Investor Series – Subsidized Tenants
June 15, 2022
This is one of many articles we will be writing regarding investing in Real Estate. Today we’ll be looking at subsidized tenants and the pros and cons with choosing these types of tenants.
A subsidized tenant is a tenant that gets part or all of their rent paid for by another entity. This is usually a non-profit or governmental program and it can be very beneficial to have this kind of arrangement. For example, most government programs such as Section 8 or a housing commission will directly deposit the portion of the rent they are obligated for directly into your bank account each month without fail. They are never late and never miss a payment. The tenant portion of the rent will have to be collected as you usually would but the other portion you never have to worry about.
As you would expect, when dealing with a government entity there are rules and regulations. One of these is typically an annual inspection of the home and a list of required repairs that must be completed before any renewal of a lease. Also, these subsidy entities usually have specific limits on how much rent you can charge. They will also review the tenant’s income situation frequently and adjust how much they will be responsible for based on the tenant’s earned income.
If a tenant gets behind on their rent, a case worker will usually get involved and try to mediate a solution. It’s not uncommon for other non-profits to help the tenant get caught up. If a tenant can’t get caught up they can lose their subsidy so there is great incentive for the tenant to find a way.
Some landlords don’t want the hassle of inspections or limits on rental amounts so there are certainly some that will forgo dealing with a subsidized tenant. My experience has been positive and its certainly nice getting that direct deposit check every month and having other entities help a tenant get caught up if they need it.
