get paid early.

 

In addition, if you advertise the fact that you accept Section 8 tenants, you'll probably have no shortage of prospective tenants lining up with a housing voucher in hand ready to move in on a moment's notice.  When tenants are hard to come by, say in a strong housing market, it's an excellent way of guaranteeing a steady flow of renters willing to be your tenants.  Unfortunately, this is where the list of positives ends.

 

Section 8 tenants can present a host of challenges and problems to you from a variety of angles.  I'll list some of the most common and let you make the call as to whether this program is worth exploring in greater depth. 

 

As a property owner, you may be lured by the easy money that renting to these people can be, but if you think the Paperwork Reduction Act applies to Section 8, you have a lot to learn.  Whenever you deal with any government bureaucracy, there are massive paperwork considerations.  If every “I” isn't dotted and every “T” crossed on every form, schedule, etc. that the government throws your way, you're in jeopardy of not being paid, having your payment delayed or – even worse – being declared a slumlord.

 

As if that isn't enough, the paperwork requirements also come with property inspections.  There are rules, schedules, policies and procedures to follow.  In order to participate in Section 8 you first have to qualify as a property owner, which means an inspection.  If the inspector finds deficiencies of any kind, they have to be corrected on the government's timetable.  Once you've met the timetable, you have to repeat the inspection process.  When you've waded through all the red tape necessary to accept tenants, you really get into the heart of the problem of the Section 8 program – dealing with tenants.

 

There are Section 8 tenants who are attentive to your rules, but I think the bad apples dwarf the good tenants with problems you thought you'd never see.  If you have a troublesome renter – one that can't/won't pay their rent on time or is a constant troublemaker, your inclination is to give them their walking papers (i.e., eviction), but if the individual you're trying to evict is a Section 8 renter, you have to follow due process rules that are stricter than any state laws anywhere.

 

Once you've begun eviction proceedings, Section 8 tenants are entitled to free or very low cost legal assistance.  Once an attorney enters the picture, this turns into an expensive, time consuming process.  You need to ask yourself at what point does a guaranteed rent payment become not worth the hassle, the expense and the headache?

 

In addition, Section 8 renters aren't famous for taking care of your property, so unless you're willing to entertain the thought of having to make extensive repairs with little hope of recovering damages (because these people lack the resources that would enable you to collect on any judgment returned in your favor) it is probably in your best interest to not involve yourself in the program to begin with.

 

Only you can decide for sure if you want to participate in the Section 8 housing program.  If you do, be vigilant, be careful, and know ahead of time what obstacles you'll need to overcome.  You will probably decide in the long run to stick with a known commodity: non-Section 8 renters.  At least if you have a bad renter it won't take an Act of Congress to get them out of your property.

 

 

About the Author:

Mike Lautensack is the owner of full service Residential Property Management

company based in and around Philadelphia, PA.  He advises real estate investors how to build wealth and financial security through hassle-free ownership of investment real estate with their “No-Hassle Property Management Program.”  This proven management system allows owners to enjoy the financial benefits of cash flow, tax savings, and wealth creation while it GUARANTEES you will never receive a late night emergency call, deal with a lengthy eviction proceeding or ever have to interact with an irate tenant.

 

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