Buying apartment buildings that provide Section 8 Housing is so successful it has been called a license to print money. Obviously, we landlords do not really have the capability to print money. When Uncle Sam ensures your rental income, it’s likely the next best thing.
Federal housing assistance for low-income households started throughout the Great Depression as a way of transferring individuals from a substandard shelter and into safer housing. When shanty villages vanished and sub-standard housing was no longer the crucial problem, the plan focused on helping low-income households cover the increasing portion of their income spent on rent.
Today, low-income families that qualify for Section 8 pay a maximum of 30% of their modified monthly income on rent and resources. If a renter makes $2,000 per month, he’d pay no more than $600 for rent and resources. In case the Fair Market Rent for his flat is $1,100, the government pays the landlord the distinction of $500. One note of warning the Fair Market Rent is based on the U.S. Department of Housing and Urban Development, therefore, it is not a Marketplace rate in the feeling that the free market establishes it. Understandably, San Francisco, California rent levels will be higher than Milwaukee Wisconsin.
Apartment building owners aren’t required to take part in the Section 8 program. There are several Pros and Cons to consider when determining if Section 8 is the right technique for the building.
- You do not want the government involved with your company.
- You do not want the government checking your property for HUD quality requirements.
- You would like to be capable to charge rent levels above the FMR as set by HUD.
- You’re concerned that Section 8 tenants won’t maintain their units or adhere to residence community rules.
- You’re concerned that the Section 8 reputation may adversely affect your property market value.
It is more time intensive and potentially pricey to evict Section 8 tenants since judicial activity is needed. Benefits to offering Section 8:
- No shortage of tenants.
- Better quality of low income tenant since if the tenant damages the unit or is late paying the rent they could be disqualified for Section 8 help.
- Section 8 had no measurable impact in transitioning individuals from government assisted housing to separate living.
- Once you’ve found a great Section 8 tenant, you might have them for quite long time