Do you know about Section 8?

Let’s talk about Section 8; no it’s not a sci-fi movie or a secret government area. Section 8 is a federal housing assistance program for low-income families. So why should you care? Many of my clients even myself have had or still have section 8 homes. What this program means is this could be a valuable option for you when looking for a tenant. Under this voucher program, section 8 will cover a portion of the tenants rent and the tenant must cover the remainder. In some cases section 8 covers all of the rent if the tenant is on some kind of disability or hardship or for whatever reason. Section 8 basically takes 30% of the tenant’s income for rent. EXAMPLE: Tenant voucher from sec. 8 pays landlord $1,000. Tenant pays $200 for remainder.

Ok so here’s the fun part, rent checks go out 1st of every month. You typically see the federal portion around the 5th or 6th usually granted there’s holidays or human error. In my experience section 8 has been about pretty darn close to being on time, only time I’ve heard something from my clients, other investors or even myself has been in the beginning due to paperwork. Keep in mind the people at the section 8 offices are worked to the bone. As the owner or property manager you will have to collect the remainder however method you typically do so. If they are late or fail to make that payment you will deal directly with them. Section 8 is not your tenant babysitter they only subsidize the rent so you will have to make the business judgment call on what to do next. Same goes for utilities, tenants get a utility allowance. But who really wants to pay for the utilities or “front” them expecting the tenant to pay it every month. Because I like to brush my teeth with the water on and be wasteful, a bad habit I’ve almost broken completely. Even though properties where the utilities are included get paid accordingly, I’ve seen them higher than FMR’s.

Rents are determined HUD’s fair market rent for the area. The area that I’m most familiar with is Phoenix; the rental figures below are up to date as of this week. I won’t list 1bed or 5bed rooms just because the majorities are 2, 3 and 4 bedroom homes. The rents are max FMR for the phoenix area.

2bedroom – $877
3bedroom – $1,277
4bedroom – $1,495

So how do you get started? Call up section 8 office; stay on hold for 10+ minutes. Tell them you’re a landlord and wish to put your property on their list. They’ll ask you for sqft, bedrooms and phone number. Don’t forget when you put a “FOR RENT” sign up throw a rider that says section 8 ready/friendly or accordingly. Landlords cannot charge over FMR for rent. EXAMPLE: Total rent $1,200, voucher pays $1,000 and tenant is SUPPOSED to only pay $200. You can’t tell tenant to pay $400. If you know you can get more than the max FMR and want more don’t go section 8.

Certain investors go section 8 because it can be fairly easy to find a tenant. Right now section 8 *phoenix* is not accepting anymore applications. The tenants I’ve spoken to tell me it’s very difficult to get on the voucher program for subsidized housing and there is a big waiting list. Also was told if they ever get evicted once from a section 8 home they lose their voucher.

The quality of tenants I’ve come across in the past/present with other investors is a preconceived notion that because they are low-income they are not good tenants. There have been some that have been long term with no hassles. It is a case by case basis just like renting to conventional tenants or higher end properties. I’ve heard/had experiences with people paying $2,500/month for rent, then trash the place and steal appliances along with fixtures. Same goes for section 8; my point here is sec. 8 is another option for the savvy investor to cash flow their properties with the end result making more money! Landlords/Property managers are responsible for screening the tenant and maintaining that property accordingly. Please if you are a new landlord familiarize yourself with the Arizona Landlord & Tenant Act.

What I liked about section 8 is they do a yearly inspection on the property, which makes sure the property is maintained and in livable condition. Some of the issues I’ve dealt with were a/c units they always have to be serviced because we know how our AZ heat affects a/c units. This can be a tedious process for some landlords because inspectors want the walls clean, so black marks and scuffs that happen over the year need to be touched up. There’s a checklist of what inspectors look for on the section 8 website. Another investor told me about his section 8 properties is that he rather sees some of rent rather than none of it every month. If you’ve ever had a tenant who was late we can relate to that!

More information about Section 8 in Phoenix here http://phoenix.gov/CITZASST/sect8hou.html or call your cities section 8 to learn about their FMR!

Ask me about cash flow properties in the phoenix area!

Dalat Nguyen
BuyerTours Team
Homesmart
Cell: 602.741.3162
Fax: 480.718.7552
dalat.nguyen@phoenixpowersearch.com