I would have to tell you that it would be their inability to analyze potential tenant markets.  What do I mean by this?  We’ll, it is simply the fact that new investors tend to always seek only the highest quality tenants for their property.  This is not a bad trait, but it does eliminate a lot of potential tenants who might have had some credit issues, employment issues, and resource issues but would nonetheless make excellent long term tenants. It also creates unnecessary vacancies and costs you money. Search for tenants who can pay market rent, who will occupy your property immediately and for a long time (so you can receive the economic benefits of owning that particular real estate for up to 10 years), tenants who will maintain the property except for normal wear and tear, who can pay increased rents over time, and who understand their lease and the penalty provisions within the lease. There is an entire segment of the potential tenant market that receives government vouchers for housing accommodations that often go over-looked by inexperienced landlords.  Their rationale is that these tenants will mess up their property, or they cannot get them out of the property, or they will not pay the rent, and so on.  In general, this is just not true.  These are irrational beliefs unsubstantiated by the facts. Through our investment group we have had a chance to experience and understand this program a little better. Here are some  basic points:  

o       First in most jurisdictions, the landlord needs to take a course from the county to qualify as a Section 8 landlord. 

o       Next, the property to be leased has to be registered with the Section 8 Administrative Office.  The property will be inspected by the Section 8 agency to be sure that the property meets minimum safety and housing requirements. 

 o       The Section 8 agency will notify eligible tenants of the availability of your property (lowering your advertising costs).  Potential tenants will need to have received a voucher from the Section 8 office that meets the landlord’s rental requirements.  o       It is the potential tenant’s responsibility to contact the landlord, and to bring the landlord the voucher and ask to be considered for the property.

  o       The landlord has a right to check the credit and the employment of the potential tenant.  The tenant pays for the credit check.  o       The Section 8 agency will contractually guarantee a portion of the rent and security deposit and pay the landlord promptly on the 1^st of the month.  Depending on the tenant’s status, the Section 8 agency may pay the entire rental amount. 

Also important is the fact that because of the economic status of the potential tenant, it is likely that accepting a Section 8 tenant will provide the landlord with a very long term tenant – 5 years to 15 years is not uncommon.  This gives the landlord an excellent opportunity to have a guaranteed income for the property and a long term increase in the equity of the property from appreciation. 

I would also tell you that rental amounts can be increase from year to year as taxes, insurance and capital improvements occur. As for property maintenance, the Section 8 staff requires an annual inspection of the property and they expect the tenant to do their part to maintain the condition of the interior of the apartment.  The tenant is always at risk of losing their housing voucher if they violate the Section 8 rules.  This is a very large motivating factor for tenants to behave in your property.  The Section 8 tenant can also be evicted just like any other tenant for failing to meet the terms and condition of the landlord’s lease. I am a big supporter of this program. 

We have renovated apartments and town home properties and immediately leased them to Section 8 tenants. We have also built modular single family properties and rented them to Section 8 tenants.   They have been among our best tenants despite their impaired credit history, and their lack of resources.  And we have long term Section 8 tenants in some of our investment properties today.  Investors need to learn about this program and take advantage of all it has to offer.  You will not be disappointed.

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