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.

Con: Inspections

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.

Con: Stigma

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.

When dealing with Section 8 and any other tenants, screening potential renters is extremely important. If you are worried about the wear and tear that is often (whether fair or not) associated with HUD-assisted tenants, the onus is on you as a responsible landlord to thoroughly screen all applicants. At Jason Cohen Pittsburgh, we cannot endorse Section 8 housing either way. It is up to you as a landlord to decide if the pros outweigh the cons.

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Home Improvements that Don’t Add a Lot of Value to Real Estate Investors

The housing market is slowly recovering. Real estate investors are having success again. But it’s still a buyer’s market. Homebuyers are more cautious now. They know better. They’re not going to spring for the luxuries that they may have before the Recession. They know what they can afford.

It’s time for real estate investors to make sensible improvements that add real value, not add luxurious unnecessary features to entice buyers who may be trying to live beyond their means. Banks have wised up and are stricter with their lending. So, just like the homebuyer, a real estate investor should be cautious with their renovations. When flipping property, the following “improvements” should probably be avoided:

Creating a Home Office.

Sure, telecommuting is getting to be a more viable option every day, but home offices tend to offer less than a 50% recoup on installation expenses. They’re not for everyone — some buyers may see more value in the space as an extra bedroom — so it doesn’t make too much sense to add it to an investment property.

Adding a sunroom.

Again, not for everyone. Some people may not think that a solarium is a necessity. Some may not know what a solarium is. Either way, it’s not the best investment.

Adding a bathroom.

Though it may seem like a huge selling point, it’s usually not. The amount of money you’d have to add to your selling price to recoup your investment in adding a bathroom may scare away buyers who see it as a luxury that they’re not willing to pay for.

Luxury bathroom remodel.

Jacuzzi tubs and enormous glass showers with massaging heads may seem enticing, but they’re practically never worth it.

A pool.

Granted, a real estate investor is generally not considering adding a pool to properties that will be flipped, but it should be mentioned as a money-guzzling undertaking that does not offer a return.

Adding a master suite.

It’s not Versailles. It’s an investment property. Most homes don’t have wings, so a master suite may seem a bit much in the average home.

A roof replacement.

Unless this is really necessary, like you’re buying a house that was the victim of the tornado in The Wizard of Oz, you probably don’t need to replace an entire roof.

As a real estate investor, a general rule that you can follow when it comes to property renovations is that luxury may be, well, too much of a luxury.