American Apartment Owners Association

Short-Term Rental Fight Sees Hotels and Realtors Lining Up on Different Sides

Mon, 10/23/2017 - 9:15am

Local crackdowns on short-term housing rentals have ignited a fight in Michigan’s Capitol, with homeowners and lobbyists lining up for and against legislation that would allow the rentals in all residential zones and prohibit treating them differently through zoning.

The bills are being pushed by the Michigan Realtors group, which accuses municipalities of trampling on property rights with overly restrictive and unfair rules. On the other side are lodging, tourism and local officials who worry about the unrestrained growth of short-term vacation rentals through online platforms such as Airbnb and HomeAway. Each community, they contend, should be free to regulate the rentals as they see fit without state interference.

Short-term rentals have become an increasingly contentious issue at the local level, especially in summer tourist destinations along Lake Michigan. Grand Rapids, Traverse City, Holland and Grand Haven are among communities with regulations such as requiring owner occupancy or special use permits.

The legislation would define a short-term rental as any rental of a single-family residence, one- to four-family house or any condo lasting under 28 days at a time. The rental of a dwelling would be deemed a residential and permitted use in all residential zones statewide. It could not be deemed a commercial use of property. Local regulations for noise, advertising, traffic and “other conditions” would be allowed if applied consistently.

Supporters and opponents are mobilizing ahead of potential legislative hearings on the House and Senate bills this fall. The Realtors association — whose political action committee is among the most prolific fundraisers of cash that can be spent on candidates and elections, according to the Michigan Campaign Finance Network — has run one-minute radio ads across the state. Tourism and local leaders held a news conference with some frustrated lakeside homeowners in recent days to express their “deep concerns” with the legislation.

“This is a one-size-fits-all solution being imposed out of Lansing and it isn’t the right way to go,” said Deanna Richeson, president and CEO of the Michigan Lodging and Tourism Association, which says the bills would silence the concerns of year-round residents. It worries that unregulated short-term rentals undercut hotels and the tax base.

Suzanne Schulz, managing director of design, development and community engagement for the city of Grand Rapids, said homes in residential neighborhoods are increasingly being “converted into hotels” by people who own multiple properties — making it even tougher for families to find affordable housing in tight markets particularly in Grand Rapids, Ann Arbor and Traverse City.

But the bills’ backers say cities and townships have overstepped and should instead address nuisance and occupancy complaints through enforcement actions. Real estate agents report uncertainty by potential homebuyers who are anxious about being unable to rent out their second home to help cover the taxes and other expenses.

One of the bill sponsors, Republican Rep. Jason Sheppard of Temperance, said there are “a lot of misconceptions” about the legislation. The intent is to pre-empt local governments from banning short-term rentals through zoning while still allowing them to have registration and other policies, he said.

“If it’s your property and you own it, I think you should be allowed to do with it what you want to do with it — following guidelines. What those guidelines would be is occupancy guidelines, making sure you’re not being bad neighbors just like any other rental of a home,” Sheppard said.

Brian Westrin, public policy and legal affairs director for the Michigan Realtors, said communities have been reinterpreting their zoning laws, allowing short-term rentals in some zones but not others, or banning them as a commercial use.

“The bills are intended to do that one thing — prevent outright bans of this longstanding practice through zoning,” he said.

The issue is not just significant in western and northern Michigan. Two of Airbnb’s top four Michigan markets are Detroit and Ann Arbor.

Though the fate of the legislation is uncertain, it could receive a friendly reception from majority Republicans who have disregarded “local control” arguments when passing business-backed laws that overrode local wage requirements and plastic bag limits. Other pre-emption bills, such as a proposed ban on potential local food and beverage taxes, may be enacted soon.



