Reply to Section 8? Accept or Don’t? Why?

@Celeste from Bigger Pockets posted: What are the pros and cons of accepting section 8? Any pitfalls, do’s or don’t? I don’t know what I am getting into.

@Crystal Smith: I was on a phone call yesterday with a mentee. During the discussion, he bought up a friend of his that was cash flowing about $10K a month on properties in Detroit (trying to get my partner and me to invest in Detroit. Not going to happen) During the pandemic friends cash flow has gone from $10K to $5K. The $5K all comes from Section 8.

I start my post with the story because that’s the biggest pro.  My opinion regarding the do’s around that Pro- Your standards for accepting applicants should be the same for section 8 as they are for a market-rate tenant. It’s just a matter of finding a combination of objective requirements that you can use to attract the type of applicants you want. Establish a minimum income requirement- 3x the rent- including the voucher as a source of income. Don’t use 2.5x the rent. Your lease can also include periodic verification of employment. Minimum FICO score requirement – The FICO score requirement should be high enough to attract Section 8 applicants that are working on improving. Set the requirement to low and ….. A maximum number of people in the property- This is where we use to run into problems. Your lease should clearly state the maximum number of people allowed to reside in the property and also give you the right to independently verify how many people reside there. Naturally no previous evictions or rental judgments.

The following was not part of my response in the Bigger Pockets post. The Chicago Housing Authority has established a relatively new program called the Mobility Program. Section 8 Voucher holders who are part of this program must go through special training to get a mobility voucher. The objective of the program is 2-fold. Encourage landlords with properties in areas of low crime to accept section 8 tenants. The inducement is 13 months rent for a 12-month lease. To minimize the risk and stigma of the section 8 program the tenant participants must go through some rigorous courses on financial management and maintaining a home. The challenge, the new Mobility Program, cannot overcome the stigma associated with the regular section 8 program.