When my apartment became available for rent - I did all the normal things you would do to get it turned around quickly. We washed down all the walls and gave it a fresh coat of paint. Pulled out the old carpet and had it replaced with a new one. I even demolished the old countertops and had a new countertop installed as well as new sink to go with it. I knew the place would rent quickly and had no concerns about it whatsoever - after all everytime one of these units becomes available - I have plenty of applicants that want to rent the place. So I go my trusty ol'e craigslist account and post up the apartment and all its amenities. Now time to sit back and watch the money roll in. The response was.......
underwhelming
Not yet worried , but curious as to why it wasn't getting the traction I was expecting, I wait it out - after all , I had a few things in the yard to take care of and the apartment wasn't exactly ready yet anyhow - but I wanted to start screening in advance so I wanted to get someone lined up and ready to go. Besides, I figured, I hadn't posted up any pics to go along with it so maybe they didn't have enough motivation. I was going to hold the open house on a Sunday - the day after the carpet was installed - the last of my updates - so I still had a week to get some interest.
Almost a week had gone by and Sunday was approaching - only TWO people had responded to the ad to request the address. I don't want to say I was worried exactly - but something wasn't right. It'd been a while since I've had to rent the place, but it had never been a problem. So I decide to up the ante a little - after all - maybe Craigslist doesn't have the same punch as it used to. I decided to list my open house on Zillow. As soon as it was listed - they informed me that it was also being posted on several other sister sites to gain more exposure - not bad - I could use all the exposure i could get. After all, I had the apartment all cleaned up and ready to go, and only 2 prospects.
The next morning when I got up - I had multiple emails and texts - ALL OF THEM WANTED MY APARTMENT! Now THIS is what I'm talking about - this is the kind of response I'm used to. What i'm not used to , is how powerful Zillow is and how wide of a reach it actually has. I learned something new already and hadn't even meant to. So my text is blowing up, my phone is blowing up and so my email. Looks like I'm the "belle of the ball". So things are right and I'm pre-screening over the phone and inviting others to come look at the apartment.
I recognized a pattern that started to develop almost immediately. About 80% of the people who contacted me wanted to know "Do you take Section 8?" Iv'e been renting out apartments for over 17 years now. My standard answer is - "Sorry - I'm not set up for Section 8" which is absolutely true. I had never been interested in the hassle of dealing with Section 8 tenants and equally if not more hesitant to deal with government agencies telling me how to operate my apartments. As usual, I fell back to my standard answer and rejected the notion of Section 8 tenants.
What is Section 8?
It's a government program actually called "Voucher Choice Housing Program ( Section 8)" and provides assistance to very low-income families to afford decent, safe, and sanitary housing. Housing can include single-family homes, townhouses and apartments and is not limited to units located in subsidized housing projects.
Why I don't accept Section 8
When I talk to other investors about whether or not they accept Section 8 - there is mixed response. Some investors swear by it while others like myself have major reservations about it. Here are some the reason that I'm not a fan of it.
I have always had to pay my rent myself. From the day I brought home my first paycheck - I was paying rent. I didn't have government subsidies and giveaways - I was taught that a person earns their way in life. I started working at the age of 13 and have been paying my own way since I was 18. The idea that some people come along and get a free ride doesn't really sit well with me. After all, that ride isn't free - someone is paying for it - hardworking taxpaying citizens that pay their own rent. On top of that - they give you a list of items that you have to adhere to by their standards or the apartment won't qualify for the program. - So now I have to go out my way to make sure everything is up to par so that someone else can get there rent for free. So my feelings were that I do not want to reward a system that doesn't encourage self sufficiency.
Other reasons stem from wondering how well someone will treat the place when they don't really "have any skin in the game" . We all know that apartment dwellers typically don't have the same reverence for for the apartment as a homeowner does for his home. Lets face it - people treat things differently when it isn't theirs and especially if they didn't pay for it. What was someone who gets free rent going to do to my place?
A Case for Section 8
I've also heard some good arguments for Section 8 too. Some investors really love the program - they say that they get their rent paid on time every month. They like getting guaranteed payments directly deposited to their bank accounts on the 1st of every month. Among the benefits , I'm told - it takes a long time for a tenant to get qualified for the program, so once they are approved - they are inclined to maintain that status so they can keep getting their rent paid.
I had the opportunity to meet with an apartment manger who works for the city and deals with Section 8 on a regular basis - He came to my weekly real estate meetup group and explained to me and my group of investors in more detail how the program actually works. It turns out that there are a lot of misconceptions about the program.
To start with, Section 8 does not pay the entire rent - it is closer to 70-80% depending on the recipient. The tenant is still responsible for paying a small portion of the rent. He also said that they do inspections periodically and if the place isn't kept clean and in good condition, the tenants could risk losing their Section 8 benefits. He confirmed that it is however a long process to get accepted into Section 8 and so those who do typically do not want to lose it - so they have an incentive to pay their portion of the rent on time and keep the place in good condition. Some "skin-in-game" you could say.
Section 8 payments come on time and they are deposited into your bank account automatically on the 1st of the month. Every month. For landlords who are used to getting excuses instead of rent checks on the 1st - this is something that can sound like music to their ears.