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New Report Analyzes Single-Family Rental Housing Yields by ZIP Code

Mon, 10/23/2017 - 9:13am
When it comes to purchasing single-family rental homes, the magic number is 30238—which is the ZIP Code for the market where buyers of these properties see the greatest potential in rental yields and cash flows. According to a report from ATTOM Data Solutions, the rental markets in 4,854 ZIP Codes and 439 counties with sufficient rental and home price data were studied for their financial yields, vacancy rates and tax and maintenance costs. Among the top 25 ZIP Codes with the strongest potential annual gross rental yield—defined as annualized gross rent income divided by median purchase price for single family homes—during the third quarter were 30238 in the Atlanta metro area (17.7 percent); 77373 in the Houston metro area (13.5 percent); 34472 in the Ocala, Fla., metro area (13.1 percent); 76140 in the Dallas-Fort Worth metro area (12.7 percent); and 30228 in the Atlanta metro area (12.6 percent). Daren Blomquist, Senior Vice President at ATTOM Data Solutions, noted these markets were “located in neighborhoods with relatively low vacancy rates and with home price growth and population growth—which should continue to put upward pressure on rental rates.” As for who is purchasing these properties, institutional investors accounted for 2.9 percent of all single-family home sales in the third quarter, up from 2.3 percent in the previous quarter but down from 3.1 percent one year earlier. However, the institutional investor share of single family home purchases increased from a year ago in 136 of the 439 counties (31 percent) and in 1,804 of the 4,854 zip codes (37 percent) analyzed in the report. And at the other end of the spectrum, the lowest potential rental property returns were in coastal metro areas with pricey housing markets, led by ZIP Codes in the Miami, Los Angeles, Santa Barbara, New York and San Jose localities. Source:

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Tax Benefits That Landlords Receive

Fri, 10/20/2017 - 5:58am

Posted on Oct 20, 2017

While being a landlord is often a difficult job, the tax benefits that come with owning investment properties help sweeten the deal. Whether you are already a landlord or thinking of investing in property, learn about the investment property tax benefits available to landlords.


Mortgage Interest Deduction

Your mortgage loan accrues interest, just as other types of loans do. When you run a property for investment (rather than as your primary residence), you are able to deduct the mortgage interest on your taxes.

Landlords can also deduct interest from home equity loans, which are loans taken out with the intention of improving a property.

Homes must be less than $1 million to qualify for the mortgage interest deduction. Thus, if you own a building assessed for more than $1 million, you can’t take this deduction.

Real Estate Tax Deduction

Landlords also get to deduct real estate taxes paid to the town or city. These taxes may be part of your mortgage payment if you have an escrow account, or you may make quarterly payments to your city. Deducting the real estate taxes allows you to offset rental income.

Home Improvement and Travel Deductions

Whenever you visit your rental property, you can deduct your travel expenses. From gas mileage and rental car costs to airfare or hotel rooms, it’s all deductible — including your meals during your visit.

You’re also able to deduct home improvement expenses, including repairs made for your renters. Whether you repaint in between tenants or hire an electrician to install more outlets, you get to deduct what you paid.

If you pay a contractor over $600 in the course of a year, the IRS requires that you provide a 1099-MISC form. No matter how much you pay the contractor, you get to deduct it on your taxes.

Regarding any money you pay for homeowners association dues, condo fees are deductible on your taxes.

Depreciation Deduction

One of the biggest landlord tax benefits is the depreciation deduction landlords can take for their properties. The depreciation deduction reflects the natural breakdown of your property over time. For residential properties, the depreciation period is 27.5 years. Depreciation affects the home only, not the land on which it sits.

To figure out how much you’ll earn in depreciation each year, divide your home’s assessed value by 27.5. If your home’s assessed value is $300,000, you can claim $10,909 per year in depreciation. This offsets rental income, effectively lowering your tax liability.

Utility Deductions

If you pay any utilities for the rental property, you can deduct what you pay. While your tenants probably pay the utilities, you may be liable for expenses incurred while the unit is vacant, municipal water or garbage bills, or other costs. It’s all deductible, and offsets rental income.

Good record keeping is key when it comes to claiming your rental property tax deductions and providing evidence, should you receive an audit request. Always maintain copies of receipts, bills, travel expenses, mileage logs and other records that show what you spent on maintaining your rental properties

For more tips on becoming a landlord, including ways to maximize your real estate income, become an American Apartment Owners Association member today.

Disclaimer: All content provided here-in is subject to AAOA’s Terms of Use.

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Want to be a landlord? These are the top markets this fall for investing in rental homes

Thu, 10/19/2017 - 10:07pm

High prices and a tight supply of houses for sale are not exactly the best mix for homebuyers, but they’re even worse for investors looking to become landlords. Sure, both tenant demand and rental returns are also high, but if the cost to get in is too high, the math doesn’t work.

