Would you like to learn how to expand your rental property's reach to even more potential tenants? If yes, stick around to learn more about one of the more untapped markets: Section 8 housing.
According to KTHV, around 7,300 households in Montana receive State or Federal housing assistance, with another 3000 on the waiting list. If you have the right property, opening it up to housing assistance programs can benefit you and your community.
To qualify as a Section 8 landlord, however, you must charge a "reasonable rent." Learn more about this legal definition in our quick guide.
How Section 8 Programs Work
Under this program, eligible households pay about 30% of their monthly income toward rent. The rest is covered by a government-issued voucher sent directly to the landlord.
However, the amount the government pays is capped based on local payment standards. These standards set the maximum amount the government will contribute for a rental unit, depending on the number of bedrooms.
Your Local Government's Payment Standard
The local Public Housing Authority (PHA) sets new payment standards yearly. PHAs start their calculations by referring to the Department of Housing and Urban Development's (HUD) Fair Market Rents (FMR) figures. An area's FMR represents the rent amount at the 40th percentile among all rental units in that area.
Landlords can set rental prices that would be considered reasonable by:
- Charging an amount that's close to the area's FMR
- Charging an amount that matches the local PHA's payment standard for that number of bedrooms
However, the rental property's condition or quality must also correspond with the proposed rent amount.
Other Factors Weighed by the PHA
Landlords must submit their proposed rent amounts to the PHA as part of the application process. The PHA conducts an inspection and a reasonableness test. At this stage, they consider:
- The unit's size
- Location
- Condition
- Amenities and upgrades
- The prices of comparable units in the area
A landlord may charge slightly higher than the published figures if any of these factors are above average.
Benefits of Renting to Section 8 Tenants
The Section 8 application process also has a set of tenant eligibility requirements that the government checks. The PHA essentially conducts a form of tenant screening for the landlord.
Affordable housing vouchers ensure that landlords always get most of the rent, even when tenants default on their portion. Landlords are still allowed to evict tenants for non-payment and criminal activity, even if they receive housing assistance.
Tenants who receive government housing support also tend to stay in the places they rent for longer. Landlords usually get built-in tenant retention if their applications are successful.
Make Strategic Choices With Investment Property
Availing your property to the Section 8 program can be a great move. You get to further expand your potential tenant pool, and get access to some unique benefits.
To qualify your rental unit for the program, you must charge a rent that meets the "reasonable rent" criteria. At PMI KC Metro, we specialize in rental valuation and can help you assess your property's potential. Our expertise will guide you in determining if participating in the Section 8 program is a smart and strategic choice for your investment.
Contact us today for excellent rental valuation service, insights, and more!
