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Urban landlord investing combines elements of crime, drugs, boarded up assets, and low income tenants. Within all this uncertainty comes a unique risk adjusted opportunity. This post is going to look at one major tenant type that you will come across: The Section 8 Tenant.
Section 8 ?
Section 8 is a Government housing voucher program that is managed by the Department of Housing and Urban Development. The goal of the Section 8 program is to help low-income, elderly, and disabled tenants afford decent and safe private rental housing.
Tenants have to apply and get approved by their local HUD, Housing Authority or Public Housing Agency office. Once approved, the tenants are provided a voucher that states that the municipal or state government will pay their rent in part or in full – depending on their income and household size. The voucher is a government guarantee that they will pay a portion of the tenants rental payment ranging from 80 to 100% of the monthly rental payment.
So, where does the money for Section 8 come from?
Section 8 “Housing Authority” (PHA) works under grants from the federal government to assist low income families, the elderly, and people with disabilities to afford clean, safe, and sanitary housing from owners of private property. Each year, every state receives a block grant from the federal government to cover housing assistance costs that gets divided throughout its municipalities or parishes. The Housing Authority uses this funding to cover the cost of the Section 8 program and to pay for a portion of the tenant’s rent and utility costs.
How to Become a Section 8 Landlord
Becoming a Section 8 landlord is accomplished by having rental units that tenant would want to live in.
Once a tenant has been approved for Section 8, it is their responsibility to find suitable housing. All participants in the program must search for a home to rent on their own. The rented unit can be a single family home, apartment, townhouse or mobile home. The participants can choose any location that meets both their needs and the requirements of the program. Hence it is important to have a vacant unit that appeals to the tenants as it is their decision as to which apartment they want to lease.
As a landlord, you can make potential Section 8 tenants aware of your unit by listing your property with the PHA office(s) that serve the community closest to the property. Once the unit is listed, the information will be provided to any voucher or certificate holder looking for a property of that particular size.
Once you find a tenant that wants to lease your unit then follow the Section 8 rental steps below:
Good & Bad of Section 8 Tenants
Use the section 8 program to your advantage if you are looking to invest within local urban markets such as Newark, Plainfield, Passaic, Paterson to name a few.