The good news is, as always, all real estate is local, so while the national picture may look bleak, certain local markets still offer lucrative options.

Texas, which continues to see strong growth in both employment and home construction, appears to be a landlord’s dream state.

Three of the top five markets for investors, according to a new ranking by real estate sales and auction company TenX, are in the Lone Star State. San Antonio tops the list, followed by Fort Worth and Dallas.

While home prices are rising fast in Texas, they remain low compared with other hot markets, like most of California. In addition, while Hurricane Harvey did not hit these top cities, the storm exacerbated the state’s labor shortage by creating massive reconstruction needs in Houston. Tight labor will reduce new construction in the rest of the state, squeezing inventory and not only pushing home prices higher but also propping up rental demand.

“If you look at our report probably eight or nine of the top 20 markets in terms of housing performance are in either Texas or Florida,” said Rick Sharga, executive vice president at TenX. “The Florida markets will be more directly impacted because Irma hit everything, but even in Texas, a lot of the construction and labor and materials and so forth that’s been going to build new properties in Dallas and Fort Worth and San Antonio might get diverted to rebuild Houston, and that could have a noticeable impact on home sales and home starts over the next six to nine months.”

San Antonio has clocked strong population growth for six years straight, and its payrolls stand at an all-time high. Fort Worth’s population has also been rising far faster than the national average. Dallas’ economy cooled slightly this year but continues to expand after a recent tech and financial services boom. Home prices there, hovering at more than 50 percent above their pre-recession peak, are still considered affordable with room to grow.

Rounding out the top five are Columbus, Ohio, and Tampa, Florida.

Both offer comparatively low entry costs and high returns. Columbus may seem surprising, given weaker job growth in the Midwest overall, but the city has outperformed its region with both employment and population growth. There’s something of a rebirth happening in Columbus, with additional urban developments springing up outside its downtown, luring new companies and workers.

Tampa’s downtown is also enjoying a resurgence, with massive new development in both residential and commercial real estate. Home prices there continue to climb, but because the foreclosure crisis hit Tampa hard, prices there still undercut those of other popular Florida cities, like Miami and Orlando.

Rounding out the top 10 markets for investors, TenX lists Orlando, Florida; Indianapolis; Austin, Texas; Nashville, Tennessee; and Raleigh, North Carolina.

Some markets that might be harder for investors to swallow: Memphis, Tennessee; Miami; and suburban Washington, D.C. Memphis’ economy has been struggling, and price points there remain high amid an oversupply of housing — especially in luxury condominiums and rental towers.

The more expensive towns of Boston and Philadelphia still offer good returns, and but they struggle with poor demographics and subpar economic growth. As for the West, California presents increasingly difficult challenges for investors, given its high price points for even the smallest homes, especially in the more metropolitan areas renters favor. Likewise, Denver’s prices are rising so fast and inventory remains so tight that investors would have to buy and hold for a long time to see significant returns.

In general, the model for investors has shifted. There is no longer a steady stream of low-priced, foreclosed homes, so they have had to change their plans dramatically.

“What they’re really looking to do now is make money on the month-to-month rent, so, in a lot of cases they’re buying properties at full value,” Sharga said. “In some cases they may even be slightly overpaying for properties, but they’re making it up in the rental income over the period of time.”

Of course, that only works if appetite among potential tenants for single-family homes to rent remains strong and the homes stay affordable.



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Rising Rents Are Stressing Out Tenants And Heightening America’s Housing Crisis

Thu, 10/19/2017 - 3:33pm

The home-buying struggles of Americans, particularly millennials, have been well documented. Yet a recent study by found that the often-proposed “solution” of renting is not much of a panacea. Rents as a percentage of income, according to Zillow, are now at a historic high of 29.1%, compared with the 25.8% rate that prevailed from 1985 to 2000.

No surprise, then, that 58% of the 1,300 renters in the Hunt survey said they felt “stressed” about their rent, or that many respondents said they couldn’t save for future purchases like homes. Rather than the sunny freedom promised by those who promote a “rentership society,” most of those surveyed said that finding a convenient place with the amenities they required – for example, fitness rooms, places for pets and adequate space – was very difficult. Some renters have been forced to euthanize their pets, spend upwards of 50 days looking for a place or move farther from family and friends.

