Have you ever considered becoming a Section 8 landlord? Renting your property to Section 8 tenants can have several benefits (assuming you have the right property), but you have to qualify first. To qualify as a Section 8 landlord, you must set a reasonable rent under the Section 8 program rules.
What counts as "reasonable" is determined in a joint exercise between your local government and the Federal government. Learn about this process and how it can work for you in this quick guide.
The Department of Housing and Urban Development's Role
The Department of Housing and Urban Development (HUD) surveys the rental prices of over 2,500 American communities annually. The data they collect allows them to see the range of rental prices for each area.
Once they have this data, they calculate each area's "fair market" rent value. The official fair market price is the 40th percentile price for the area. This means the price is more expensive than 40% of units in the area and cheaper than the other 60%.
New units will become available as areas develop, and others will fall out of the market. That's why HUD updates the official values and publishes them every year.
Your Local Public Housing Authority's Involvement
Every community's public housing authority (PHA) uses the fair market value as the foundation for the local Section 8 rent calculation. In this part of the process, the PHA works out a payment standard for their area. The payment standard is the most money the PHA is willing to contribute to a Section 8 voucher.
Depending on the economic forces that may affect a community, the payment standard typically falls within 90% and 110% of the fair market value. If a rental unit has more rooms, better amenities, or is in a comfier neighborhood, the PHA usually contributes more to the voucher.
How Section 8 Works for Tenants and Landlords
Letting your rental unit out as Denver Section 8 housing can be a brilliant move, especially if your rental fee already falls close to the fair market value. One of the top benefits is that Section 8 tenants tend to renew their leases more than other classes of tenants. This gives you stability in your landlord-tenant relationship and lowers vacancy costs and losses.
In order to get Section 8 rent approval, prospective tenants must first apply and tick several boxes. The background check aims to prioritize helping families and needy individuals while doing criminal and citizenship checks. This means the tenants are already screened once they're approved for vouchers.
Lastly, the PHA pays for most of the rent. This means you have guaranteed monthly income even if a tenant defaults.
Making Brilliant Strategic Decisions
Becoming a Section 8 landlord depends on you charging a "reasonable" amount of rent. What's reasonable for your area is determined by your local PHA.
The PHA does this with reference to the fair market value figures that HUD publishes each year. They take that number and consider the neighborhood broadly to determine a payment standard. That payment standard usually works out to 90% to 110% of the fair market value.
Renting your property to Section 8 tenants can be a brilliant strategic decision. If you need help with Section 8 application tips, property management strategies, or anything else, then contact PMI Denver West today. We bring two decades' worth of nationwide property management experience to every client we serve.
