Sunday, August 17, 2014
The Pros and Cons of Renting to Section 8 Tenants
Sure, there are the horror stories of tenants turning your property into a veritable house of horrors, but renting to Section 8 tenants can have advantages. The U.S. Department of Housing and Urban Development runs this financial assistance housing program to help low-income families afford rentals. As with any demographic, there are risks and rewards to renting. At Jason Cohen Pittsburgh, we believe in thoroughly researching a program before either writing it off or diving in headfirst.
Pro: Rent comes in on time via direct deposit
Since HUD is responsible for the payments, rent is automated and deposited to a landlord on time every month. The federal government does not have medical or education expenses or vacation plans that make monthly payments late.
Local Public Housing Authorities conduct frequent inspections in 13 aspects of the property that must all meet their standards.
Pro: HUD takes care of payments if a tenant cannot
Even if a resident falls into unemployment, HUD will cover the rent until work is found.
Con: Lack of security deposits
The vouchers that HUD supplies for monthly rent payments do not cover security deposits. Obtaining the deposit directly from the tenant can be challenging, but it should be an essential step towards ensuring the state of your investment.
Pro: Higher profit margins
Because of the government assistance, you can charge more monthly rent in lower-income neighborhoods where properties are much cheaper to purchase.
Con: Limits on voucher amounts
Although you could receive more money in rent from HUD if you were to rent to non Section 8 tenants in the same depressed area, there are also limits on how much rent the government will pay each month. HUD calculates Fair Market Rents annually and allots voucher amounts based on those while factoring in number of bedrooms and condition of property. Even if your property is immaculate, there is a limit on how much HUD will pay.
Pro: Free marketing
Tenants are relatively easy to find by listing your property on the Section 8 web site. Keep your marketing costs low by containing your advertising on a free government site.
While you may not have any trouble renting your HUD-assisted unit, you may have issues renting other units in your building due to the stigma attached to Section 8 tenants. Even if the conception that Section 8 tenants are unruly is wholly untrue, it is still enough to drive other potential renters away from your property.