Should you rent to Section 8 tenants

Should You Rent to Section 8 Tenants?

From the stand-point of stability of income and resulting appreciation of value, it is absolutely crucial that the units we choose to hold long-term are desirable today and remain desirable in the future – period. If not, you are going to have the hardest sales job ever…

However, simply owning desirable units is not enough. My attorney has a favorite saying that he tells with both sarcasm and sadness from time to time, and it goes like this:

“Jesus Christ himself couldn’t pay you if he were broke…”

Should you rent to Section 8 tenants? This article will dive into affordability, rental qualifications, and how to analyze affordability.

Rental Affordability and Desirability

That’s right – the most honest, descent, respectable people could not pay you if they don’t have the money. You could own the most attractive Taj Mahal of a building with granite floors and gold-plated toilets in the most romantic setting, and yet if people can’t afford it then what’s the use…

As such, the issue of affordability certainly plays an important role in what we do. It’s important to have a product that many people want, but it is equally important that they can afford it! This is why I’ve always said that successful real estate investing exists at the intersection of Desirability and Affordability.

The Challenge of Pricing

Most of us are used to thinking of this issue of affordability as strictly a pricing thing. I teach students that when considering an acquisition, the questions that we ask ourselves are the following:

1. Would I want to live here as is? And if not,

2. Can I afford to spend what I need to spend to revitalize this building’s affordability and still not be upside down on my investment metrics from a standpoint of cash flow and equity?

The first question establishes the desirability threshold, while the follow-up question takes care of affordability to both us and our perspective tenants. We certainly do not want to buy a unit that requires so much capital upfront in order to make it desirable that we are forced to charge rent that is higher than the market can support. This is one of the most common mistakes noobs make – charging too much for rent because they paid too much for the property…

However, recently I am becoming more and more aware that it is possible for the unit to be unaffordable due to structural macro-economic problems that we have no control over. In other words, having done everything right; having bought a perfectly attractive unit in a desirable location; having priced our rental exactly where it should be, it is possible that the unit is unaffordable due to issues that we have no control over – problem.

An Affordability Analysis of My Rentals

In my marketplace, rents range from $375/month to $1,200/month. On the lower end are the rentals that I would be afraid to come into after dark, and on the upper end are the corporate single family rental houses.

My entire portfolio is positioned within the range of $600/month – $850/month. I did this for several reasons:

1. NOI in this price range affords significant cash flow.

2. The units are not too expensive, but are nice enough to be attractive to widest cross-section of people.

3. The tenants who can afford to live in my units typically have stable employment and are in a stable economic and social circumstance. They are not rich or highly-paid people in search for every bell and whistle, but they are either, hard-working young people, young families doing what needs to be done, or retirees – great tenants to do business with by and large.

Well – I just came face to face with an underlying economic issue which is causing my rentals to become unaffordable.

Income Qualifications for My Tenants

My rental qualifications stipulate that in order to qualify for tenancy the applicant must prove income in the amount of at least three times the rent. This is what it takes to be in one of my properties. As such, in order to qualify for a $650/month unit the applicant (household) needs to show income of plus or minus $2,000. Thus, a single person working full time would need to make about $12/hr. – $13/hr.

An Example Section 8 Applicant

Well – yesterday I received an application for one of the units in the 10-Plex I bought in February, which I wrote about here. I am asking $615/month for this unit. She filled out an application and it turns out that she works full time, but she only brings-in $1,300/month before withholdings, meaning that she earns a bit over $8/hr (the minimum wage in Ohio is currently $7.70).

Now, let me ask you – how it’s possible to live on that? More importantly, how is it that in America today working honestly 40 hours per week, passing drug tests (her job requires her to), being on time every day of the 3 years that she’s been with this employer – how is it that she does not make enough money to afford the basic decency in life of a roof over her head in a place other than the drug-infested slum? She indicated to me that she currently pays $450/month for rent and she said – “I am trying to get out of there as soon as I can”…

She applied for my unit because I told her I would consider Section 8; I have never had any of my units qualified on Section 8. I’ve always assumed that an honest day’s work would be enough to put people into my attractive but mid-range units, and I’ve always been found right. I’ve never had a shortage of qualified renters.

Today’s Economy and Section 8

Things are different in today’s world and getting worse every day. We have huge structural problems in our economy that our politicians seem incapable of addressing. So, instead of an economy that allows rich to be rich, but also allows the minimum wage earners to earn enough to be able to live with decency, we now force someone who works 40-hour weeks to look to government (tax dollars) to fill the gaps.

Look – I will never have any patience or sympathy for the lazy among us who take, and take, and take without contributing to the society around them. However, someone who picks herself up by her shoe-straps and claws her way toward a better life for herself and her kid – yes, I absolutely want to help.

It would be best if the economy we live in facilitated her earning enough minimum wages so that she could afford her rent without needing to rely on a handout – I think that she would rather it this way as well. But, this would require some fundamental shifts in our economy – it would require a minimum wage in Ohio of $13/hour.

Why I Allow Section 8 Applicants

Do you think that this is going to happen any time soon? Can it happen? If businesses paid more to their employees, then this cost would have to be passed along to the consumers – can we afford that? Can we afford to pay $5 more for pizza and McDonald’s…?

I am not holding my breath, but we will need to make some painful changes in this economy before too long. In the mean time, I am open for business with Section 8.


  • Douglas Dowell Reply

    Great post Ben,

    While it seems to be a solid business strategy with the understanding Sect 8 have a perception of lacking social skills. If you are willing to treat them with respect Its a win win in my book. Its not for the true passive investors in my opinion. Some coaching skills are involved.

