Posted by Jimmy on June 13, 2006 at 07:50:03:
AV: these comments are not intended to make you feel bad. I don’t have much help to offer you. But there are some lessons here for others who might want to get into landlording with section 8 tenants. I learned these lessons the hard way. Fortunately, my mistakes were not fatal.
Lesson 1: Never put yourself in a posiion where you are dependent on Section 8 for tenants or for rents.
Lesson 2: We cannot control what HUD does, how much money they opump into vouchers, etc. In 2000, when I started, there were tons of vouchers floating around, and tons of new ones issued every couple of months. I had 55% of my rent coming in from Section 8. Today, I rarely see them. I am down to 18% Section 8 rent. and I am a lot healthier now.
Lesson 3: Do not assume that the Section 8 rent is the same as Market rent. Huge mistake. In my market, Section 8 rents can be 20-25% higher than FMR. and with a decline in vouchers, the elevated Section 8 rent is not sustainable. I saw rents for 3/2 units in Tyler, TX go from $780 on Section 8 to $575-600 for regular tenants. Ouch.
Lesson 4: Do not buy properties in places where the only tenants are likely to be on housing. It makes you a welfare case youself. You want to be in a place where you can attract all kinds of tenants. working stiffs, elderly, Section 8, etc.
Lesson 5. When buying a property with Section 8 tenants in place, be very careful. Take some time and figure out what real market rents are. Do not make a buying decision based on the prevailing Section 8 scale. These rents can be fleeting and unsustainable. Figure out what the regular market will deliver you in rents, and work from there to determine your price. To do otherwise is playing Russian Roulette with 5 bullets in chambers.