All of this is taking place at a time when the national vacancy rate has fallen to 7.3% (in the second quarter of 2017), from 11.1% in the third quarter of 2009. That trend has continued even with apartment construction in many areas, notably core cities, because the new buildings tend to be too expensive for most renters.

Fuel For A Housing Crisis

There is a strong relationship between high rents and high house prices. Although rents have not risen as much as house prices generally, they tend to attract people who in the past might have become homeowners but instead have been crowded out by the high prices. This essentially brings into the rental market more affluent tenants who directly compete with those with lower incomes.

The result in many places, such as Southern California, is overcrowding. Two-thirds of the places in the United States (municipalities and census-designated places) with more than 5,000 residences and with more than 10% of housing units being overcrowded are in California, according to the American Community Survey.

The rent-related stress also points to a bigger crisis: the decline in the purchase of homes. One of the most prominent reasons for not buying a house directly relates to higher rents: It becomes all but impossible to save enough for a down payment. This also reflects changes in the labor market; service and blue-collar workers, whose incomes have been down in relation to rents, are the most burdened by rising rents. In San Francisco, even a teacherhas been driven into the ranks of the homeless.

The situation is worst in the most expensive markets. In New York City, incomes for millennials (ages 18–29) have dropped in real terms compared with the same age cohort in 2000, despite considerably higher education levels, while rents have increased 75%. New York, Los Angeles and San Francisco have three of the nation’s four lowest homeownership rates for young people and among the lowest birthrates.

According to Zillow, for workers ages 22-34, rent costs claim up to 45% of income in the Los Angeles, San Francisco, New York and Miami metropolitan areas, compared with closer to 30% of income in metros like Dallas-Fort Worth and Houston. Home prices provide an even starker contrast. Dallas-Fort Worth, the nation’s fastest-growing housing market, as well as Houston, San Antonio and Charlotte have prices that are more like one-third those of the superstars.

That helps explain why, according to the Hunt survey, the highest percentage of people who cannot save for future purchases (almost 60%) live on the pricey West Coast. The West Coast also had the largest percentage of people stressed about their rent, followed, not surprisingly, by the East Coast.

High rents may also help explain recent shifts in migration to lower-rent areas. A recent survey by found that the best prospects for renters becoming homeowners are in metropolitan areas like Pittsburgh, Provo, Madison, San Antonio, Columbus, Oklahoma City and Houston; the worst are, not surprisingly, in California, New York, Boston and Miami.

Profound Implications

What emerges from the Hunt study, and other research, is a renting population that may never achieve homeownership. This represents a sort of social evolution from the culture of self-assertion and independence that once so clearly characterized America after World War II and was so important to the unprecedented spread of middle-income affluence. Rather than striking out on their own, many millennials are simply failing to launch, with record numbers living with their parents or forced to shell out much of their income rent.

The implications of high rent, and declining home ownership, could be profound over time. In survey after survey, a clear majority of millennials — roughly 80%, including the vast majority of renters — express interest in acquiring a home of their own. A Fannie Mae survey of people under 40 found that nearly 80% of renters thought that owning made more financial sense, a sentiment shared by an even larger number of owners. They cited such things as asset appreciation, control over the living environment and a hedge against rent increases.

But it won’t just be renters impacted by rising rents. Jason Furman, who served as chairman of the Council of Economic Advisors under President Obama, calculated that a single-family home contributed two and a half times as much to the national GDP as an apartment unit.

The decline in investment in residential properties has dropped to levels not seen since World War II. By some estimates, if we had that kind of housing investment again, we would return to 4% growth, as opposed to our all-too-familiar 2% and below.

America’s housing crisis, long tied to ownership, is now extending into rising rents. But the stress that renters are feeling impacts all of us.



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What Sets Seattle’s Apartment Market Apart from the Rest of the Country?

Thu, 10/19/2017 - 3:29pm

Thanks to affordability and strong job growth—including in the city’s core—few new apartments are sitting vacant and rents continue to rise.

Multifamily developers have been very busy in Seattle, especially in the core sub-markets around downtown. But thanks to affordability and strong job growth—including in the city’s core—few new apartments are sitting vacant and rents continue to rise.

“Performance remains terrific, despite all the new product that has been added to the stock,” says Greg Willett, chief economist with RealPage, which provides property management software and solutions for commercial and multifamily properties. “Lots of places register very solid expansion of downtown jobs, but Seattle’s urban core growth rate is in a whole different category.”

