Section 8 landlords make from $1,080 to $1,320 for a two-bedroom unit in semi-urban areas. The fair market rate is around $1,200. Section 8 tenant contributes 30% of their adjusted gross monthly income. The rest of the amount is covered by the Section 8 voucher up to the payment standard set or FMR. Landlords in urban areas have higher rental incomes. In big cities like San Francisco or New York, the monthly rate ranges from $2,000 to $3,000. This means landlords can make from $24,000 to $36,000 gross rental income there.
This Section 8 landlord says he charges $1,100 rent. The voucher covers $920, while the tenant pays $180.
This landlord was lucky to receive a $1K bonus for listing his rental unit in Section 8. This covered the two months vacancy between tenants. The program in his area gives up to $2,250 for repairs. This helped landlords renovate their rental property and pass the inspection.
This article discusses how much Section 8 landlords make on average. It's an informative read for those who want to explore this business. HUD's payment scheme is discussed, including how to determine reasonable rent. I'll also share three value-added services you can offer tenants for extra income.
How Much Does Section 8 Pay Landlords?
Section 8 pays landlords 70% of the rent value up to the payment standard set by the local Public Housing Agency. The tenant pays 30% of their adjusted monthly income.
The Department of Housing and Urban Development incentivizes landlords to join the program. They do this by offering higher rental rates. It’s strategic in markets where landlords are reluctant to rent to low-income tenants. The payment standard made to Section 8 owners is typically 90% to 110% of the fair market value. Local authorities can increase payment standards based on local conditions. Landlords may charge up to 120% of the FMR in some areas.
Can a Section 8 Landlord Charge Full Rent To The Tenant?
A Section 8 landlord cannot charge full rent to the tenant. Tenants only pay 30% of their monthly adjusted gross income towards rent and utilities. The Public Housing Agency (PHA) covers the difference up to a set payment standard.
For example, if a tenant's income is $1,500 per month, they would pay $450 towards rent. PHA will cover the rest of the payment as long as it’s within the limit. Landlords could only charge reasonable rent within their area. They cannot require tenants to pay more than the combined tenant contribution and PHA subsidy. This ensures rent is still affordable for low-income families.
How To Determine Reasonable Section 8 Rent Value?
All of this ensures that the FMR is fair and competitive. It is the price benchmark for all landlords. FMR is evaluated and adjusted every year.
What’s the Difference Between FMR and SAFMR?
Fair Market Rent (FMR) is set by HUD every year to maintain a reasonable rental rate for Section 8 tenants. Small Area Fair Market Rent (SAFMR) is specific to zip codes within metropolitan areas.
The baseline for computing FMR covers an entire metropolitan area. Payment standards set by local housing authorities are based on FMR. Landlords may charge from 90% to 120% of the FMR value.
SAFMR provides more granular data. It reflects variations in rent within close neighborhoods and helps tenants find housing in better neighborhoods. It protects Section 8 tenants from landlords in lower-quality neighborhoods who are charging disproportionately high rents. Local housing authorities may choose to use FMR or SAFMR to set payment standards. It appropriates rent with local neighborhood conditions.
How To Maximize Section 8 Listing Price
What are Other Services Section 8 Landlords Can Offer To Tenants?
Rhett Wiseman Talks About The Cons of Becoming a Section 8 Landlord
Section 8 landlord application has a long processing time. You need to go through several steps to get your property listed in Section 8. It’s much slower than traditional leasing. The property goes through inspection and paperwork. The average processing time can range from 30 to 60 days.
Section 8 properties need to meet annual maintenance requirements. HUD conducts annual and bi-annual inspections. Landlords are required to address inspection issues so they can continue leasing to Section 8 tenants. About 20% fail the annual property inspection.
Some Section 8 tenants abuse the property. Landlords should be extra cautious in conducting background checks. However, they should also be careful not to discriminate against applicants because of the stigma.
Landlords have to deal with government employees. Delays in rental income are common because of inspection backlogs and absent caseworkers. This affects the profitability of your rental business. 30% of Section 8 landlords experienced delays in receiving rental payments according to NAR.
There’s a constant need to meet government standards. Some landlords say you need connections in the government to pass HUD inspections. This can be frustrating and stressful. A study by the Joint Center for Housing Studies at Harvard University found it's the biggest worry of 25% of Section 8 landlords.
Landlords Talk About The Pros and Cons of Section 8 Investing
This landlord said the biggest pro is income consistency. The con is that there's a few months gap before you get your first payment.
This one claims that voucher holders are not afraid of losing their vouchers. Housing authority doesn't want more homeless people on the street. So, they sometimes let property damage issues slide.
Going after Section 8 tenants isn't worth it. This commenter claims that even court-ordered judgements don't get paid.
How Much Do I Need To Start A Section 8 Rental Business?
You need around $100K to $150K to start a single-family Section 8 rental business. Here’s a detailed breakdown:
COST | ESTIMATED AMOUNT |
|---|---|
Down payment for the property | $40K to $60K (varies depending on size and location) |
Initial repairs and renovations | $10K to $20K |
Section 8 application and compliance costs | $1,000 |
Emergency fund for unforeseen repairs | $15,000 |
Other costs Section 8 landlords might incur:
How To Become a Section 8 Landlord?
What is a Section 8 Rental?
A Section 8 rental is a housing option designed to assist low-income families. It is rolled out through the Section 8 Housing Choice Voucher Program. Section 8 voucher recipients get vouchers that cover a significant portion of their rent. The HUD pays 70% of the actual rent cost while the remaining 30% is paid by the tenant.
There are about 2.1 million landlords that accept Section 8 vouchers in the U.S. Section properties undergo annual inspections to ensure their safety. Property owners must pass these inspections to remain in the program.
Digital Real Estate: My High-Income, Low-Capital Alternative To Section 8 Investing
My high-income, low-capital alternative to Section 8 investing is digital real estate. It has higher ROI potential compared to renting out Section 8 properties. A good-ranking website on Google generates traffic with very minimal maintenance. Scaling a digital real estate business is also easier than scaling a Section 8 rental business. Your investments are not bound by physical limitations.
Digital real estate has lower capital requirement than Section 8. You'll need about $100K to $150K to start one Section 8 unit. Only $500 for starting a digital real estate business. Websites on the first page of Google get 91.5% of the traffic. Ranked digital assets are scarce resources with consistent demand. It's easier to manage compared to traditional real estate. You don't have to constantly deal with government policies. You're free from tenants who could cause damage to your property. Digital real estate investing through local lead generation is much more relaxed. The income is also more consistent and stable.
