Ask Brian is a weekly column by Real Estate Expert Brian Kline. If you have questions on real estate investing, DIY, home buying/selling, or other housing inquiries please email your questions to [email protected].
Question from Hannah in AR: Hi Brian, Two months ago I inherited three rental houses from my brother’s estate. He was a landlord for almost 30 years, but I have no experience with it. The houses are in two small towns near each other but about 45 miles from where I live. The houses are between 25 and 40 years old. Although they are a little old, my brother kept them in good repair and was picky about having tenants that took care of them. Two of them are two-bedroom houses and the other has three bedrooms.
My husband and I have been racking our brains about what to do with these houses. One is currently vacant and the other two have tenants with leases that expire over the next several months. After lots of discussion about selling them, we have finally decided to keep all three as rentals. However, because one has been vacant for several months, we are concerned if we can keep them rented out full time. My husband’s sister suggested that we look into the Section 8 program because there is always a waiting list of approved tenants. Do you think this is a good idea and where do we start?
Answer: Hello Hannah. Most Landlords either love or hate the Section 8 program. They love it because they don’t have to worry about receiving most of their rent on time, every single month. They don’t need to worry about checks being “lost in the mail” and a million other excuses tenants use to not pay their rent on time. And they love it because they can charge a lot for their rent.
On the other hand, one of the reasons that some landlords don’t like Section 8 is the government regulations involved. They don’t want the government involved with their rental properties. The regulation includes a safety inspection when the tenant moves in and ongoing inspections once a year or every other year. After the inspection process, you’ll need to fix every item on their list before the tenant is approved for move-in. The inspection criteria are more stringent than most landlords expect, so the expense can be costly. Because Section 8 is a government housing program, you can expect the process to move slowly.
Section 8 housing is a government-sponsored program with its roots in the United States Housing Act of 1937, which authorized housing assistance for low-income Americans, and access to safe and sanitary rental properties. Today, Section 8 housing is formally known as the Housing Choice Voucher Program. It provides financial assistance to nearly 5 million households across the country. If the Section 8 program didn’t have serious advantages, there wouldn’t be so many property owners offering units through the program.
One of the first things you should know is that there are two ways that section 8 works — Voucher-Based and Project Based. Tenants with voucher-based assistance may choose where they live, while project-based vouchers are attached to a specific unit. Therefore, if a project-based tenant moves, the rental assistance stays with the unit, and cannot be carried with them to another building. My understanding is that HUD stopped awarding new contracts for the Project Based program in the 1980s, so only already-participating landlords can renew their contracts today.
Although Section 8 is a federal program, it is administered through what is known as your local public housing authority (PHA). You want to start by finding the PHA responsible for section 8 housing where your houses are located. The PHA should provide you details on the local process and the method for posting your vacant units. My suggestion is that after you talk with your local PHA and you want to go ahead with Section 8, you start with the house that is currently vacant but hold off on the other two until you have some real-life experience with the program in your area.
Because the program is administered locally, some of this may vary but here is what you can generally expect;
Hannah, now that you have an overview, you should also consider the pros and cons.
Hannah, now that you have some basic information, the good, the bad, and the truth, go forth and choose well! The Section 8 Housing Voucher Program has its place and can be a viable option for many landlords. But before jumping in, make sure you know exactly what it is you’re getting into.
Please leave a comment.Our weekly Ask Brian column welcomes questions from readers of all experience levels with residential real estate. Please email your questions or inquiries to [email protected].