Vacancies shrink in Seattle

Despite all the new construction, the percentage of vacant apartments has fallen on average. Currently, vacancy is at 4.6 percent, down from 4.9 percent at the end of 2016, according to New York City-based research firm Reis Inc.

“Seattle has seen a lot of construction, but demand has stayed even with construction, so Seattle has not seen any vacancy rate increase,” says Barbara Byrne Denham, senior economist with Reis.

Seattle’s economy is strong—but not strong enough to account for how well the apartment sector is doing there. The number of jobs in the Seattle area has grown steadily, increasing by 2.5 percent since last year. That puts Seattle at number 20 out of the 82 metro areas tracked by Reis. Seattle is doing better than the U.S. overall, where the number of jobs is now just 1.6 percent higher than it was the year before.

Seattle is also attracting new residents because it’s not quite as painfully expensive to live there as in other large cities in Western United States. “What is different about Seattle is that its rent levels ($1,654 per unit) are considerably lower than San Francisco ($2,990 per unit) and San Jose ($2,530), so it’s more affordable for millennials,” says Denham.

Seattle’s urban core leads the market

Seattle’s urban core sub-markets fit within the general theme of the metro area. Developers have opened a large number of new apartments, but employers in the area have also hired a large number of new employees.

Since 2010, developers have opened 21,707 new apartments in Seattle’s three urban core markets: Downtown, South Lake Union/Queen Anne and Capitol Hill. That’s a third (33 percent) of the new apartments that opened in the metro area overall. Another 9,378 new apartments are under construction. “That’s 46 percent of everything under construction across the metro,” says Willett.

New jobs are helping to fill all these new units, led by the expansion of tech giant Amazon. The apartments in the urban core markets are 96.7 percent occupied, and apartment rents are growing at a rate of 6.6 percent a year, according to research firm MPF.

In the South Lake Union/Queen Anne sub-market, where Amazon has its headquarters, rents are growing even more quickly, at a rate of 11.8 percent a year.

With so many more new apartments on the way, occupancy is likely to fall below 96 percent over the next few years, according to MPF. Rent growth should slow as well, with the expected annual increase coming in at around 4.5 percent.

“Even with that moderation, however, Seattle’s urban core forecast is among the strongest in any downtown across the country,” says Willett.



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Does rent control impact crime rates? These economists have the answer…

Thu, 10/19/2017 - 3:28pm

Rent-control policies are a cause célèbre advocated by progressive politicians such as New York City Mayor Bill de Blasio and U.K. Labour Party leader Jeremy Corbyn.

But evidence shows that getting rid of these rules causes a reduction in crime.

The sudden end of rent control in Cambridge, Mass., in 1995 resulted in a 16% decrease in overall crime through the year 2000, according to a new working paper by researchers from the Massachusetts Institute of Technology. That equates to roughly 1,200 fewer crimes a year.

A drop in the number of property crimes (including burglary and shoplifting) and public disturbances (including vandalism, prostitution and trespassing) was largely responsible for the reduction in crime overall in Cambridge during that time. Researchers also reported fewer violent crimes, such as murder, sexual assault and robbery. The decrease in crime was also most acutely felt in the neighborhoods with the highest share of rent-controlled apartments.

Rent deregulation in Cambridge had other benefits

  • Improved public safety following rent deregulation represented an economic benefit to the city of between $10 million and $22 million.
  • Deregulation led to $2 billion-worth of property value appreciation between 1994 and 2005, findings that are supported by previous research by the newly-minted Nobel laureate Richard Thaler.

Cambridge represents a strong test subject for studying the impact of rent deregulation, according to the paper, which was distributed by the National Bureau of Economic Research. The city’s rent control policy was eliminated following the success of a statewide referendum in 1994. Nearly 60% of Cambridge’s voter’s opposed the referendum, indicating strong support for rent control at the time.

Only a third of Cambridge’s residential units were subject to rent control rules, and the ordinance only applied to buildings constructed before 1969. As a result, many of the buildings affected by the change were concentrated in the same neighborhoods, which allowed researchers to determine better the effect deregulation had. The researchers also compared their findings against the nationwide decrease in crime and to other potential causes of the lower crime rate, including proximity to public transit and public housing.

