Elite Invest blog

THE FACTS AND MYTHS ABOUT SECTION 8

Q: How does the Section 8 process work?

A: The Section 8 process is fairly straightforward. In order to operate a Section 8 rental, the local housing authority must approve both the landlord and the property itself. As a landlord, you will need to complete an application and provide personal information once you approve a voucher holder.

Once the housing authority approves you as a landlord, an inspector will visit your rental property to make sure it meets all local building and safety codes. The initial inspection process is a lengthy one about 7-14 days from start to finish, but doesn’t cost the owner anything. At the very least, you must have working locks on every window and door, the structure must be sound, and the wiring and plumbing must work safely and correctly.

Once the inspector approves your property and you pass the inspection, the housing authority will review your rental rates to ensure that they fall in line with rates for comparable dwellings in your area and contact you for a rent determination. You have the right to approve or reject the rental amount as well as contest it if you think the amount should be higher. If you reject the amount, the process starts over and you must find a new tenant. The tenant also must search for a new place to live. If you approve the unit then CHA asks for the lease dates and issues you a HAP contract, which is a federal contract agreeing to pay a certain percentage of the total lease amount. Generally this amount is around 80-85% on average. If you want to contest the rental amount you must submit comparable rentals in the area and this process can take up to 14 days to get an answer and it isn’t guaranteed.

Once the HAP contract is signed and submitted you begin collecting rents on the 1st of the month.

Q: Are the move-out expenses more for Section 8 tenants compared to market rate tenants?

A: No, the myth that Section 8 tenants will destroy the property or leave it in disarray couldn’t be farther from the truth. Although you will get the occasional rogue tenant, the vast majority will keep the place as they found it. Section 8 tenants do not want landlords complaining to Section 8 because they have a chance of losing their voucher. ERM thoroughly screens all of our tenants and require a non-refundable move-in fee to help cover the average wear and tear costs.

 Q: What happens if a Section 8 tenant doesn’t pay their required portion? 

A: ERM recognizes that many things can happen where it concerns rent; rent can really be “lost in the mail”, employers can delay the tenant’s paycheck, there are real tenant emergencies, and more. Therefore, we make a serious effort to determine why the tenant is having a problem.

If ERM does not receive rent by the due date, ERM both calls and delivers a past due notice. ERM will try to contact the tenant again, and if the tenant continues to be non- responsive or cooperative, we will issue them a five-day notice informing them that their rent is past due, and asks them to pay in full within five days. If they fail to remit payment and remain uncooperative we will begin the eviction process.

Q: How does the rent collection process work?

A: Rent is due on the first day of the month, and is considered late on the 5th day of the month by noon. Late rents will be charged late fees.

The property management agreement gives us full authority to collect rents and deposit on your behalf. We will disburse monthly rent proceeds, minus the property management, landscaping, and any other costs on the 15th of each month. If we collect rent from the tenant after the 15th of the month it will be disbursed to you the following month.

Q: How does Elite Rentals & Management market to Section 8 tenants?

A: ERM displays For Rent yard signs prominently, unless prohibited by neighborhood regulations. Each sign carries our office phone number and website address. Yard signs promote calls and website visits.

ERM prides itself on effective internet marketing. Each rental property has a page on our website, www.EliteRentalsChicago.com, with photos, maps, a description, and instructions about how to request a showing appointment and how to apply.

In addition to our website, ERM markets properties on a variety of paid and free websites. ERM marketing staff is on the internet every day and pays close attention to which rental home websites attract the most visitors. ERM markets our rental homes on the most visited websites. Trends in internet advertising change rapidly and our selection of marketing websites changes with the market.

Q: How does Elite Rentals & Management Screen their tenants?

A: Thorough screening is crucial for successful property management. ERM requires all applicants to fill out a detailed application and submit it for processing and approval.

For each tenant, we examine the following:

  • Credit report
  • Nationwide criminal background report
  • Nationwide report of previous evictions
  • Employment
  • Income
  • Rental history

All applicants must submit verifiable information on their income to show that they can support the rental payment. Rental history or previous home ownership is carefully checked. The credit report, criminal background report, rental history, and proof of income together provide the criteria to qualify or disqualify prospective applicants.

Q: Do Section 8 tenants have a higher tendency to be evicted than a market rate tenant?

A: As we all know, evictions can happen to any landlord both section 8 and market rate tenants. Circumstances change in people’s lives and they are not able to pay the rent. This is especially true when people lose their job, get a divorce, or have a serious injury.

Section 8 tenants do not want to be evicted because an eviction would cause them to lose their voucher. However, if a financial hardship does occur, Section 8 tenants have the extra security of going to the CHA and asking for a rent portion readjustment. Once approved by the CHA they can raise the CHA rent portion and reimburse the landlord the difference starting on the day of the financial hardship.

Q: Are my utility bills going to be higher than normal with a Section 8 tenant?

A: No, like market tenants the utilities must be on for showings but once the unit is rented the gas and electric utilities become the responsibility of the tenants. Owners are only responsible for any common area accounts (if any) and water.

Q: Are Section 8 tenants typically lower quality tenants than market rate tenants?

A:  This is considered to be a myth by most Property Management experts.  The real importance of getting good tenants is to make sure that you pre-screen your tenants properly and effectively.  Just because someone has a Section 8 voucher doesn’t mean they are bad people or rowdy people.

Q: Why is Section 8 a good thing for a landlord?

A: There are many advantages renting to section 8. Here are the some of most important reasons you should consider renting to section 8 tenants.

  • Rent is paid on time. As a landlord, this is probably the biggest advantage to renting to section 8 tenants as the money is not only paid on-time, in full or high portion, and is directly deposited into an account. This reason alone should make any serious landlord consider the prospect of renting to section 8 tenants.
  • Higher profit margins. The government is pretty fair when it comes to reimbursement rates; they tend to pay rates that are on par with (or higher) than whatever the local market rate is.

For example, in a low-income neighborhood perhaps you can charge $1,200 per unit, whereas in a higher income neighborhood you can charge $1,400, but the property in the low-income area cost much less to purchase.

  •  Less overall risk. If a financial hardship were to occur a section 8 tenants can apply for the CHA to change their rent portion starting the day the financial hardship began. Once approved, the CHA will then pay the difference.
  •   Short Vacancies. Cities like Chicago have a nice pool of people looking for section 8 vouchers. This means that when turnover happens and one tenant leaves, there’s literally a line of new tenants waiting to fill the spot on short notice, which means less downtime and less lost revenue as a result.