There is not a lot required from the landlord to accept Section 8 - the tenant brings you a form and you fill it out - basic stuff like how many bedrooms , what kind of appliances you have there and, and how you would like to receive your payment. The tenant turns in the form ( or you could take it in yourself) Then they calculate how much they are willing to pay and will approve or disapprove the rent. If they feel the rent is too high for the area or the amenities they will reject it - however they will tell you the maximum amount that they are willing to pay. I found out that in my city , they were willing to pay more that I was already charging.
As I turned away one applicant after another - I met one applicant that I really liked. She was working part time for a staffing agency and and is going to school for business administration. She already lived close by so she really knew the neighborhood - which I felt was important because it's a little rough around the edges and I was looking for people who were familiar with the location. The apartment itself is very nice, and we don't really have a lot of crime, but we are next to canal - so we get a lot of transient foot traffic. This applicant already lived right up the street, and had the canal behind her house too. Things were starting to look good and it looked like I was going to have someone who was responsible and seemed well rounded and would be able to keep up the place - then she the dropped the question -
" Do you take section 8?"
As usual , I said no. I told her that I had never gotten set up for it before. She told me that neither had she and that this was her first time getting Section 8 . She had just gotten approved and was on the lookout for a place for her and her two children. I asked what was involved with it and she told me that I just had to fill out single form and if they approved the unit, they would start paying me the rent. She already had everything ready to go if only I was willing to approve it. We had just finished updating the place with new paint , carpet, countertops, etc. I didn't seem like it should have any problems passing their inspections.
I had an opportunity before me. I had never been involved with any government subsidy programs before so I thought that this could possibly be a learning experience. I could learn how the program works, and then I could share that experience that with my meetup group and tell then what Iv'e learned. I also had a chance to help make a difference in this woman's life - not something I typically put at the top of my priorities when it comes to renting the apartment. But I wanted to expand my horizons and after learning more about the program from other apartment managers - I was willing to give it a try and take a chance on this applicant.
The paperwork had payment information and requested my Social Security Number - so I didn't want to just hand it over to my applicant. I told her that I would meet her downtown and go to the appointment with her to turn in the paperwork. She was surprised, but accommodating. So we both met there on the following Thursday and I really wanted to be sure that I had filled everything out correctly on my end so that there wouldn't be any hold ups in the process. I also wanted to verify the order of operations - I knew that I didn't want to have a signed contract before my unit was accepted, but there was paperwork asking for the contract - so I brought a blank one to have it ready. So the staff was very helpful and it was a very quick and simple process - they verified everything and we were done. They told me to hold off on having her sign the contract until the apartment was approved. Now we just had to wait for the inspection.
Within about 5 days , the tenant called me to let me know that we had an inspection date and sent me a checklist of items that they would be looking for. Basically stuff like working heat, appliances , no cracks in the windows , holes in the walls, doors all close properly and standard items like that. I made sure everything was as it should be and prepared for the inspection.
The day came and I met the inspector and the applicant at the apartment. It was raining heavily that day , so it was a little nasty outside. The inspector was a very nice man and right away seemed impressed with the unit. He asked me if we had remodeled it recently. At one point he even mentioned that he wouldn't mind living there himself. So after doing a walk around and checking on the running water, checking all the electrical outlets and walking around the yard - he finally pronounced -
"OK - your all set - let's go inside and sign some paperwork"
The tenant and I looked at each other with big smiles and high-fived. We were in. The inspector had a few final things to confirm and signed off on us. Immediately, I pulled out the rental contract and had the tenant sign it. She also gave me the deposit and her portion of the prorated rent. She was very excited - and I was happy to get it rented. I'm also looking forward to those on time, automatic payments to my checking account.
One setback to all of this is that the apartment was ready to occupy on the 1st of the month - but because of waiting for paperwork, processes and inspections - my tenant was not able to move in until the 21st of the month - this means that I lost almost a whole month of rent just to get this set up. But now that it is finalized my rent should be showing up on a regular basis. I could have allowed her to move in sooner , but if the apartment did not qualify then we would have the hassle of having her move back out - or I may have had to make potentially costly repairs for it to qualify. I prefered to play it safe and just wait till I had final approval.
Was it worth it?
I cant say just yet. I have not even received my 1st subsidized check. But the experience up to this point has been rather painless and I haven't really had to go out of my way for much. I'm happy with the tenant so far - all of our interactions have been very cordial and I get a good sense from her and her well behaved children. I was previously getting much less for the apartment so Section 8 is going to pay me more for it than I've ever gotten for these units. She is only going to have to pay $124 a month so I don't think she will have a problem with that.
At this point I do not regret getting involved with the program and was happy to learn about how the process works, what the paperwork is like, and how the inspections take place. I feel like I am more educated and have something to share with others now. If things work out with this tenant - then I may be likely to open up more units to Section 8. If you manage apartments and have Section 8 available take a look at it and see if it's something that could work for you.
Please be sure to check out my others articles on real estate, investing , and cryptocurrency ( and some other random dog stuff)