Going the Section 8 Route for a Rental
A couple of weeks back in my rental property update I talked about how I’d decided to go the Section 8 route for it. This post will talk about how that went for me.
For those not familiar (and I wasn’t really either) Section 8 is a portion of US housing law that allows for government-provided rental assistance to the low income families who qualify and are accepted by the program.
The program basics
Here’s a little excerpt from the fact sheet that explains the basics:
“A family which receives a housing voucher can select a unit with a rent that is below or above the payment standard. The housing voucher family must pay 30% of its monthly adjusted gross income for rent and utilities, and if the unit rent is greater than the payment standard the family is required to pay the additional amount.”
So basically the government decides what’s a fair rent range, and then they will pay 70% of the housing cost difference for the unit. Note that this doesn’t necessarily mean the government will pay 70% of the rent, however. It could also be more or less than that.
Even though it’s a federal program run by the US Department of Housing and Urban Development (HUD), if you want to accept Section 8 vouchers as a rental property owner (and I presume if you want to use them as a tenant) things are handled on a local level by the area’s public housing authority. So I had to find that info for the city my rental property is in.
The next step was to get the house ready for rent and make sure it was in good shape, which of course I had been doing anyway. I also had to figure out what amount I wanted to rent the house for. To do that, I searched for similar available units in the immediate area…and couldn’t find any. There were pretty much only 1 & 2 bedroom apartments for rent, not 3 bedroom houses. So I expanded my search to a larger area and went toward the lower end of what I found. (The other houses were in better neighborhoods.) In the end I set the rent at 1% of my purchase price, with the tenant to pay all utilities (water, sewer, trash, electric, & gas).
Finding a tenant
I made up an online rental flyer (using Postlets, which is pretty cool) and offered the house for rent. I was also able to submit it to a list of available section 8 homes kept by the city, so that made finding a tenant a lot easier. (The majority of interested people who called said they had section 8.)
It was “rent out as normal” in the beginning. Prospective tenants came and checked out the house, and filled out an application if they were interested, etc. Basically I followed the usual process you’d use to rent out a property up until this point.
From here on out is where things got a little complicated.
Once I found a tenant (which didn’t take long at all) I had to have the unit inspected by the public housing authority and approved as being eligible, and the lease agreement also had to be approved. (I assume they just check to make sure your agreement isn’t violating any housing laws.) In order to be a Section 8 landlord you have to use the same lease agreement you use with anyone else, which of course was no problem. It also had to have a special HUD addendum attached to it, so I just found the latest version of that online.
The tricky part was that you don’t know how much of the rent the tenant will be responsible for and how much the government will pay until everything is completed, and you can’t figure any of that out until you have a prospective tenant and the unit and lease are approved.
The worst part? The public housing office was massively short-staffed and backed up. My tenant had a deadline to be out of their old place because their lease was almost up. So there was a huge crunch to try to get everything coordinated quickly and with just the right timing.
Spoiler alert: We failed at that.
I got the inspection scheduled for as soon as possible, which ended up being just a few days before the tenants were due to move in. I went over the checklist of stuff they look at during the inspection, and didn’t see any reason why it wouldn’t pass.
Everything worked, was clean, and in good condition.
But the house failed the inspection because it didn’t have baseboards in two rooms (even though the space between the tile floor & the walls was sealed up — with grout, for some odd reason — and there was no way bugs could come in there.) It also failed to qualify as a 3 bedroom, which was an issue because the voucher was for a 3 bedroom and not a two. The house is listed as a 3 bedroom for tax purposes, etc., but the inspector said it only qualified for Section 8 as a 2 bedroom plus den because there wasn’t a built-in closet in one of the bedrooms.
I was a little baffled, because lots of old houses do not have built-in closets in one or more of their bedrooms. But, ok. Everything came to a screeching halt for a day while I caulked the bedrooms without baseboards (it apparently wasn’t the baseboards themselves that were required, just the caulk) and made a trip to IKEA for a wardrobe so the third bedroom would have a closet included and be considered the third bedroom.
We lucked out and the city was able to reinspect right away. The house passed and was approved as a 3 bedroom. But the lease still had to be approved, and the amount of rent the tenants would be paying determined. The tenants who had to be out of their current place the very next day.
I ended up letting them move in with their paid deposit and a signed backup agreement for a daily rate that was good for one month — in which case they’d have to move if everything wasn’t straightened out by then.
Finalizing the details
The tenant also signed the lease, and we submitted it for approval. Did I mention the housing department is really understaffed and backed up? About 3 weeks later they approved the lease, figured out the amount the tenant would be responsible for, got my tax information, met with me, and explained everything. Shortly after that I received a check for the previous and next month’s worth of rent.
Aside from that stressful period where we weren’t sure if things would be approved, I really like having the house in the Section 8 program. That’s because the housing authority does the background checks and makes sure things are on the up and up. They’re also less likely to fail to send the checks on time, etc. The tenants are also motivated to continue to qualify for the program, which to my way of thinking means they’re more likely to meet the terms of the agreement and take care of the house.
In theory the process should be a little bit easier next year, since although the house will need to be reinspected it’s at least already in in the program. And if the current tenants want to re-up their agreement, that should be an easier process too. I hope :)
Do you have rental property? What’s your experience been like? Do you accept Section 8 for it?