Rent control regulations are rare across the country

Only four states (California, Maryland, New Jersey and New York) and the District of Columbia have rent-control laws on the books either state-wide or at the municipal level, according to the National Multifamily Housing Council, a trade organization representing the apartment industry.

In another nine states, there are no rent control laws on the books — nor are there laws preempting rent control ordinances. The remaining 37 states either have state laws preempting rent control ordinances at the local level or require local governments to get approval from state legislatures to enact such provisions.

Even though rent control laws are rare, more cities across the country have been exploring them, likely a reflection of soaring housing costs nationwide. Voters have succeeded in putting referenda on the ballots in cities like Glendale, Calif., Newark, N.J., and Portland, Maine, that would create or strengthen rent control laws. And activists in cities like Minneapolis and Seattle are pushing for rents to be regulated, even though their state governments have been rent control ordinances.

A recent poll also found that a 55% majority of voters in California’s Orange and San Diego counties supported rent control policies, according to the Orange County Register.

Other studies show that rent control likely doesn’t work

While rent-control policies are aimed at keeping housing affordable, it often has the reverse effect in practice.

There is evidence that renters pay more in rent-controlled cities, according to the Urban Institute, a Washington, D.C., think-tank. These policies generally raise the rents in uncontrolled apartments. “Given the current research, there seems to be little one can say in favor of rent control,” wrote Peter Tatian, a senior fellow in the Urban Institute’s Metropolitan Housing and Communities Policy Center.

One theory for the increase in property values: Studies have shown that the construction of new rental units decreased in many cities after they implemented rent-control regulations, according to the National Multifamily Housing Council. Consequently, the supply of rental properties may not grow to accommodate increased demand in these cities. Many people will remain in rent-controlled apartments and pass them along to family or friends, meaning that fewer vacancies come up. That leaves people looking for housing with fewer options.

Studies have also found that rent-controlled apartment buildings are kept in worse conditions, a reflection of negligence on the part of landlords and tenants alike.



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Should You Accept Section 8 As A Landlord?

Thu, 10/19/2017 - 3:16pm

If you are a landlord with a few properties or even a massive portfolio to rent out, chances are you’ve wondered to yourself at one time or another whether or not you should start accepting Section 8 housing subsidies for low-income tenants. This can be a difficult choice to make, as many landlords have the idea that opening their doors to Section 8 tenants opens them up to having to accept tenants they would otherwise reject. However, there can be some very significant advantages to becoming a Section 8 landlord, and the cons aren’t as large as some people are led to believe.

Advantages Of Accepting Section 8

The biggest perk of accepting Section 8 subsidies is the fact that a substantial part of the rent money you are owed will show up reliably and on time each and every month. The portion of the rent that the government will pay is dependent upon a few different factors but is usually between 40% and 70% of the total. The rest of the rent will be up to your tenant to pay, but with Section 8 subsidies, you at least know that you will receive rental income monthly, even if your tenant slips into paying late.

Another major advantage to accepting Section 8 is that it opens you up to a whole new market of potential tenants, many of whom can’t afford to rent anything that isn’t subsidized. This can give you a competitive advantage over other landlords in your area who do not accept government subsidies. Contrary to popular belief, you can also screen these potential tenants just as you would any other tenants, and you can even rent your property out to someone without Section 8 just as you normally would. In many ways, the benefit of Section 8 is just as great to landlords as it is to the tenants it assists.

Disadvantages Of Section 8

While few and comparatively minor, there are some disadvantages to accepting Section 8. The first of these is that you may have to wade through some red tape to get accepted. In order to be approved as a Section 8 landlord, you will have to undergo a full home inspection and set your rental rate according to the range of average prices in your area. This isn’t a huge problem for most landlords, but it is something to consider.

If you are a landlord with a portfolio made up of high-value properties in affluent areas, however, Section 8 will probably not be for you. The rents you can get from those paying on their own on these properties will be higher than what the government will allow you to charge in order to be approved as a Section 8 housing provider.


While it will not be for every landlord, Section 8 housing offers great benefits to landlords with one or more low- to middle-priced rental properties. Overall, the benefits outweigh the disadvantages, particularly when you take into account the fact that rental income checks will always show up on time. If you are a landlord with properties that might qualify for Section 8 subsidies, it is a program that is well worth looking into.



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