US - DETROIT - How to Rent an Investment Property to Section 8 Tenants
The United States government created the Section 8 program as a way to help low-income families, the disabled and the elderly to afford housing. Today’s Section 8 tenants are given a housing voucher that they can use to rent a home that qualifies under the Section 8 program. Depending on the financial situation of the tenant, the program will either pay a portion or the full amount of the monthly rent.
For many landlords, renting investment properties to Section 8 tenants is a plan that’s ripe with opportunity. Today we’re looking at the ins and outs of the Section 8 program, so you can decide if it’s the right option for you.
Who Are Section 8 Tenants?
There are three main qualifications for a person to become a Section 8 tenant. First and foremost, their income is taken into consideration. According to Angela Colley, a mortgage and real estate writer for Money Crashers, the housing authority “gives 75% of their funding to families whose income falls at or below 30% of the median income level.”
The next consideration is the lifestyle of the potential tenant. In order to qualify, a potential tenant must undergo an interview and strict screening.
Finally, in order to become a Section 8 tenant, renters must be a United States citizen with proper documentation. Depending on the circumstance, legal immigrants are sometimes allowed to pursue Section 8 benefits, as well. To learn more about the requirements for Section 8 tenants, check with your local housing authority.
Why Would I Rent Out My House to Section 8 Tenants?
Pool of Renters – In most situations, it’s easier to fill a Section 8 home, as most urban areas have a long waiting list for Section 8 tenants. The U.S. Department of Housing and Urban Development (HUD) allows you to advertise your property for free, and the same is true for most local housing authorities.
Higher Rents – Section 8 landlords are often able to set rent prices a bit higher than other private rental agreements.
Payments On Time – If you’re a veteran to the renting game, you know that getting your rental payment on time (or at all) can be a challenge. With Section 8, you’re guaranteed to receive your rent (either the full amount or a portion of it, depending on the situation), at the same time each and every month.
Improved Community – Not only are the benefits of Section 8 advantageous for landlords, but they can also help low-income families, and in turn, the communities in which they live. Lifting the weight of monthly rent will allow them to stretch their budgets further, providing them with security.
These advantages make Section 8 a great option for many landlords. However, before you’re ready to rent your property to Section 8 tenants, take a hard look at the disadvantages.
In order to rent your property to Section 8 tenants, you’ll need to do the following:
Contact your local housing authority and fill out the application form for the property, which will include details about the house, including address, available appliances and the number of bedrooms.
Once the application has been approved, your property will be inspected by a Section 8 inspector to make sure everything in the building is up to code. Once your home is approved, it will need to be inspected on a yearly basis. Depending on the situation, this part of the process can cause some major pitfalls for landlords, so do your due diligence and prepare the property accordingly.
After the property has been approved by an inspector, you can start accepting Section 8 housing vouchers from applicants who’ve qualified for the program. It’s important to note that Section 8 is not responsible for creating and upholding a lease. You’ll have to work that out with a prospective tenant.
Once you’ve chosen a tenant and they’ve signed a lease, your local housing authority will mail you the percentage of the check agreed upon, while the tenant will be responsible for the rest.
Is Section 8 Right for You?
While there are some challenges to renting your investment property to Section 8 tenants, the benefits are appealing to many landlords. If you’re interested in learning more about purchasing an investment property, for Section 8 tenants or otherwise, reach out to a home loan expert today.