    • Ben Reply

      Agreed Doug!

  • Deborah B. Reply

    I am beginning to lean the same way… never did Section 8 because I never needed to, and really don’t ‘need’ to now but my recent squatters got me looking at the families on the street and it’s probably time for me to consider the needs of working poor in our community.

    • Ben Reply

      I agree Deborah – there is never a “need” to do Section 8 since we buy desirable units in desirable locations. However, while there certainly are lazy bums draining the system, there are also people working as much as they can but unable to earn enough – not everyone can. Minimum wage used to be enough for bare necessities; it is not any longer. Section 8 is for those who try but fall short as far as I’m concerned…

      Thanks so much for your comment Deborah!

  • Curt Smith Reply

    Hi Folks, I paused and pondered Ben’s premise mainly that there’s a need for low income housing with rent assistence. The hourly working take home math proves it. I don’t disagree there.

    My market is Atlanta GA and the discussion of whether taking Sec 8 or equiv is a viable business I believe varies per North vs South vs East vs West because renter quality per what I hear via the mobile home park owners discussions, varies widely depending on geography.

    The subtle inference above that Sec 8 is NOT a passive role is way too light. I think A LOT needs to be stressed that you need to tripple, quadripple your screening steps and care or you’ll end up with a complete rehab after each turn over. In my Atlanta area REIA,, I hear horror stories of crazy damage.

    If taking Sec 8 is net net after a few years a money maker, is entirely dependant on your ability to screen for a sane, hard worker, who’s organized enough to get their portion of the rent to you every month,,, and remember to clean the home up periodically.
    Good luck folks who go this route. Since Ben is big on business model math, my back of the envelope calc of actual expenses and actual income works out to Sec 8 here in the Atlanta area is more likely to actually lose money. Maybe Ben will take a poll and collect real numbers from North and here in the deep South? I just don’t think the _effort_ vs “potential” income is worth it.

    • Ben Reply


  • Kim Martin Reply

    Great post Ben! I have not considered Section 8, but will now.

    I will say that we have raised the minimum wage in Seattle, and a handful of the workers are asking for less hours from their employers so they can continue to receive subsidies (daycare, college tuition, etc.). I think we will continue to work to find a solution.

    • Ben Reply

      Agreed, Kim. However, I see minimum wage increase as a net positive to both me and economy as a whole. The cycle goes like this:

      1. Minimum wage goes up. Tenants can afford more.
      2. Velocity of money as well as supply goes up, causing inflation of all things including rents. Eventually, rents swing too high, and…
      3. Recognizing that it’s once again more difficult to afford units, government raises subsidy levels.
      4. Eventually minimum wage goes up and we rinse and repeat 🙂

  • No Nonsense Landlord Reply

    I am a former Section 8 landlord. Far too much drama with Section 8 3-BR units. Your tenant only pays 30% of her income on rent.

    If we raise the minimum wage, it may be good, or not. Some people would work less hours to still be eligible for subsidies.

    I am not sure what the answer is, but everyone need to participate in society.

    • Ben Reply

      Haha – well, I’m not sure that everyone should participate. Some people we can do without! But, those who are trying to do it right is who this article is about, Eric. There’s a problem here, and I think it’ll take smarter people than me to arrive at a solution. But, minimum wage going up is an inevitable reality…it’s already happening all over this country 🙂

      Thanks so much for reading and leaving a comment, Eric!

      • No Nonsense Landlord Reply

        I think as long as you maintain reasonable credit score standards, criminal record checks, and look at past rental history, you may be OK. A section 8 tenant should still be able to have a decent credit score. They should not have a bunch of misdemeanors. Rent responsibility is only 30% of the tenants income. Past landlord checks are always suspect, unless they are bad.

        Many landlords assume a Sections 8 tenants rent is paid, the credit is bad, the criminal record is good, and the past landlord is telling the truth.

        When you throw out most common screening criteria, such as credit score, income, criminal history and past landlord checks, you are really taking a gamble.

        • Ben Reply

          I agree with you, Eric.

  • Nathan Duncan Reply

    Totally agree with you Ben. In my market the rents and economics are roughly the same. Good hard working folks that cannot afford the minimum three times rent rule. I’ve been learning quite a bit about the program and plan to allow it for my properties. Everybody needs a helping hand from time to time and with minimum wage in a stagnant state it makes sense to provide a place these folks can call home.

    • Ben Reply

      That’s how I look at it, Nathan.

      Thanks indeed for jumping in 🙂

  • Ben Biggs Reply

    Great Article Ben, I completely agree. If you can seek out the hard workers and the people trying to improve their situation, absolutely! But I am still scarred from when I went to visit my step-brother in section-8 housing, and seeing the quality of the neighboors and hearing the bass thumping through the walls and screaming fights everywhere. But hey, this is where strict screening comes in to play.

    • Ben Reply

      Agreed, Ben – I’ve had very good experience with the Sec. 8 tenants! There are specific way in which I approach the sector, but overall – good…

      Thanks so much for jumping in 🙂

  • Louise Reply

    The wide differences from the comments proves that you can’t lump everyone in the same bucket. I have a friend who has 26 homes in Atlanta that are all section 8 and he is still investing to purchase more. He says it’s a proven model. Screening is key in any rental property.

    • Ben Reply

      Agreed. Besides, each municipality observes differing practices on this issue. I found working with these guys relatively easy, but that may not translate…

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